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                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                 ---------------

                                    FORM 10-K

            [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended September 30, 1999

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from to
                                 ---------------

                         Commission File Number: 0-22026

                                 RENT-WAY, INC.
             (Exact name of registrant as specified in its charter)

                 Pennsylvania                           25-1407782
           (State of incorporation)        (I.R.S. Employer Identification No.)

                   One RentWay Place, Erie, Pennsylvania 16505
                    (Address of principal executive offices)

                                  814-455-5378
                         (Registrant's telephone number)

               Securities registered pursuant to Section 12(b) of the Act:

  Title of Class                         Name of Exchange on Which Registered
  --------------                         ------------------------------------
Common Stock, no par value                  New York Stock Exchange, Inc.

        Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Based on the closing sales price on December 6, 1999, the aggregate market value
of stock held by non-affiliates of the registrant was $372,103,705.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

     CLASS                     OUTSTANDING AS OF DECEMBER 6, 1999
   Common Stock                           21,984,041
===============================================================================
Documents  Incorporated  by Reference  Portions of the  registrant's  definitive
proxy  statement for the annual meeting of shareholders to be held March 8, 2000
are incorporated by reference into Part III of this Form 10-K

<PAGE>


                                 RENT-WAY, INC.

                                     PART I

ITEM I BUSINESS

General

    Rent-Way,  Inc. (the "Company" or "Rent-Way") is the second largest operator
in the rental  purchase  industry  with 1,114  stores in 41 states.  The Company
offers home entertainment equipment,  furniture, major appliances and jewelry to
customers under full-service rental-purchase agreements that generally allow the
customer to obtain  ownership of the  merchandise at the conclusion of an agreed
upon rental period. Management believes that these rental-purchase  arrangements
appeal to a wide  variety of customers  by allowing  them to obtain  merchandise
that they might  otherwise be unable or unwilling to obtain due to  insufficient
cash  resources  or lack of access to credit or because  they have a  temporary,
short-term need for the merchandise or a desire to rent rather than purchase the
merchandise.

    The Company's  principal executive offices are located at One RentWay Place,
Erie, Pennsylvania 16505, and its telephone number is (814) 455-5378.

    On December 10, 1998,  the Company  completed a merger (the  "Merger")  with
Home Choice  Holdings,  Inc. ("HMCH" or "Home Choice").  The Merger,  as per the
terms of the  agreement,  was recorded as a pooling of interests,  in accordance
with Accounting  Principles Board ("APB") Opinion No. 16. Under the terms of the
agreement the Company  issued 0.588 shares of common stock for each  outstanding
share of HMCH common stock. The Merger  increased the outstanding  shares of the
Company by  approximately  10,025,000  shares.  HMCH, at the time of the Merger,
operated 458 stores in 26 states, primarily in the southeastern, midwestern, and
southwestern   portions  of  the  United   States,   with  annual   revenues  of
approximately  $260 million.  As a result of the Merger,  the Company became the
second largest company in the rental-purchase industry.

    On February 26, 1998, Home Choice (formerly Alrenco,  Inc.) merged with RTO,
Inc. The merger, as per the terms of the agreement, was recorded as a pooling of
interests,  in  accordance  with APB  Opinion  No.  16.  Under  the terms of the
agreement,  Home Choice issued 0.898 shares of common stock for each outstanding
share of RTO common stock.

    Prior to the mergers,  the management of the Company,  Alrenco, and RTO grew
their operations through diverse strategies.

Rent-Way Acquistions

    Rent-Way  was  formed in 1981 to  operate a  rental-purchase  store in Erie,
Pennsylvania.  In 1993, as a result of acquisitions and new store openings,  the
Company was  operating 19 stores in three states and had  completed  its initial
public offering. In 1994, the Company acquired 20 rental-purchase stores through
its  acquisition of D.A.M.S.L.  Corporation.  In 1995,  the Company  acquired 50
rental-purchase   stores,   46  through  the  acquisition  of  McKenzie  Leasing
Corporation.  In 1996, the Company  acquired 32  rental-purchase  stores in four
separate transactions.  In 1997, the Company acquired 92 rental-purchase stores,
70 of which were acquired  from Perry  Electronics,  Inc.  d/b/a Rental King. In
1998, the Company acquired 226 rental-purchase stores, 50 of which were acquired
from Ace Rentals and 145 of which were acquired from Champion Rentals,  Inc. The
Company also opened 13 new stores in 1998.

Alrenco Acquisitions

    Alrenco grew primarily  through the opening of new stores from its inception
in 1980 through 1990.  During the period from 1990 to 1993,  management  focused
its efforts on improving the  performance of its existing  stores.  As a result,
Alrenco  increased  its revenue from $16.3 million to $22.3  million,  operating
profit from $0.9 million to $2.0 million,  and net earnings from $0.1 million to
$1.0 million.  In 1994,  Alrenco acquired 18  rental-purchase  stores.  In 1995,
Alrenco acquired 15 stores.  In 1996,  Alrenco acquired 75 stores in 23 separate
transactions.  In  1997,  Alrenco  acquired  54  stores  and 13  rental-purchase
portfolios in 19 separate transactions.

RTO Acquisitions

    RTO  was  incorporated  on  June  20,  1996  and  since  that  time  it  has
aggressively  sought to establish  its store base through  multiple  significant
store acquisitions, new store openings, and smaller store acquisitions. In 1996,
RTO purchased 109 stores,  102 of which were acquired from Action TV & Appliance
Rentals,  Inc. In 1997, RTO acquired 73 stores in a series of  transactions.  In
1996 and  1997,  RTO  acquired  59  stores in  transactions  accounted  for as a
pooling-of-interests.  Also in 1997,  RTO opened 34 new stores.  From January 1,
1998 until March 31, 1998, RTO opened eight additional stores.



Fiscal 1999 Acquisitions

     On June 30, 1999, the Company acquired America's  Rent-To-Own  Center, Inc.
("America's  Rent-To-Own").  The transaction  value was approximately $7 million
and was paid for with a combination of 231,140 shares of Rent-Way's common stock
and the assumption of certain  liabilities.  America's  Rent-To-Own  operated 21
rental-purchase  stores in  Arkansas,  Kansas,  Missouri,  and  Oklahoma and had
annual revenues of approximately $8 million.

    On September 23, 1999, the Company acquired all of the stock of RentaVision,
Inc.  ("RentaVision")  for a purchase price of approximately $74 million,  which
was paid for with a  combination  of $69 million in cash and  278,801  shares of
Rent-Way's common stock and the assumption of certain  liabilities.  RentaVision
operated a chain of 250  rental-purchase  stores in 16 states,  50 of which have
been opened  during the past year,  with annual  revenues of  approximately  $75
million.

The Rental-Purchase Industry

    Begun in the mid-to-late 1960s, the rental-purchase business is a relatively
new segment of the retail industry offering an alternative to traditional retail
installment sales. The rental-purchase  industry provides brand name merchandise
to customers  generally on a week-to-week or  month-to-month  basis under a full
service rental  agreement,  which in most cases includes a purchase option.  The
customer may cancel the rental agreement at any time without further  obligation
by returning the product to the rental- purchase operator.

    The Association of Progressive Rental Organizations ("APRO"), the industry's
trade  association,  estimated that at the end of 1998 the U.S.  rental-purchase
industry comprised  approximately 8,000 stores providing 7.5 million products to
3.3 million  households.  Management  believes that its customers generally have
annual  household  incomes  ranging  from  $20,000  to  $40,000.  Based  on APRO
estimates,  the  rental-purchase  industry had gross revenues of $4.7 billion in
1998.  The  U.S.   rental-purchase   industry  is  highly  fragmented,   but  is
experiencing  increasing  consolidation.  Based  on APRO  estimates,  management
believes that the ten largest industry  participants  account for  approximately
50% of total industry  stores and that the majority of the remaining  portion of
industry  consists of operations  with fewer than 20 stores.  See  "--Strategy",
"--Competition."

    Management  believes  that  the  rental-purchase  industry  is  experiencing
increasing consolidation due to, among other factors, the recognition by smaller
operators  of  the  increased  operating  efficiencies  and  better  competitive
position achievable by combining with larger operators,  greater availability of
capital for larger operators,  and the willingness of older operators to sell as
a means of resolving business  succession issues.  Management believes that this
trend toward consolidation of operations in the industry presents an opportunity
for well-capitalized rental-purchase operators to continue to acquire additional
stores on favorable terms.

Strategy

    Management   believes  that  the  Company's  continued  success  depends  on
successful implementation of the following business strategies:

Acquiring and Opening New Stores

    The Company currently intends to expand its operations by acquiring existing
stores and  opening new stores,  both  within its  present  market  areas and in
geographic regions not currently served by the Company. At present, the majority
of that  expansion  is expected to be  accomplished  through  acquisitions.  The
Company believes that acquisitions can effectively increase the Company's market
share while simultaneously expanding its customer base. In addition, in pursuing
its  growth  strategies,  the  Company  expects to  benefit  from both  enhanced
purchasing  power and the  ability to  leverage  economies  of scale for certain
operating expenses.

    The Company continually reviews  acquisition  opportunities,  and management
believes that a number of acquisition opportunities currently exist. The Company
presently has no plans,  proposals,  arrangements or understandings with respect
to significant acquisitions. In identifying targets for acquisition, the Company
intends to focus on operations that complement the Company's  existing  markets,
while remaining open to the  possibility of making  acquisitions in other areas.
The Company has not  established  formal  criteria for  potential  acquisitions.
Generally, however, the Company seeks to acquire rental-purchase businesses that
operate  profitably  and are located in geographic  markets that  complement the
Company's  existing  stores or that the Company views as growth  markets for the
rental-purchase  industry.  The  Company  seeks to acquire  such  businesses  at
purchase  prices that will permit the Company a prompt return on its  investment
in the form of increased earnings. The Company has no formal policy with respect
to acquisitions  with related entities.  To date, no related party  acquisitions
have  been  considered  nor  does  the  Company   anticipate   considering  such
acquisitions in the future. Management believes that senior management's ability
and  experience  provides  the  Company  with  a  competitive  advantage  in the
evaluation and consummation of acquisition opportunities.

    Following  consummation of an acquisition,  the Company appoints a dedicated
team to oversee and monitor the  integration of the acquired  stores,  including
determining  staffing,   store  merchandise  and  facility  needs,  budgets  and
performance goals. All acquired stores are promptly evaluated and, if necessary,
remodeled.  Management  seeks to integrate  acquired  stores and the  management
information  system of such  stores  within  one to three  months  following  an
acquisition. The Company completed the integration of the 250 RentaVision stores
acquired on September 23, 1999 by November 11, 1999.

    In  addition,  in May 1999 the Company  announced a new store  opening  plan
designed to complement its  acquisition  strategy.  The Company plans to open an
additional  40-60 stores in the next twelve months.  The new store openings will
occur  in  under-served  markets  near  existing  locations  to  leverage  field
operating  strength and  advertising  efficiencies.  In fiscal 1999, the Company
opened 12 new stores  and hopes to have  opened a total of 21 new stores for the
15 month period ending December 31, 1999.

Customer-Focused Philosophy

    Management  believes that through the  continued  adherence to its "Welcome,
Wanted and Important" business philosophy, it should be able to increase its new
and repeat  customer base, and thus the number of units it has on rent,  thereby
increasing  revenues  and  net  income.  The  "Welcome,  Wanted  and  Important"
philosophy is a method by which the Company  seeks to create a store  atmosphere
conducive to customer  loyalty.  The Company  attempts to create this atmosphere
through the  effective  use of  advertising  and  merchandising  strategies,  by
maintaining the clean and well-stocked appearance of its stores and by providing
a high  level of  customer  service  (such  as the  institution  of a  toll-free
1-800-RENTWAY  complaint and comment line). The Company's advertising emphasizes
brand name  merchandise  from leading  manufacturers.  In addition,  merchandise
selection  within each product  category is periodically  updated to incorporate
the latest  offerings from  suppliers.  Services  provided by the Company to the
customer include home delivery,  installations,  ordinary maintenance and repair
services and pick-up  during the term of the contract at no  additional  charge.
Store  managers  also work closely with each  customer in choosing  merchandise,
setting delivery dates and arranging a suitable payment schedule. As part of the
"Welcome,  Wanted and  Important"  philosophy,  store  managers  are  empowered,
encouraged and trained to make decisions regarding store operations subject only
to certain Company-wide operating guidelines and general policies.

Expanding the Company's Product Lines

    One of the Company's principal  strategies is to provide the rental-purchase
customer with the opportunity to obtain merchandise of a higher quality than the
merchandise  available from its  competitors on competitive  terms. To this end,
the Company attempts to maintain a broad selection of products while emphasizing
better  quality,  higher  priced  merchandise.  The Company  intends to continue
expanding its offerings of better quality, higher priced products in all product
areas.  Management  believes  that  previous  offerings of these  products  have
succeeded in both  increasing  the Company's  profitability  and  attracting new
customers to the Company's existing stores. In addition, the Company selectively
tests new merchandise  and services.  During the last quarter of the 1999 fiscal
year, a new program focusing on Compaq personal  computers was  implemented.  In
addition,  the  Company  has begun to act as an agent to provide  prepaid  phone
service  through a third  party.  This  program is  currently  being tested on a
limited  basis.   Management   believes  that  opportunities  exist  to  provide
additional non-traditional merchandise to its customers.

Monitoring Store Performance

    The  Company's  management  information  system allows each store manager to
track  rental and  collection  activity on a daily basis.  The system  generates
detailed reports that track inventory  movement by piece and by product category
and the number and frequency of past due accounts and other collection activity.
Physical  inventories  are  regularly  conducted  at each  store to  ensure  the
accuracy of the management  information system data. Senior management  monitors
this information to ensure  adherence to established  operating  guidelines.  In
addition,  each store is provided  with a monthly  profit and loss  statement to
track store  performance.  Management  believes  the  Company's  management  and
accounting  information  systems  enhance  its ability to monitor and affect the
operating  performance  of  existing  stores and to  integrate  and  improve the
performance of newly acquired stores.

Results-Oriented Compensation

    Management  believes  that an important  reason for the  Company's  positive
financial  performance  and  growth  has been the  structure  of its  management
compensation  system. A significant  portion of the Company's regional and store
managers' total compensation is dependent upon store  performance.  Regional and
store managers earn  incentives by increasing  both store revenues and operating
profits.  As further  incentive,  the Company  grants  managers  stock  options.
Management believes that the Company's emphasis on incentive-based  compensation
is instrumental in the Company's  ability to attract,  retain,  and motivate its
regional and store managers.

Manager Training and Empowerment

    The Company employs four full-time  trainers who conduct classroom  programs
in the areas of sales, store operations and personnel management. These training
programs often continue for several months and culminate in an exam. The Company
requires its managers to attend,  at Company expense,  leadership and management
programs  offered by leading  management and organization  experts.  The Company
empowers its store  managers by permitting  them to make  significant  decisions
involving store  operations  including  personnel,  merchandise,  and collection
decisions.  Management  believes that  well-trained and empowered store managers
are important to the Company's efforts to maximize individual store performance.

Operations

Company Stores

    As of September 30, 1999, the Company  operates 1,114 stores in 41 states as
follows:

<TABLE>
<CAPTION>

                         Number of                     Number of                      Number of                         Number of
          Location        Stores           Location     Stores          Location       Stores            Location         Stores
      ----------------   ---------     --------------- ---------   -----------------  ---------        ---------------  ----------
<S>                       <C>                             <C>                               <C>                              <C>
      Texas................124         Arkansas.......... 37        Mississippi........     12         Washington.......     4
      Florida.............. 97         Kentucky.......... 36        Nebraska...........     12         Rhode Island.....     3
      New York............. 84         Virginia.......... 33        Kansas.............     11         Utah.............     3
      Pennsylvania......... 73         Michigan.......... 28        New Mexico.........     10         South Dakota.....     2
      Ohio................. 63         Alabama........... 23        New Hampshire......      9         Idaho............     1
      South Carolina....... 61         Oklahoma.......... 16        Nevada.............      7
      North Carolina....... 45         Arizona........... 15        Vermont............      7
      Indiana.............. 43         Massachusetts..... 15        West Virginia......      7
      Louisiana............ 41         Maryland.......... 15        Iowa...............      6
      Tennessee............ 41         Maine............. 13        Connecticut........      5
      Georgia.............. 40         Missouri.......... 13        Delaware...........      5
      Illinois............. 38         Colorado.......... 12        California.........      4
</TABLE>


     The Company's stores average approximately 3,500 square feet in floor space
and are  generally  located in strip  shopping  centers in or near low to middle
income neighborhoods. Often, such shopping centers offer convenient free parking
to the  Company's  customers.  The  Company's  stores are  generally  uniform in
interior appearance and design and display of available merchandise.  The stores
have separate storage areas, but generally do not use warehouse  facilities.  In
selecting  store  locations,  the Company  uses a variety of market  information
sources to locate areas of a town or city that are readily accessible to low and
middle income consumers.  The Company believes that within these areas, the best
locations are in neighborhood  shopping centers that include a supermarket.  The
Company  believes this type of location  makes frequent  rental  payments at its
stores more convenient for its customers. Generally, the Company refurbishes its
stores every two to five years.

    Product Selection

    The  Company  offers  brand  name  home  entertainment  equipment  (such  as
television sets, VCRs, camcorders and stereos),  furniture, major appliances and
jewelry. Major appliances offered by the Company include refrigerators,  ranges,
washers and dryers.  The Company's  product line currently  includes the Zenith,
RCA, Pioneer,  JVC, Sharp and Panasonic brands in home entertainment  equipment,
the Kenmore,  Crosley and General  Electric  brands in major  appliances and the
Ashley and New England  Corsair  brand in furniture.  In June 1999,  the Company
added  Compaq  computers  to its  product  line.  The Company  closely  monitors
customer rental requests and adjusts its product mix to offer rental merchandise
desired by customers.

    For the year  ended  September  30,  1999,  payments  under  rental-purchase
contracts for home  entertainment  products  accounted for approximately  40.7%,
furniture for 28.3%,  appliances for 26.5%, jewelry for 3.9% and other items for
0.6% of the Company's rental revenues. Customers may rent either new merchandise
or previously rented merchandise.  Weekly rentals currently range from $14.99 to
$39.99 for home  entertainment  equipment,  from $9.99 to $39.99 for  furniture,
from $9.99 to $29.99 for major  appliances and from $6.99 to $19.99 for jewelry.
Previously rented merchandise is typically offered at the same weekly or monthly
rental rate as is offered for new merchandise, but with an opportunity to obtain
ownership of the merchandise after fewer rental payments.

Rental-Purchase Agreements

    Merchandise   is  provided  to  customers   under  written   rental-purchase
agreements  that set  forth the terms and  conditions  of the  transaction.  The
Company uses  standard  form  rental-purchase  agreements  which are reviewed by
legal  counsel  and  customized  to meet the legal  requirements  of the various
states in which they are to be used. Generally, the rental-purchase agreement is
signed  at the  store,  but may be  signed at the  customer's  residence  if the
customer  orders the product by telephone and requests home delivery.  Customers
rent merchandise on a week-to-week  and, to a lesser extent, on a month-to-month
basis  with  rent  payable  in  advance.  At the  end of the  initial  and  each
subsequent rental period, the customer retains the merchandise for an additional
week or month by paying the required rent or may terminate the agreement without
further  obligation.  If the customer  decides to terminate the  agreement,  the
merchandise  is returned to the store and is then  available for rent to another
customer.  The Company retains title to the  merchandise  during the term of the
rental-purchase  agreement.  If a customer  rents  merchandise  for a sufficient
period  of time,  usually  12 to 24  months,  ownership  is  transferred  to the
customer without further payments being required.  Rental payments are typically
made in cash or by check or money order. The Company does not extend credit. See
"--Government Regulation."



Product Turnover

    Generally,  a minimum rental term of between 12 and 24 months is required to
obtain ownership of new merchandise. Based upon merchandise returns for the year
ended  September 30, 1999, the Company  believes that the average period of time
during which  customers rent  merchandise is 16 to 17 weeks.  However,  turnover
varies significantly based on the type of merchandise being rented, with certain
consumer  electronic  products,  such as camcorders  and VCRs,  generally  being
rented for shorter periods,  while appliances and furniture are generally rented
for longer  periods.  Each  rental-purchase  transaction  requires  delivery and
pickup of the product,  weekly or monthly payment processing and, in some cases,
repair and  refurbishment of the product.  In order to cover the relatively high
operating  expenses  generated  by  greater  product  turnover,  rental-purchase
agreements  require larger aggregate  payments than are generally  charged under
installment purchase or credit plans.

Customer Service

    The  Company  offers  same day  delivery,  installation  and  pick-up of its
merchandise at no additional cost to the customer. The Company also provides any
required service or repair without charge, except for damage in excess of normal
wear and tear. If the product  cannot be repaired at the  customer's  residence,
the  Company  provides  a  temporary  replacement  while  the  product  is being
repaired.  The customer is fully liable for damage,  loss or  destruction of the
merchandise,  unless the customer purchases an optional loss/damage waiver. Most
of the products offered by the Company are covered by a manufacturer's  warranty
for varying periods, which, subject to the terms of the warranty, is transferred
to the  customer  in the  event  that the  customer  obtains  ownership.  Repair
services  are  provided  through  in-house  service   technicians,   independent
contractors or under factory  warranties.  The Company  offers  Rent-Way Plus, a
fee-based  membership  program that provides special loss and damage  protection
and an  additional  one  year  of  service  protection  on  rental  merchandise,
preferred  treatment in the event of involuntary job loss,  accidental death and
dismemberment insurance and discounted emergency roadside assistance, as well as
other discounts on merchandise and services.

Collections

    Management  believes that effective  collection  procedures are important to
the Company's success. The Company's collection  procedures increase the revenue
per product with minimal  associated  costs,  decrease the likelihood of default
and reduce charge-offs.  Senior management,  as well as store managers,  use the
Company's computerized management information system to monitor cash collections
on a daily basis.  In the event a customer  fails to make a rental  payment when
due, store management will attempt to contact the customer to obtain payment and
reinstate  the  contract  or will  terminate  the  account and arrange to regain
possession of the  merchandise.  However,  store  managers are given latitude to
determine the  appropriate  collection  action to be pursued based on individual
circumstances.  Depending on state regulatory requirements,  the Company charges
for the  reinstatement of terminated  accounts or collects a delinquent  account
fee.  Such fees are  standard  in the  industry  and may be subject to state law
limitations. See "--Government Regulation." Despite the fact that the Company is
not  subject  to the  federal  Fair Debt  Collection  Practices  Act,  it is the
Company's  policy  to abide by the  restrictions  of such law in its  collection
procedures.  If an item  on  rent is not  returned  or  payment  thereon  is not
received  within 90 days of its due date, the Company's  policy is to charge-off
the item. Charge-offs due to lost or stolen merchandise were approximately 2.9%,
3.1% and 3.4% of the Company's  revenues for the years ended September 30, 1999,
1998, and 1997, respectively. The charge-off rate for chains with over 40 stores
reporting to APRO in 1998 was 3.3%.

Management

    The Company's  stores are organized  geographically  with several  levels of
management. At the individual store level, each store manager is responsible for
customer relations,  deliveries and pickups, inventory management,  staffing and
certain marketing  efforts.  A Company store normally employs one store manager,
one assistant  manager,  two account managers,  one full-time office manager and
one  full-time  delivery and  installation  technician.  The staffing of a store
depends on the number of rental-purchase contracts serviced by the store.

    Each store manager reports to one regional  manager,  each of whom typically
oversees six to eight stores.  Regional  managers are primarily  responsible for
monitoring  individual  store  performance  and  inventory  levels  within their
respective  regions.  The  Company's  regional  managers,  in  turn,  report  to
directors of operations, who monitor the operations of their regions and through
their  regional  managers,   individual  store  performance.  The  directors  of
operations  report to one of five  Divisional  Vice  Presidents  who monitor the
overall  operations of their  assigned  geographic  area.  The  Divisional  Vice
Presidents  report  to the  Vice  President-Operations  who is  responsible  for
overall  Company-wide  store  operations.  Senior  management  at the  Company's
headquarters  directs  and  coordinates   purchasing,   financial  planning  and
controls,  management information systems, employee training,  personnel matters
and acquisitions.  Headquarters  personnel also evaluate the performance of each
store.





Management Information System

    The Company  believes that its  proprietary  management  information  system
provides  it  with a  competitive  advantage  over  many  small  rental-purchase
operations.  The Company uses an integrated  computerized management information
and control  system to track each unit of merchandise  and each  rental-purchase
agreement.  The Company's system also includes extensive management software and
report  generating  capabilities.  Reports for all stores are reviewed  daily by
senior management and any  irregularities  are addressed the following  business
day. Each store has the ability to track individual  components of revenue, idle
items,  items  on rent,  delinquent  accounts  and  other  account  information.
Management electronically gathers each day's activity report. Company management
has access to operating and financial  information  about any store  location or
region in which the  Company  operates  and  generates  management  reports on a
daily,  weekly,  month-to-date and year-to-date basis.  Utilizing the management
information system, senior management,  regional managers and store managers can
closely monitor the productivity of stores under their  supervision  compared to
Company-prescribed guidelines. This system has enabled the Company to expand its
operations while maintaining a high degree of control over cash receipts, rental
merchandise,  and  merchandise  units  in  repair.  The  Company  completed  the
management  information  system  integration of all stores  acquired in the Home
Choice  merger  by March  31,  1999 and all  stores  acquired  in the  America's
Rent-To-Own  acquisition  by July 31, 1999. The  management  information  sysyem
integration  and conversion of all the stores from the  RentaVision  acquisition
was  complete by November 11, 1999.  While the Company  believes its  management
information system is adequate to meet its needs for the foreseeable  future, it
continues  to upgrade the system over time.  See  "Management's  Discussion  and
Analysis of Financial Conditions and Results of Operations, Year 2000 Issues".

Purchasing and Distribution

    The Company's general product mix is determined by senior management,  based
on an analysis of customer rental patterns and introduction of new products on a
test basis.  Individual  store  managers are  responsible  for  determining  the
particular product selection for their store from a list of products approved by
senior  management.  All purchase orders are executed through regional  managers
and the Company's purchasing  department to insure that inventory levels and mix
throughout the store regions are appropriate.  Merchandise is generally  shipped
by vendors  directly  to each store,  where it is held for  rental.  The Company
purchases its  merchandise  directly from  manufacturers  or  distributors.  The
Company  generally  does not enter into written  contracts  with its  suppliers.
Although the Company currently  expects to continue its existing  relationships,
management  believes  there are  numerous  sources of products  available to the
Company,  and does not believe that the success of the  Company's  operations is
dependent on any one or more of its present suppliers.

Marketing and Advertising

    The Company promotes its products and services through targeted direct mail,
spot and national television  advertising and, to a lesser extent, through radio
and secondary print media  advertisement.  The Company also solicits business by
telephoning  former and  prospective  customers.  The Company is  dedicating  an
increasing  percentage of its marketing  dollars to  television  advertising  to
build brand recognition in markets where it is economically attractive to do so.
The Company's print  advertisements  emphasize product and brand name selection,
prompt  delivery  and  repair,  and  the  absence  of  any  downpayment,  credit
investigation or long-term  obligation.  Advertising  expense as a percentage of
revenue for the years ended  September 30, 1999,  1998 and 1997 were 4.7%,  5.4%
and 5.6%,  respectively.  In  addition  to the  Company's  national  advertising
efforts,  a good deal of emphasis has been placed on the  development of a local
store marketing plan to allow the stores to leverage market specific  knowledge.
As the  Company  obtains new stores in its  existing  markets,  the  advertising
expenses of each store in the market can be reduced by listing all stores in the
same  market-wide  advertisement.  In  addition,  the  Company  participates  in
cooperative advertising programs with many of its major vendors.

Competition

    The  rental-purchase  industry is highly  competitive.  The Company competes
with other  rental-purchase  businesses  and,  to a lesser  extent,  with rental
stores that do not offer their customers a purchase option. Competition is based
primarily on rental rates and terms,  product  selection and  availability,  and
customer  service.  With respect to consumers who are able to purchase a product
for cash or on  credit,  the  Company  also  competes  with  department  stores,
discount  stores and retail outlets that offer an  installment  sales program or
offer comparable products and prices. The Company is the second largest operator
in the rental-purchase industry, second only to Rent-A-Center.  Rent-A-Center is
national  in  scope  and  has  significantly  greater  financial  and  operating
resources and name recognition than does the Company.

Personnel

     As of September 30, 1999, the Company had approximately 5,617 employees, of
whom 202 are located at the corporate office in Erie, Pennsylvania.  None of the
Company's  employees are represented by a labor union.  Management  believes its
relations with its employees are good.


Government Regulation

    Forty-six states have adopted legislation  regulating or otherwise impacting
the   rental-purchase   transaction.   These  laws  generally   require  certain
contractual and advertising disclosures concerning the nature of the transaction
and also provide  varying levels of  substantive  consumer  protection,  such as
requiring a grace period for late payments and contract  reinstatement rights in
the event the agreement is terminated for nonpayment.

    Recent court decisions in Minnesota,  New Jersey, and Wisconsin have created
a legal  environment  in those states which is  prohibitive  to  rental-purchase
transactions.  The Company does not operate in those states. The majority of the
states  in  which  the  Company   operates   impose  some  type  of   disclosure
requirements,  either in advertising  or in the  rental-purchase  agreement,  or
both.  The  regulations  in  these  states  also   distinguish   rental-purchase
transactions from credit sales.  Management  believes that its operations are in
material compliance with applicable state rental-purchase laws.

    No federal  legislation  has been  enacted  regulating  the  rental-purchase
transaction.  The  Company  instructs  its  managers in  procedures  required by
applicable law through training seminars and policy manuals and believes that it
has  operated in  compliance  with the  requirements  of  applicable  law in all
material respects.

    Management  believes  that in the  unlikely  event  federal  legislation  is
enacted  regulating  rental-purchase  transactions as credit sales,  the Company
would be able to adapt to the new laws and remain  profitable  by  repositioning
itself as a rent-to-rent business.

Service Marks

    The Company has registered the "Rent-Way" service mark under the Lanham Act.
The Company believes that this mark has acquired  significant market recognition
and goodwill in the  communities  in which its stores are  located.  The service
mark  "Rent-Way  Because  There's  Really Only One Way" and "RentWay - the Right
Way" and the related  designs  have also been  registered  by the  Company.  The
Company has also prepared  applications to register the following service marks:
"RentWay.  The Right Way.  Right Away.",  "Lifetime  Reinstatement",  and "We're
Changing the Way America Rents". In connection with the Home Choice merger,  the
Company  acquired the "Home Choice" service mark,  which is registered under the
Lanham Act.


Related Party Transactions

    Although  the  Company  has in the past  and may in the  future  enter  into
transactions  with related parties,  the Company has adopted no formal policies,
procedures or controls with respect to such  transactions.  Generally,  however,
the Company requires that any transactions  with related entities be on terms no
less  favorable to the Company than would be available  from an unrelated  third
party.



<PAGE>



ITEM 2 DESCRIPTION OF PROPERTIES

    The Company leases all of its store  facilities  under operating leases that
generally  have terms of three to five years and require the Company to pay real
estate  taxes,  utilities  and  maintenance.  The Company has  optional  renewal
privileges on most of its leases for  additional  periods  ranging from three to
five years at rental  rates  generally  adjusted  for  increases  in the cost of
living.  There is no assurance that the Company can renew the leases that do not
contain  renewal  options,  or that if it can renew them, that the terms will be
favorable to the  Company.  Management  believes  that  suitable  store space is
generally available for lease and that the Company would be able to relocate any
of its  stores  without  significant  difficulty  should it be unable to renew a
particular lease.  Management also expects that additional space will be readily
available  at  competitive  rates for new store  openings.  The  Company's  main
corporate  offices are in Erie,  Pennsylvania  and consist of three buildings of
approximately 34,000,  11,000, and 10,000 square feet. In addition,  the Company
leases administrative  offices in Dallas, Texas,  Daytona,  Florida,  Lexington,
Kentucky,  and Raleigh, North Carolina. The Company also owns an office building
in Erie, Pennsylvania, which is used for record retention.

ITEM 3 LEGAL PROCEEDINGS

    From  time to time the  Company  is a party  to  various  legal  proceedings
arising in the ordinary  course of its business.  The Company is not currently a
party to any material litigation.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were  submitted to a vote of security  holders  during the fourth
quarter of the fiscal year covered by this report.



<PAGE>


                                     PART II


ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

    The Company's  Common Stock is traded on the New York Stock  Exchange  under
the symbol "RWY." The Company  began  trading on the New York Stock  Exchange on
October 8, 1998. The Company's common stock was previously  traded on the NASDAQ
National Market under the symbol "RWAY". The following table sets forth, for the
periods  indicated,  the high and low sales prices per share of the Common Stock
as reported on the NASDAQ National Market and the New York Stock Exchange.
<TABLE>
<CAPTION>

                            Year Ended              Year Ended
                           September 30,           September 30,
                               1999                    1998
                      ----------------------  -----------------------
                         High        Low         High         Low
<S>                      <C>       <C>           <C>        <C>
    First Quarter.       $28.00    $17.50        $20.50     $15.75
    Second Quarter        27.88     21.38         24.75      17.31
    Third Quarter.        29.44     20.50         33.63      25.13
    Fourth Quarter        25.06     19.00         32.00      22.00
</TABLE>

     As of December 6, 1999,  there were 194 record  shareholders  of the Common
Stock.

     The  Company  has  not  paid  any  cash  dividends  to  shareholders.   The
declaration  of any cash or stock  dividends  will be at the  discretion  of the
Board of Directors, and will depend upon earnings,  capital requirements and the
financial  position  of the  Company,  general  economic  conditions  and  other
pertinent  factors.  At this time,  the Company  does not intend to pay any cash
dividends in the foreseeable future. Management intends to reinvest earnings, if
any,  in  the  development  and  expansion  of  the  Company's  business  for an
indefinite  period of time. The Company's credit facility  prohibits the payment
of dividends.

    On June 30, 1999 and  September  23, 1999,  the Company  issued  231,140 and
278,801 shares of its common stock as partial  consideration  in connection with
the  acquisitions of America's  Rent-To-Own and RentaVision,  respectively.  The
shares were issued in connection with  acquisitions to unaffiliated  persons and
bear  restrictions  on transfer.  As such, the issuances of the shares is exempt
from registration under Section 4 (2) of the Securities Act of 1933, as amended.



<PAGE>


ITEM 6 SELECTED FINANCIAL DATA

    The  following  selected  financial  data for the years ended  September 30,
1995,  1996,  1997, 1998 and 1999 were derived from the financial  statements of
Rent-Way  which have been  restated  to reflect the  Company's  merger with Home
Choice.  The  historical  financial data are qualified in their entirety by, and
should be read in  conjunction  with,  Management's  Discussion  and Analysis of
Financial  Condition and Results of Operations  and the financial  statements of
the Company and notes thereto included elsewhere in this document.


<TABLE>
<CAPTION>

                                                                          Year Ended September 30, (1)
                                                               --------------------------------------------------
                                                               1995(2)    1996(3)     1997(4)    1998(5)   1999(6)
                                                               -------    -------     -------    -------   -------
                                                                  (Dollars in millions, except per share data)

                Statement of Operations Data:
<S>                                                          <C>         <C>        <C>        <C>
                  Total revenues..........................   $ 105,723   $175,333   $ 320,330  $ 436,031 $ 494,351
                  Gross profit............................       6,531      8,710      10,998     14,529    46,715
                  Income (loss) before extraordinary item.       2,961      3,945       1,566     (1,838)   15,102
                  Net income (loss).......................       2,961      3,945       1,297     (1,838)   14,583
                  Earnings (loss) applicable to common shares    2,923      3,816       1,577     (1,838)   14,583
                  Basic:
                    Income (loss) before extraordinary item  $    0.41   $   0.34   $    0.11  $   (0.09)$    0.71
                    Net income (loss).....................   $    0.41   $   0.34   $    0.09  $   (0.09)$    0.68
                  Diluted:
                    Income (loss) before extraordinary item  $    0.41   $   0.32   $    0.11  $   (0.09)$    0.68
                    Net income (loss).....................   $    0.41   $   0.32   $    0.09  $   (0.09)$    0.66
                  Weighted average shares outstanding:
                    Basic.................................       7,056     11,954      16,653     20,283    21,341
                    Diluted...............................       7,156     12,089      16,653     20,283    23,345

                Balance Sheet Data:
                  Rental merchandise......................   $  34,335   $ 76,586  $  132,393  $ 176,022 $ 202,145
                  Total assets............................      71,496    219,105     319,849    478,831   597,394
                  Debt....................................      42,215     19,751      96,318    179,603   288,130
                  Stockholders' equity....................      14,309    177,063     183,968    247,863   277,452
</TABLE>


(1)  As  a  result   of  the   Company's   merger   with   Home   Choice   in  a
     pooling of interests,  all periods  prior to the year ended  September  30,
     1999 have been  restated.  The year ended  September  30, 1998 reflects the
     combination  of the preceding  twelve-month  financial  periods for each of
     Rent-Way and Home Choice. All other years presented reflect the combination
     of twelve  months ended  September 30 for Rent-Way and twelve  months ended
     December 31 for Home Choice.

(2) During  the  year  ended  September  30,  1995,  the  Company   acquired  50
    rental-purchase  stores,  46 through the  acquisition  of  McKenzie  Leasing
    Corporation in July 1995, which affects the  comparability of the historical
    financial information for the periods presented.

(3)  During  the year  ended  September  30,  1996,  the  Company  acquired  190
     rental-purchase  stores,  102  through  the  acquisition  of  Action  TV  &
     Appliance  Rental,  Inc., which affects the comparability of the historical
     financial information for the periods presented.

(4)  During  the year  ended  September  30,  1997,  the  Company  acquired  214
     rental-purchase  stores,  70 of which were  acquired in February  1997 from
     Perry Electronics,  Inc. d/b/a Rental King, which affects the comparability
     of the historical financial information for the periods presented.

(5)  During  the year  ended  September  30,  1998,  the  Company  acquired  250
     rental-purchase  stores, 50 of which were acquired in January 1998 from Ace
     Rentals  and 145 of which were  acquired in  February  1998 from  Champion,
     which affects the comparability of the historical financial information for
     the periods presented.

(6)  During  the year  ended  September  30,  1999,  the  Company  acquired  275
     rental-purchase  stores,  250 of which were acquired in September 1999 from
     RentaVision,  which affects the  comparability of the historical  financial
     information for the periods presented.


<PAGE>


ITEM 7  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION  AND
RESULTS OF OPERATIONS

Overview

  Rent-Way is the second largest operator in the rental purchase industry with
1,114 stores  located in 41 states.  The Company  offers quality brand name home
entertainment equipment,  furniture,  appliances, and jewelry to customers under
full-service  rental-purchase  agreements  that generally  allow the customer to
obtain  ownership of the  merchandise at the conclusion of an agreed upon rental
period.

    On December 10, 1998,  the Company  completed a merger (the  "Merger")  with
Home Choice  Holdings,  Inc. ("HMCH" or "Home Choice").  The Merger,  as per the
terms of the  agreement,  was recorded as a pooling of interests,  in accordance
with Accounting  Principles Board ("APB") Opinion No. 16. Under the terms of the
agreement the Company  issued 0.588 shares of common stock for each  outstanding
share of HMCH common stock. The Merger  increased the outstanding  shares of the
Company by  approximately  10,025,000  shares.  HMCH, at the time of the Merger,
operated 458 stores in 26 states, primarily in the southeastern, midwestern, and
southwestern   portions  of  the  United   States,   with  annual   revenues  of
approximately  $260 million.  As a result of the Merger,  the Company became the
second largest company in the rental-purchase industry.

    On February 26, 1998, Home Choice (formerly Alrenco,  Inc.) merged with RTO,
Inc. The merger, as per the terms of the agreement, was recorded as a pooling of
interests,  in  accordance  with APB  Opinion  No.  16.  Under  the terms of the
agreement,  Home Choice issued 0.898 shares of common stock for each outstanding
share of RTO common stock.

    Prior to the mergers,  the management of the Company,  Alrenco, and RTO grew
their operations through diverse strategies.

Rent-Way Acquistions

    Rent-Way  was  formed in 1981 to  operate a  rental-purchase  store in Erie,
Pennsylvania.  In 1993, as a result of acquisitions and new store openings,  the
Company was  operating 19 stores in three states and had  completed  its initial
public offering. In 1994, the Company acquired 20 rental-purchase stores through
its  acquisition of D.A.M.S.L.  Corporation.  In 1995,  the Company  acquired 50
rental-purchase   stores,   46  through  the  acquisition  of  McKenzie  Leasing
Corporation.  In 1996, the Company  acquired 32  rental-purchase  stores in four
separate transactions.  In 1997, the Company acquired 92 rental-purchase stores,
70 of which were acquired  from Perry  Electronics,  Inc.  d/b/a Rental King. In
1998, the Company acquired 226 rental-purchase stores, 50 of which were acquired
from Ace Rentals and 145 of which were acquired from Champion Rentals,  Inc. The
Company also opened 13 new stores in 1998.

Alrenco Acquisitions

    Alrenco grew primarily  through the opening of new stores from its inception
in 1980 through 1990.  During the period from 1990 to 1993,  management  focused
its efforts on improving the  performance of its existing  stores.  As a result,
Alrenco  increased  its revenue from $16.3 million to $22.3  million,  operating
profit from $0.9 million to $2.0 million,  and net earnings from $0.1 million to
$1.0 million.  In 1994,  Alrenco acquired 18  rental-purchase  stores.  In 1995,
Alrenco acquired 15 stores.  In 1996,  Alrenco acquired 75 stores in 23 separate
transactions.  In  1997,  Alrenco  acquired  54  stores  and 13  rental-purchase
portfolios in 19 separate transactions.

RTO Acquisitions

    RTO  was  incorporated  on  June  20,  1996  and  since  that  time  it  has
aggressively  sought to establish  its store base through  multiple  significant
store acquisitions, new store openings, and smaller store acquisitions. In 1996,
RTO purchased 109 stores,  102 of which were acquired from Action TV & Appliance
Rentals,  Inc. In 1997, RTO acquired 73 stores in a series of  transactions.  In
1996 and  1997,  RTO  acquired  59  stores in  transactions  accounted  for as a
pooling-of-interests.  Also in 1997,  RTO opened 34 new stores.  From January 1,
1998 until March 31, 1998, RTO opened eight additional stores.

  The number of stores  operated  by the Company  has  increased  from 395 as of
September 30, 1996 to 1,114 as of September 30, 1999. The following  table shows
the number of stores  opened,  acquired,  and/or merged  during this  three-year
period.


<TABLE>
<CAPTION>

                                                            Years Ended September 30,
                                                            ------------------------
                                       Stores                1997     1998     1999
                             --------------------------     -----    -----    -----

<S>                                                            <C>      <C>      <C>
                             Open at Beginning of Period      395      597      869
                             Opened....................        16       65       12
                             Acquired..................       214      250      275
                             Locations Sold............         8        8       --
                             Closed or Combined........        20       35       42
                                                            -----    -----    -----
                             Open at End of Period.....       597      869    1,114
                                                            =====    =====    =====

</TABLE>

     In May 1999,  the Company  announced  its plans to open 40-60 stores in the
next twelve months.  The new store openings will occur in  under-served  markets
near existing  locations to leverage field  operating  strength and  advertising
efficiencies.  The  Company  plans  to open 25 new  locations  by the end of the
calendar year. Through November 1999, the Company had opened 16 new stores.

    On June 30, 1999, the Company acquired America's  Rent-To-Own  Center,  Inc.
("America's  Rent-To-Own").  The transaction  value was approximately $7 million
and was paid for with a combination of 231,140 shares of Rent-Way's common stock
and the assumption of certain  liabilities.  America's  Rent-To-Own  operated 21
rental-purchase  stores in  Arkansas,  Kansas,  Missouri,  and  Oklahoma and had
annual revenues of approximately $8 million.

    On September 23, 1999, the Company acquired all of the stock of RentaVision,
Inc.  ("RentaVision")  for  a  purchase  price  of  approximately  $74  million.
RentaVision  operated a chain of 250 rental-purchase  stores in 16 states, 50 of
which  have  been  opened  during  the  past  year,   with  annual  revenues  of
approximately $75 million.

    Management continues to actively seek acquisition  candidates with financial
and geographic profiles consistent with the Company's growth objectives.

    In fiscal 1998 and 1999, the Company  increased its staffing levels in field
management,  accounting,  computer  information systems,  purchasing,  and human
resources to support its growth plans.  As a result,  in June 1998,  the Company
purchased  a  34,000  square  foot  building  to be used  as its  new  corporate
headquarters.  The Company  plans to construct a 30,000  square foot addition to
this building in fiscal 2000 to support the Company's  growth in the foreseeable
future.  The Company expects to benefit from leveraging  these  additional costs
over a larger store base as it continues to expand its operations.  In addition,
the Company maintains administrative offices in Dallas, Texas, Daytona, Florida,
Lexington, Kentucky, and Raleigh, North Carolina.

RESULTS OF OPERATIONS

    As an aid to understanding the Company's  operating  results,  the following
table  expresses  certain  items of the  Company's  Consolidated  Statements  of
Operations for the years ended September 30, 1999, 1998 and 1997 as a percentage
of total revenues.



<TABLE>
<CAPTION>

                                                                               Years ended
                                                                              September 30,
                                                                     ----------------------------
                                                                        1999       1998      1997
                                                                     ---------  --------- ---------
                                Revenues:.........................
<S>                                                                      <C>        <C>       <C>
                                  Rental revenue..................       86.4%      86.7%     86.6%
                                  Other revenue...................       13.6       13.3      13.4
                                                                     --------   --------  --------
                                     Total revenues...............      100.0      100.0     100.0
                                Costs and operating expenses:
                                  Depreciation and amortization:
                                     Rental merchandise...........       25.0       24.9      25.0
                                     Property and equipment.......        2.0        1.7       1.7
                                     Amortization of goodwill.....        2.0        2.6       3.7
                                  Salaries and wages..............       26.0       27.6      27.9
                                  Advertising.....................        4.7        5.4       5.6
                                  Occupancy.......................        6.7        6.9       7.0
                                  Name change expense.............         --        0.3       0.3
                                  Business combination costs......        3.4        2.6       0.3
                                  Signing bonus...................         --         --       0.1
                                  Other operating expense.........       20.8       24.7      25.0
                                                                     --------   --------  --------
                                     Total costs and operating
                                      expenses....................       90.6       96.7      96.6
                                                                     --------   --------  --------
                                  Operating income................        9.4        3.3       3.4
                                  Interest expense................       (3.3)      (2.6)     (1.8)
                                  Other income (expenses), net....       (0.1)        --       0.4
                                                                     --------   --------  --------
                                     Income before income taxes
                                      and extraordinary item......        6.0        0.7       2.0
                                  Income tax expense..............        3.0        1.1       1.5
                                                                     --------   --------  --------
                                     Income (loss) before
                                      extraordinary item..........        3.0       (0.4)      0.5
                                  Extraordinary item..............       (0.1)        --      (0.1)
                                                                     --------   --------  --------
                                     Net income (loss)............        2.9%      (0.4)%     0.4%
                                                                     ========   ========  ========


</TABLE>

Fiscal 1999 compared to Fiscal 1998

    Total revenues.  Total revenues increased $58.4 million, or 13.4%, to $494.4
million from $436.0 million.  The increase is attributable to the inclusion of a
full year's  results for the stores  acquired in fiscal 1998,  a partial  year's
operations for the stores acquired and opened in fiscal 1999, and increased same
store revenues. The stores acquired in the Champion acquisition,  consummated on
February 5, 1998,  accounted for $29.5 million,  or 50.5%, of the increase.  The
stores acquired in the Ace Rentals  acquisition,  consummated on January 7, 1998
accounted for $5.0 million,  or 8.6%,  of the increase.  The stores  acquired in
other 1998 acquisitions  accounted for $12.2 million, or 20.9%, of the increase.
The stores acquired in 1999 acquisitions accounted for $3.4 million, or 5.8%, of
the increase.  The stores opened in fiscal 1999  accounted for $2.7 million,  or
4.6%, of the increase.  The Company's same stores accounted for $5.6 million, or
9.6%, of the increase.  The increase in same store revenues was primarily due to
a 0.4% increase as a percentage of total revenues in electronics rentals, a 0.4%
increase as a percentage of total revenues in furniture rentals, a 0.4% increase
as a  percentage  of total  revenues in jewelry  rentals,  a 0.2%  increase as a
percentage of total revenues in early purchase option sales, and a 0.6% increase
as a  percentage  of total  revenues  in sales of the  Rent-Way  Plus  liability
protection  plan offset by a 1.3% decrease as a percentage of total  revenues in
sales of liability waivers, a 0.3% decrease as a percentage of total revenues in
processing  fees, and a 0.2% decrease as a percentage of total revenues in pager
rentals.  Appliance  rentals  and  merchandise  sales  remained  unchanged  as a
percentage of total revenues.  The Company expects increased same store revenues
in fiscal 2000 due to,  among many other  factors,  the addition of new products
and services.  During the last quarter of fiscal 1999,  the Company added Compaq
personal  computers to its product line.  In addition,  the Company has begun to
act as an agent to provide  prepaid  phone service  through a third party.  This
program is currently being tested on a limited basis.  Management  believes that
opportunities  exist to provide  additional  non-traditional  merchandise to its
customers.

    Depreciation  and  amortization.  Depreciation  expense  related  to  rental
merchandise  increased  slightly to 25.0% as a percentage of total revenues from
24.9%. This increase is primarily due to the depreciation expense related to the
new Compaq  computers.  These computers,  added to the Company's product line in
June 1999,  are  depreciated  on the  straight-line  basis  over 15 months.  The
Company believes that this computer  depreciation may cause depreciation expense
as a percentage of total revenues to be slightly higher in fiscal 2000.

    Depreciation  expense related to property and equipment increased to 2.0% as
a percentage of total revenues from 1.7%.  This increase is  principally  due to
the depreciation  costs associated with the new corporate  building purchased in
June 1998,  new store  signage  and  remodels  associated  with the Home  Choice
stores,  and the computer  and  software  costs  associated  with the  Company's
implementation of a PeopleSoft software package in January 1999.

    Amortization of goodwill decreased to 2.0% as a percentage of total revenues
from 2.6%. This is attributable to the reduced  amortization expense of 1996 and
1997 purchase acquisitions  primarily for customer rental agreements,  which are
amortized on an accelerated method over an estimated useful life of 18 months.

    Salaries and wages.  Salaries and wages  increased by $8.2 million to $128.5
million from $120.3  million  principally  due to the addition of 526 new stores
and additions to corporate personnel. Salaries and wages decreased to 26.0% as a
percentage  of total  revenues  from 27.6%.  This  decrease is due the Company's
ability to spread  corporate  and regional  managers'  payroll over an increased
store revenue base. This decrease is also  attributable to the Company  bringing
Home Choice payroll and store personnel  levels within the Company's  standards.
As a result of these factors,  the Company expects a further decline in salaries
and wages as a percentage of total revenues in fiscal 2000.

    Advertising.  Advertising  expense  decreased  to $23.4  million  from $23.6
million and as a percentage of total revenues  decreased to 4.7% from 5.4%. This
decrease  is  principally  due to the  Company's  ability  to focus  advertising
efforts in cluster  markets.  It is also due to the Company's  participation  in
co-operative   advertising   programs  with  its  vendors.   As  part  of  these
co-operative  programs,  the  Company  is  able  to  recoup  a  portion  of  its
advertising  costs from its vendors in the form of rebates for advertising their
products in Rent-Way ads.

     Occupancy.  Occupancy expense increased to $33.0 million from $30.0 million
principally due to the addition of the stores opened and acquired in fiscal 1998
and 1999.

    Business  combination  costs.  In conjunction  with the Merger,  the Company
incurred  $16.8 million in costs which included  investment  banker fees of $6.5
million,  proxy  preparation,  printing,  and  other  professional  fees of $1.3
million,  employee severance and stay-put arrangement costs of $4.5 million, due
diligence and other costs of $0.9 million, costs related to closing or disposing
of duplicate corporate headquarters, equipment and stores in overlapping markets
of $2.1 million,  and the write-off of prepaid assets which could not be used of
$1.5 million.  In fiscal 1998,  the Company  incurred  $11.2 million in business
combination  costs  associated  with Home  Choice's  predecessor's  merger  with
Alrenco,  Inc. in February 1998.  These costs included  investment  banker fees,
proxy preparation, printing, and other professional fees, employee severance and
other costs associated with relocating the corporate  headquarters  from Indiana
to Texas,  costs  related to closing  and  merging  stores in the same  markets,
amortization  expense of stock awards  which  vested fully upon the merger,  and
costs associated with terminating certain leases.

    Name change expense. Name change expense decreased to $0.1 million from $1.8
million.  In 1997,  Home Choice  launched a program to change the name of all of
its stores from the various trade names acquired to  "HomeChoice  Lease or Own".
In connection with this program,  Home Choice incurred  nonrecurring costs which
included  the  write-off  of the net  carrying  values of old signs and  branded
supplies and the expensing of new vehicle decals. The Company currently operates
under both the RentWay and HomeChoice trade names.

    Other  operating  expenses.  Other  operating  expenses  decreased to $103.0
million from $107.8  million and  decreased  to 20.8% as a  percentage  of total
revenues from 24.7%.  This decrease is the result of the efficiencies  gained by
the Company  from its ability to spread  certain  fixed costs over an  increased
store revenue base.  These  decreased fixed costs include  liability  insurance,
legal and professional fees, state and local taxes, and office supplies.

    Operating  income.  Operating  income increased to 9.4% from 3.3% due to the
factors discussed above. In connection with the Merger, the Company identified a
large  number of rental  merchandise  items,  which  failed to meet the accepted
quality  standards  of the  Company's  operating  procedures.  Accordingly,  the
Company  experienced an excessive amount of inventory deletions during the three
month  period  ended  December  31,  1998.  The  amount of  excessive  inventory
write-offs  included  in  the  other  operating  expenses  in  the  Consolidated
Statement of Operations for the year ended September 30, 1999 was  approximately
$1.1 million.  Excluding  these  write-offs and the business  combination  costs
described  above,  operating  income  increased to 13.1% from 5.9%.  The Company
anticipates its operating  income to increase to  approximately  16.0% in fiscal
2000 as a result of its  continued  ability to leverage  costs over an increased
store revenue base.

    Interest  expense.  Interest  expense  increased  to  3.3%  from  2.6%  as a
percentage  of total  revenues.  This  increase  is mainly due to a full year of
interest  accruing on the $81.0 million in funds drawn on the  Company's  senior
credit  facility to consummate  the Champion  acquisition  compared to a partial
year of interest accruing in fiscal 1998.

    Income tax  expense.  Income tax expense as a percentage  of total  revenues
increased to 3.1% from 1.1%.  The increase was due to a significant  increase in
pretax  book income and  operating  income.  The  Company's  effective  tax rate
decreased from 1998 because nondeductible business combination costs represented
a smaller  portion of pretax  income in 1999 compared to 1998 and as a result of
$1,520 of  favorable  adjustments  related  to the  completion  of  certain  tax
authority  audits and  finalization  of certain tax returns  related to acquired
entities.

    Extraordinary  item. In connection with the Merger, the Company entered into
a new syndicated  loan facility.  As a result of this  refinancing,  the Company
wrote off the remainder of deferred financing costs associated with its and Home
Choice's  previous  credit  facilities.  The  amount of the  remaining  deferred
financing costs was $0.9 million, $0.5 million net of tax benefit.

    Net income.  Net income increased to 2.9% from a net loss of 0.4% due to the
factors discussed above.

Fiscal 1998 compared to Fiscal 1997

    Total revenues.  Total revenues increased $115.7 million, or 36.1% to $436.0
million from $320.3 million.  The increase is attributable to the inclusion of a
full year's results for the stores acquired and opened in fiscal 1997, a partial
year's  operations  for the  stores  acquired  and  opened in fiscal  1998,  and
increased same store revenues.  The stores acquired in the Champion  acquisition
accounted for $51.1 million,  or 44.2%, of the increase.  The stores acquired in
the Ace Rentals  acquisition,  accounted  for $15.9  million,  or 13.7%,  of the
increase.  Other 1998 acquisitions  accounted for $2.8 million,  or 2.4%, of the
increase.  Stores opened in fiscal 1998 accounted for $3.8 million,  or 3.3%, of
the increase.  The stores acquired in Rent-Way 1997  acquisitions  accounted for
$17.8 million, or 15.4% of the increase. The stores acquired in Home Choice 1997
acquisitions  accounted for $14.3 million, or 12.3% of the increase.  The stores
opened in fiscal 1997 accounted for $9.1 million, or 7.9%, of the increase.  The
Company's same stores accounted for $0.9 million, or 0.8%, of the increase.

    Depreciation  and  amortization.  Depreciation  expense  related  to  rental
merchandise  increased to $108.4  million from $80.2  million,  but decreased to
24.9% from 25.0% of total revenues principally due to increases in weekly rental
rates,  lower purchase costs of rental  merchandise due to increased volume, and
improved realization of collectible rent.

    Depreciation  expense  related to property and  equipment  increased to $7.2
million from $5.5 million primarily due to the new store signage,  remodels, and
computer  equipment  costs  associated  with the  Champion  acquisition  and Ace
Rentals acquisition.

    Amortization of goodwill decreased to 2.6% as a percentage of total revenues
from 3.7%. This is attributable to the reduced  amortization expense of 1996 and
1997 purchase acquisitions  primarily for customer rental agreements,  which are
amortized on an accelerated method over an estimated useful life of 18 months.

    Salaries and wages.  Salaries and wages increased by $30.8 million to $120.3
million  from  $89.5  million  principally  due to the  addition  of the  stores
associated with the Champion acquisition and Ace Rentals  acquisition.  Salaries
and wages as a percentage of total revenues decreased 0.3% to 27.6% from 27.9%.

    Advertising.  Advertising  expense  increased  to $23.6  million  from $17.9
million  principally  due to the  addition  of the  stores  associated  with the
Champion acquisition and Ace Rentals acquisition.  Advertising expense decreased
to 5.4% from 5.6% of total revenues.

    Occupancy.  Occupancy  expense increased to $30.0 million from $22.3 million
principally  due to the addition of the stores  associated  with the Ace Rentals
acquisition and Champion  acquisition,  but decreased to 6.9% from 7.0% of total
revenues.

    Business combination costs.  Business combination costs increased to 2.6% as
a percentage  of total  revenues  from 0.3%.  This  increase is due to the $11.2
million in costs incurred by Home Choice's predecessor to effect the merger with
Alrenco,  Inc. in February 1998.  These costs included  investment  banker fees,
proxy preparation, printing, and other professional fees, employee severance and
other costs associated with relocating the corporate  headquarters  from Indiana
to Texas,  costs  related to closing  and  merging  stores in the same  markets,
amortization  expense of stock awards  which  vested fully upon the merger,  and
costs associated with terminating certain leases.

    Name change expense. Name change expense increased to $1.8 million from $0.7
million.  In 1997,  Home Choice  launched a program to change the name of all of
its stores from the various trade names acquired to  "HomeChoice  Lease or Own".
In connection with this program,  Home Choice incurred  nonrecurring costs which
included  the  write-off  of the net  carrying  values of old signs and  branded
supplies and the expensing of new vehicle decals.

    Other  operating  expenses.  Other  operating  expenses  increased to $107.8
million  from  $80.0  million  primarily  due to  the  addition  of  the  stores
associated  with the Ace  Rentals  acquisition  and  Champion  acquisition,  but
decreased to 24.7% from 25.0%.

    Operating  income.  Operating  income  decreased  to 3.3%  from  3.4%.  This
decrease is principally due to the business  combination  costs described above.
Excluding  these  costs,  operating  income  increased  to 5.9% from 3.7%.  This
increase is principally due to the Company's  ability to spread fixed costs over
an increased store revenue base.

    Interest  expense.  Interest  expense  increased to 2.6% as a percentage  of
total revenues from 1.8%. This increase is mainly due to a full year of interest
accruing on borrowings drawn on the Company's credit facility in connection with
the acquisition of Bill Coleman TV in January 1997 and the $20.0 million of 7.0%
Convertible  Subordinated  Debentures  due 2007  (the  "Debentures")  issued  in
connection  with the Rental King  acquisition.  This increase is also due to the
$81.0  million  in funds  drawn  on the  Company's  senior  credit  facility  in
connection with the Champion acquisition.

    Income tax expense.  Income tax as a percentage of total revenues  decreased
to 1.1% from 1.5%.  The decrease in fiscal 1998 was due to lower pretax  income,
resulting  from increased  business  combination  costs incurred  during 1998, a
portion of which were nondeductible for tax purposes.

    Net  income.  The  Company  generated  a net loss of 0.4% in fiscal  1998 as
compared to net income of 0.4% in fiscal  1997.  This  decrease is the result of
the business combination costs described above.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's  capital  requirements  relate primarily to acquisitions,  new
store  openings,  and purchasing  additional  rental  merchandise  and replacing
rental  merchandise  that has been sold or is no longer  suitable for rent.  The
Company   intends  to  increase  the  number  of  stores  it  operates   through
acquisitions and new store openings. Such acquisitions will vary in size and the
Company will consider large  acquisitions that could be material to the Company.
To provide any  additional  funds  necessary  for the  continued  pursuit of its
growth strategies,  the Company may incur, from  time-to-time,  additional short
and long-term bank or other institutional  indebtedness and may issue, in public
or private transactions,  its equity and debt securities,  depending upon market
and other conditions.  There can be no assurance that such additional  financing
will be available on terms acceptable to the Company.

     Net cash  provided by (used in)  operating  activities  increased  to $11.0
million for fiscal 1999 from ($12.9  million) for fiscal 1998.  This increase is
principally  due to a $16.4  million  increase  in net income,  a $11.3  million
increase in deferred income taxes, a $5.2 million decrease in rental merchandise
purchases, and a $4.5 million increase in income taxes payable offset by a $27.1
million  decrease in  accounts  payable  and a $11.3  million  decrease in other
liabilities.

     Net cash used in  investing  activities  decreased  $45.1  million to $92.0
million  in fiscal  1999  compared  to $137.1  million in fiscal  1998.  Capital
expenditures  in fiscal 1999  included the purchase of 21 stores from  America's
Rent-To-Own in June 1999 and 250 stores from  RentaVision in September  1999. It
also  included  the  purchase of new store  signage and store  remodeling  costs
associated  with  the  stores  obtained  in  the  Home  Choice  merger.  Capital
expenditures  in 1998  included  the  purchase  of 50 stores from Ace Rentals in
January 1998,  145 stores from Champion in February  1998,  and an additional 55
stores.  It also  included the purchase of a 34,000  square foot  building to be
used as the  Company's  new corporate  headquarters  in June 1998.  The purchase
price of the building was $3.7 million. In addition,  1998 capital  expenditures
included the computer equipment and software costs related to the implementation
of a PeopleSoft software package for all accounting  functions,  payroll,  human
resources, and benefit administration requirements and a J. Driscoll package for
cash management.

    In fiscal 2000, the Company plans to construct a 30,000 square foot addition
to its current corporate  headquarters  facility. The Company estimates the cost
at  approximately  $3.5  million.  The Company  plans to fund this  project with
borrowings on its senior credit facility.

     Net cash  provided by financing  activities  decreased to $84.4  million in
fiscal  1999 from  $149.7  million in fiscal  1998.  Cash  flows from  financing
activities have  historically  represented  the Company's  financing of its long
term growth.

    On September 23, 1999, the Company  amended its existing  collaterized  term
loan and  revolving  credit  facility  with a syndicate  of banks led by Bank of
Montreal and National City Bank (the "Amended  Facility").  The Amended Facility
provides for loans and letters of credit up to $325.0 million.  Borrowings under
the Amended Facility bear interest at the Company's option either at a base rate
or a LIBOR based rate. The Amended Facility requires the Company to meet certain
financial  covenants and ratios  including  maximum  leverage,  minimum interest
coverage,  minimum  tangible  net  worth,  fixed  charge  coverage,  and  rental
merchandise  usage  ratios.  As of  September  30,  1999,  the  Company  was  in
compliance with all covenants contained in the Amended Facility. As of September
30, 1999 $268.0 million in borrowings is outstanding under the Amended Facility.
Of the $268.0  million  outstanding,  $43.0  million  is related to a  revolving
credit  facility,  which is payable  September 30, 2004 and $225.0 million is in
the form of term notes.

    The principal amount of the Term Notes A (with maximum  borrowings of $125.0
million) are payable in quarterly payments due on the last day of each December,
March, June, and September, beginning with the quarter ending December 31, 1999,
and as follows:



<TABLE>
<CAPTION>



       Quarter (s) Ending on Following         Amount of Quarterly Payment of
       Date or In The Following Period       Principal Due on Each Payment Date
       -------------------------------       ----------------------------------
                                                     (in millions of $)
<S>    <C>   <C>        <C>  <C>                  <C>   <C>
       12-31-99 through 9-30-00.............      $      3.8
       12-31-00 through 9-30-01.............             5.0
       12-31-01 through 9-30-02.............             6.3
       12-31-02 through 9-30-03.............             7.5
       12-31-03 through 9-30-04.............             8.8
</TABLE>


     The principal  amount of each of the Term Notes B (with maximum  borrowings
of $100.0  million)  are  payable in  quarterly  payments  each in the amount of
$250,000  due on the last day of each  December,  March,  June,  and  September,
beginning with the quarter ending December 31, 1999, and continuing  through and
including  September 30, 2004,  followed by two annual payments on September 30,
2005 and September 30, 2006, each in the amount of $47.5 million.

    The Company believes that it will generate  sufficient  amounts of cash from
operations to make the required quarterly principal repayments in fiscal 2000.

    Management believes that sufficient  resources will be available to meet the
Company's cash requirements through at least the next twelve months. The Company
believes that it can adequately fund its cash needs for the  foreseeable  future
through   borrowings   under  the  Amended  Facility  and  cash  generated  from
operations.  Cash  requirements for periods beyond the next twelve months depend
on  the  Company's   profitability,   its  ability  to  manage  working  capital
requirements, and its rate of growth.

Quantitative and Qualitative Disclosures About Market Risk

    The  Company's  major  market  risk  exposure is  primarily  due to possible
fluctuations in interest rates.  The Company's policy is to manage interest rate
risk by  utilizing  interest  rate swap  agreements  to convert a portion of the
floating  interest rate debt to fixed interest rates. The Company does not enter
into derivative financial instruments for trading or speculative  purposes.  The
interest rate swap agreements are entered into with major financial institutions
thereby minimizing the risk of credit loss.

    The  following  table  presents   information  about  the  Company's  market
sensitive  financial  instruments.  The  table  illustrates  the  principle  and
notional amounts,  as well as the date of maturity,  actual and weighted average
pay and receive rates for all  significant  financial and  derivative  financial
instruments in effect as of September 30, 1999:




<PAGE>
<TABLE>
<CAPTION>


                           Expected Maturity Dates
                            (dollars in millions):           1999    2000    2001     2002     2003    2004      Thereafter
                    --------------------------------------   ----    ----    ----     ----     ----    ----      ----------
                    Debt:
<S>                                                                                                   <C>
                      Revolving credit facility, Base rate
                    option................................                                            $3.0
                     --Actual floating rate...............                                            9.250%
                      Revolving credit facility, Euro-rate
                    option................................                                            $40.0
                     --Actual floating rate...............                                            8.014%
                      Term Loan A Euro-rate option........          $15.0   $20.0    $25.0    $30.0   $35.0
                     --Actual floating rate...............          8.014%  8.014%   8.014%   8.014%  8.014%      8.014%
                      Term Loan B Euro-rate option........          $1.0    $1.0     $1.0     $1.0    $1.0        $95.0
                     --Actual floating rate...............          8.383%  8.383%   8.383%   8.383%  8.383%      8.383%
                      Convertible Subordinated Debentures.                                                        $20.0
                     --Actual fixed interest rate.........                                                        7.0%
                    Interest rate swap agreements:
                      National City Bank, notional amount.                                    $30.0
                     --Actual fixed interest rate pay rate                                    5.965%
                     --Actual variable interest rate
                       receive rate, (based on 3 month
                       LIBOR).............................                                    5.514%
                      Bank of America, notional amount....                                    $20.0
                     --Actual fixed interest rate pay rate                                    5.760%
                     --Actual variable interest rate
                       receive rate, (based on 3 month
                       LIBOR).............................                                    5.514%
                      Manufacturers and Traders Trust,
                      notional amount.....................                                    $10.0
                     --Actual fixed interest rate pay rate                                    5.925%
                     --Actual variable interest rate
                       receive rate, (based on 3 month
                       LIBOR).............................                                    5.514%
                      Harris Bank, notional amount........                                    $20.0
                     --Actual fixed interest rate pay rate                                    5.090%
                     --Actual variable interest rate
                       receive rate, (based on 3 month
                       LIBOR).............................                                    5.514%
                      SunTrust Bank, notional amount......                                    $10.0
                     --Actual fixed interest rate pay rate                                    5.105%
                     --Actual variable interest rate
                       receive rate, (based on 3 month
                       LIBOR).............................                                    5.514%
                      LaSalle Bank, notional amount.......                                    $10.0
                     --Actual fixed interest rate pay rate                                    5.095%
                     --Actual variable interest rate
                       receive rate, (based on 3 month
                       LIBOR).............................                                    5.514%
                      Bank of America, notional amount....                                    $10.0
                     --Actual fixed interest rate pay rate                                    5.120%
                     --Actual variable interest rate
                       receive rate, (based on 3 month
                       LIBOR).............................                                    5.514%
                      Harris Bank, notional amount........                                    $10.0
                     --Actual fixed interest rate pay rate                                    5.120%
                     --Actual variable interest rate
                       receive rate, (based on 3 month
                       LIBOR).............................                                    5.514%

                     Letters of credit:
                      Letter of credit, Base rate
                     option............................... $650
                      --Actual floating rate..............  N/A
                      Letter of credit, Base rate
                     option............................... $300
                      --Actual floating rate..............  N/A
                      Letter of credit, Base rate
                     option...............................          $450
                      --Actual floating rate..............           N/A
                      Letter of credit, Base rate
                     option...............................          $300
                      --Actual floating rate..............           N/A

</TABLE>






Seasonality and Inflation

    Management believes that operating results may be subject to seasonality. In
particular,  the  fourth  quarter  generally  exhibits  a slight  tightening  of
customer  spending habits  commensurate  with summer  vacations,  back-to-school
needs and other factors.  Conversely,  the first quarter typically has a greater
percentage  of  rentals  because  of  traditional   holiday  shopping  patterns.
Management plans for these seasonal variances and takes particular  advantage of
the first quarter with product  promotions,  marketing  campaigns,  and employee
incentives.  Because  many  of the  Company's  expenses  do not  fluctuate  with
seasonal  revenue  changes,  such revenue changes may cause  fluctuations in the
Company's quarterly earnings.

    During the year ended  September 30, 1999,  the cost of rental  merchandise,
store lease rental expense and salaries and wages have increased modestly. These
increases  have  not  had a  significant  effect  on the  Company's  results  of
operations  because the Company  has been able to charge  commensurately  higher
rental  for  its  merchandise.  This  trend  is  expected  to  continue  in  the
foreseeable future.

Recent Accounting Pronouncements

    In June 1997,  the  Financial  Accounting  Standard  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standards  ("SFAS")  No.  130,  "Reporting
Comprehensive  Income",  effective for fiscal years beginning after December 15,
1997.  This  Statement  establishes  standards  for  reporting  and  display  of
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial  statements.  The Company  adopted  the  provisions  of this  standard
effective October 1, 1998 and has had no items of other comprehensive income.

    In June 1997, the FASB issued SFAS No. 131,  "Disclosures  about Segments of
an Enterprise  and Related  Information"  effective  for fiscal years  beginning
after  December  15,  1997.   This  Statement   requires  that  public  business
enterprises  report certain  information about operating  segments in annual and
interim financial statements.  It also requires that public business enterprises
report certain  information  about their  products and services,  the geographic
areas in which they operate, and their major customers. The Company has only one
segment.

    In June 1998,  the FASB  issued  SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging Activities"  effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. This Statement  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments   embedded  in  other  contracts,   (collectively   referred  to  as
derivatives)  and for hedging  activities.  It requires that an entity recognize
all  derivatives  as either assets or  liabilities in the statement of financial
position and measure those  instruments  at fair value.  In June 1999,  the FASB
issued  SFAS  No.  137,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities-Deferral  of the  Effective  Date SFAS No.  133-an  Amendment of FASB
Statement 133". This Statement delays the effective date for this standard until
fiscal years beginning after June 15, 2000. The Company is currently  evaluating
the provisions of these statements.

     The Accounting  Standards  Executive  Committee Statement of Position 98-1,
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal Use" ("SOP 98-1"),  issued in March 1998 and effective for fiscal years
beginning after December 15, 1998 with earlier application  permitted,  provides
guidance on accounting for the costs of computer software  developed or obtained
for  internal  use.  The  Company  adopted  this  statement  for the year  ended
September  30,  1999  resulting  in  no  significant  effect  in  the  Company's
consolidated financial statements.

     The Accounting  Standards  Executive  Committee Statement of Position 98-5,
"Accounting for the Costs of Start-up Activities" ("SOP 98-5"),  issued in April
1998 and  effective  for fiscal  years  beginning  after  December 15, 1998 with
earlier application permitted, provides guidance on financial reporting of start
up costs and  organization  costs.  The  Company  is  currently  evaluating  the
provisions of this statement.

    Year 2000 Issues

    The Company utilizes management  information systems and software technology
that may be affected  by Year 2000  issues  throughout  its  operations.  During
fiscal  1998 the  Company  began to  implement  plans to  ensure  those  systems
continue to meet its  internal  and  external  requirements.  All the  Company's
remote locations operate on an internally  developed point of sale system.  This
system  utilizes a peer to peer,  Windows 95 local area network.  Communications
between remote locations and the corporate office are handled via e-mail through
the internet.  After completion of testing,  the Company has determined that its
point of sale  system  is Year  2000  compliant.  As a result  of the  Company's
growth,  a decision  was made to upgrade  information  systems at the  corporate
office. The installation and implementation of a Year 2000 compliant  PeopleSoft
software package was completed on January 1, 1999. This package  encompasses all
accounting  functions,  payroll,  human  resources  and  benefit  administration
requirements.  The  system  operates  in an n-tier  environment  on a Windows NT
platform.  The cost of all hardware,  software,  training and implementation was
approximately  $1.5 million,  the majority of which was incurred in fiscal 1998.
In addition to the PeopleSoft  package,  the Company has implemented a Year 2000
compliant J. Driscoll Package for cash management.  This package will operate on
the same platform as the PeopleSoft package.

    The  Company  has  developed  questionnaires  and  contacted  key  suppliers
regarding  their Year 2000 compliance to determine any impact on its operations.
In general,  the  suppliers  have  developed or are in the process of developing
plans to address  Year 2000  issues.  The Company  will  continue to monitor and
evaluate  the  progress of its  suppliers  on this  matter.  The Company is also
reviewing its non-information  technology systems to determine the extent of any
changes that may be necessary  and believes  that there will be minimal  changes
required for compliance.

    Based on the  progress  the  Company  has made in  addressing  its Year 2000
issues and the Company's plan and timeline to complete its  compliance  program,
the Company does not foresee  significant  risks  associated  with its Year 2000
compliance  at this time. As the  Company's  plan is to address its  significant
Year  2000  issues  prior to being  affected  by them,  it has not  developed  a
comprehensive  contingency plan. However, if the Company identifies  significant
risks  related to its Year 2000  compliance  or its progress  deviates  from the
anticipated  timeline,  the Company  will  develop  contingency  plans as deemed
necessary at that time.


                              CAUTIONARY STATEMENT

    This  Report  on Form 10-K and the  foregoing  Management's  Discussion  and
Analysis of  Financial  Condition  and Results of  Operations  contains  various
"forward looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company's Annual Report to Shareholders, any Report on Form 10-Q
or Current Report on Form 8-K or any other written or oral statements made by or
on behalf of the Company may include forward looking statements. Forward-looking
statements  represent the Company's  expectations or beliefs  concerning  future
events. Any  forward-looking  statements made by or on behalf of the Company are
subject to  uncertainties  and other factors that could cause actual  results to
differ  materially from such statements.  These  uncertainties and other factors
include,  but are not  limited  to, (i) the  ability  of the  Company to acquire
additional  rental-purchase  stores on favorable terms,  (ii) the ability of the
Company to improve the performance of such acquired stores and to integrate such
acquired stores into the Company's  operations,  (iii) the Company's  ability to
open new  stores  in  favorable  locations  and to cause  such  stores to become
profitable in a timely  manner or at all, (iv) the Company's  ability to improve
the revenue  performance  and  profitability  of the Home Choice  stores and the
other stores  acquired in fiscal 1999,  (v) the impact of state and federal laws
regulating or otherwise  affecting  the  rental-purchase  transaction,  and (vi)
unforeseen impacts arising from Year 2000 issues.

    Undue reliance should not be placed on any  forward-looking  statements made
by or on behalf of the  Company  as such  statements  speak  only as of the date
made.  The Company  undertakes no  obligation  to publicly  update or revise any
forward-looking  statement,   whether  as  a  result  of  new  information,  the
occurrence of future events or otherwise.



<PAGE>


ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>

                                                                                                     Page
<S>                                                                                                    <C>
                          Index to Financial Statements.........................................       21
                            Reports of Independent Accountants..................................       22
                            Financial Statements:
                             Consolidated Balance Sheets, September 30, 1999 and 1998...........       24
                             Consolidated Statements of Operations, Years Ended September 30,
                                 1999, 1998, 1997...............................................       25
                             Consolidated Statements of Shareholders' Equity, Years Ended
                                 September 30, 1999, 1998, 1997.................................       26
                             Consolidated Statements of Cash Flows, Years Ended September 30,
                                 1999, 1998, 1997...............................................       27
                             Notes to Consolidated  Financial Statements........................       28
</TABLE>


<PAGE>


                                 RENT-WAY, INC.

                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders of Rent-Way, Inc.:

     In our  opinion,  based  on our  audits  and in 1997  the  report  of other
auditors,   the  accompanying   consolidated  balance  sheets  and  the  related
consolidated  statements  of  operations,  shareholders'  equity  and cash flows
present fairly, in all material  respects,  the financial  position of Rent-Way,
Inc. and its  Subsidiaries  at September  30, 1999 and 1998,  and the results of
their  operations and their cash flows for each of the three years in the period
ended  September 30, 1999, in conformity with  accounting  principles  generally
accepted in the United States. These financial statements are the responsibility
of the  Company's  management;  our  responsibility  is to express an opinion on
these financial  statements based on our audits.  We did not audit the financial
statements of Alrenco,  Inc. prior to its combination with RTO, Inc. on February
26, 1998, which 1997 statements  reflect total revenues of 37% and net income of
$3,586,000 for the year ended December 31, 1997.  Those  statements were audited
by other auditors whose report thereon has been furnished to us, and our opinion
herein,  insofar as it relates to amounts  included for Alrenco,  Inc., is based
solely on the report of the other  auditors.  We  conducted  our audits of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States,  which  require  that we plan and  perform  the  audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.


                                                   PricewaterhouseCoopers LLP



Cleveland, Ohio
December 22, 1999
























<PAGE>






                                 RENT-WAY, INC.

                        REPORT OF INDEPENDENT ACCOUNTANTS


To The Board of Directors and Shareholders of Rent-Way, Inc.:

     We have audited, prior to the restatement for the 1998 pooling of interests
with RTO, Inc., the statements of  operations,  shareholders'  equity,  and cash
flows of Alrenco,  Inc.  for the year ended  December  31,  1997,  which are not
presented  herein.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

    We  conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

    In our opinion,  the financial  statements referred to above present fairly,
in all material  respects,  the results of operations and cash flows of Alrenco,
Inc. for the year ended December 31, 1997, in conformity with generally accepted
accounting principles.




                                                            GRANT THORNTON LLP



Dallas, Texas
January 30, 1998




<PAGE>
<TABLE>
<CAPTION>


                                                     RENT-WAY, INC.
                                              CONSOLIDATED BALANCE SHEETS
                                               (all dollars in thousands)



                                                                                          September 30,
                                                                                  ------------------------------
                                                                                      1999              1998
                                                                                  ------------      ------------
             Assets
<S>                                                                               <C>               <C>
             Cash and cash equivalents.........................................   $      8,646      $      5,326
             Prepaid expenses..................................................          9,610             7,819
             Income tax receivable.............................................             --             2,972
             Rental merchandise, net...........................................        202,145           176,022
             Deferred income taxes.............................................             --             5,301
             Property and equipment, net.......................................         50,578            38,519
             Goodwill, net of accumulated amortization of $26,411 and $16,627,
              respectively.....................................................        305,900           225,354
             Deferred financing costs, net of accumulated amortization of $487
              and $571, respectively...........................................          3,688             1,575
             Non-compete agreements and prepaid consulting fees, net of
              accumulated amortization of $6,687 and $2,045, respectively......          5,494             6,950
             Other assets......................................................         11,333             8,993
                                                                                   -----------       -----------
                                                                                   $   597,394       $   478,831
                                                                                   ===========       ===========

             Liabilities and Shareholders' Equity
             Liabilities:
             Accounts payable..................................................   $      8,417      $     28,145
             Other liabilities.................................................         15,861            23,220
             Income taxes payable..............................................          2,316                --
             Deferred income taxes.............................................          5,218                --
             Debt..............................................................        288,130           179,603
                                                                                   -----------       -----------
                                                                                       319,942           230,968
             Commitments and contingencies (Note 9)...........................             --                --

             Shareholders' equity:
             Preferred stock, without par value; 1,000,000 shares authorized;
              no shares issued and outstanding at September 30, 1999 and 1998,
              respectively.........................................                         --                --

             Common  stock,  without par value;  50,000,000  shares  authorized;
              21,976,401 and 21,060,820 shares issued and outstanding at
              September 30, 1999 and 1998, respectively........................        256,755           241,749

             Retained earnings.................................................         20,697             6,114
                                                                                    ----------        ----------
               Total shareholders' equity......................................        277,452           247,863
                                                                                    ----------        ----------
                                                                                    $  597,394        $  478,831
                                                                                    ==========        ==========

                               The accompanying notes are an integral part of these financial statements.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                            RENT-WAY, INC.
                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                           (all dollars in thousands, except per share data)


                                                                                For the Years Ended September 30,
                                                                         --------------------------------------------
                                                                              1999            1998            1997
                                                                         --------------  --------------  ------------
                          Revenues:
<S>                                                                      <C>             <C>             <C>
                          Rental revenue..............................   $   427,093     $   377,918     $   277,261
                          Other revenue...............................        67,258          58,113          43,069
                                                                         -----------     -----------     -----------
                            Total revenues............................       494,351         436,031         320,330
                          Costs and operating expenses:
                          Depreciation and amortization:
                            Rental merchandise........................       123,511         108,367          80,165
                            Property and equipment....................         9,603           7,238           5,506
                            Amortization of goodwill..................         9,784          11,248          11,829
                          Salaries and wages..........................       128,525         120,296          89,510
                          Advertising.................................        23,352          23,613          17,872
                          Occupancy...................................        33,016          29,974          22,349
                          Name change expense.........................            86           1,770             743
                          Business combination costs..................        16,800          11,210             935
                          Signing bonus...............................            --              --             400
                          Other operating expenses....................       102,959         107,786          80,023
                                                                         -----------     -----------     -----------
                          Total costs and operating expenses..........       447,636         421,502         309,332
                                                                         -----------     -----------     -----------
                               Operating income.......................        46,715          14,529          10,998
                          Other income (expense):
                          Interest expense............................       (15,581)        (10,949)         (5,642)
                          Amortization--deferred financing costs......          (422)           (358)           (239)
                          Interest income.............................            29             251             219
                          Other income (expense), net.................          (405)           (540)          1,096
                                                                         -----------     -----------     -----------
                               Income before income taxes and
                                extraordinary item....................        30,336           2,933           6,432
                          Income tax expense (Notes 4 and 11).........        15,234           4,771           4,866
                                                                         -----------     -----------     -----------
                               Income (loss) before extraordinary item        15,102          (1,838)          1,566
                          Extraordinary item (Notes 1 and 7)..........          (519)             --            (269)
                                                                         -----------     -----------     -----------
                               Net income (loss)......................        14,583          (1,838)          1,297

                          Preferred stock gain on redemption (Note 10)            --              --             280
                                                                         -----------     -----------     -----------
                          Earnings (loss) applicable to common shares.   $    14,583     $    (1,838)    $     1,577
                                                                         ===========     ============    ===========
                          Earnings (loss)  per common share:
                          Basic earnings (loss) per share (adjusted to
                          give effect to preferred stock gain on
                          redemption):
                               Income (loss) before extraordinary item   $      0.71     $     (0.09)    $      0.11
                                                                         ===========     ============    ===========
                               Net income (loss)......................   $      0.68     $     (0.09)    $      0.09
                                                                         ===========     ============    ===========
                           Diluted earnings (loss) per share (adjusted
                           to give effect to preferred stock gain on
                           redemption):
                               Income (loss) before extraordinary item   $      0.68     $     (0.09)    $      0.11
                                                                         ===========     ============    ===========
                               Net income (loss)......................   $      0.66     $     (0.09)    $      0.09
                                                                         ===========     ============    ===========
                           Weighted average number of shares outstanding:
                               Basic..................................        21,341          20,283          16,653
                                                                         ===========     ===========     ===========
                               Diluted................................        23,345          20,283          16,653
                                                                         ===========     ===========     ===========

                                    The accompanying notes are an integral part of these financial statements.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                          RENT-WAY, INC.

                                         CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                     For the Years Ended September 30, 1999, 1998 and 1997
                                            (all dollars and shares in thousands)


                                                                  Common Stock                           Total
                                                             -----------------------      Retained    Shareholders'
                                                              Shares         Amount       Earnings       Equity
                                                             --------       --------     ----------  --------------

<S>                                   <C> <C>                   <C>      <C>
                 Balance at September 30, 1996.........        16,598     $  175,446     $    1,618   $   177,064
                   Net income..........................            --             --          1,297         1,297
                   Common stock returned to treasury
                      (Note 4).........................           (66)            --             --            --
                   Purchases of business (Note 4)......            --            107             --           107
                   Issuance of common stock under stock
                      option plans including tax benefit
                      (Note 13)........................           457          4,434             --         4,434
                   Issuance of common stock to 401(k)
                      Plan (Note 15)...................            22            272             --           272
                   Issuance of common stock............            29            690             --           690
                   Purchase and retirement of common
                      stock from dissenters............           (10)          (266)            --          (266)
                   Amortization of stock awards........            --            194             --           194
                   Distributions to S-Corporation
                    Shareholders.......................                                         (77)          (77)
                   Preferred stock (dividends)/gain on
                      redemption (Note 10).............            --            280            (30)          250
                                                          -----------   ------------     ----------  ------------
                 Balance at September 30, 1997.........        17,030        181,157          2,808       183,965
                                                          -----------   ------------     ----------  ------------
                   Net (loss)..........................            --             --         (1,838)       (1,838)
                   Home Choice net income for the three
                    months ended December 31, 1997 due to
                    merger and resulting change in fiscal
                    year-end (Note 1)..................            --             --          5,144         5,144
                   Public stock offering,
                    net of expenses (Note 3)...........         2,888         47,053             --        47,053
                   Conversion of convertible debt (Note
                    7).................................           704          7,000             --         7,000
                   Write-off deferred financing costs
                    on convertible debt (Note 7)........           --            (25)            --           (25)
                   Purchase of business (Note 4).......            16            425             --           425
                   Issuance of common stock to 401(k)
                    Plan (Note 15).....................            18            383             --           383
                   Issuance of common stock under stock
                     option plans including tax benefit
                     (Note 13).........................           404          4,768             --         4,768
                   Amortization of stock awards........            --            988             --           988
                                                          -----------   ------------   ------------  ------------
                 Balance at September 30, 1998.........        21,060        241,749          6,114       247,863
                                                          -----------   ------------   ------------  ------------
                   Net income..........................             --             --        14,583        14,583
                   Purchases of business (Note 4)......            503          9,938            --         9,938
                   Issuance of common stock to 401(k)
                      Plan (Note 15)...................             18            351            --           351
                   Issuance of common stock under stock
                      option plans including tax benefit
                      (Note 13)........................            395          4,717            --         4,717
                                                          ------------   ------------  ------------  ------------
                                                                21,976   $    256,755  $     20,697  $    277,452
                                                          ============   ============  ============  ============


                                 The accompanying notes are an integral part of these financial statements.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>


                                                  RENT-WAY, INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                            (all dollars in thousands)



                                                                          For the Years Ended September 30,
                                                                   ---------------------------------------------
                                                                        1999           1998 (A)        1997 (A)
                                                                   -------------   -------------   -------------
                  Operating activities:
<S>                                                                <C>             <C>             <C>
                  Net income (loss).............................   $      14,583   $      (1,838)  $       1,297
                  Adjustments to reconcile net income (loss) to
                    net cash provided by (used in) operating
                    activities:
                    Loss on sale of property and equipment......              --             989             229
                    Gain on sale of stores, net.................              --            (174)           (950)
                    Depreciation and amortization...............         143,320         127,211          97,739
                    Deferred income taxes.......................          10,748            (591)         (1,117)
                    Deferred financing costs write-off..........             865             682             324
                    Issuance of common stock to 401(k) plan.....              --             383             272
                  Changes in assets and liabilities:
                    Prepaid expenses............................          (1,585)         (1,875)            (42)
                    Rental merchandise..........................        (135,806)       (141,043)       (111,257)
                    Income tax receivable.......................           2,972             (43)             --
                    Other assets................................           1,950          (4,340)         (4,482)
                    Accounts payable............................         (18,072)          8,961          12,897
                    Income taxes payable........................           2,197          (2,266)         (2,102)
                    Other liabilities...........................         (10,195)          1,075            (837)
                                                                   -------------   -------------    ------------
                       Net cash provided by (used in) operating
                         activities.............................          10,977         (12,869)         (8,029)
                                                                   -------------   -------------    ------------
                  Investing activities:
                    Purchase of businesses, net of cash acquired         (69,985)       (113,561)        (76,579)
                    Purchases of property and equipment.........         (22,051)        (27,074)        (14,373)
                    Proceeds from the sale of property and
                       equipment................................              --              --           3,321
                    Dispositions of stores, net of cash sold....              --           3,032           3,032
                    Payments received on notes receivable.......              --             521           1,098
                    Other.......................................              --              --              (7)
                                                                   -------------   -------------    ------------
                       Net cash used in investing activities....         (92,036)       (137,082)        (83,508)
                                                                   -------------   -------------    ------------

                  Financing activities:
                    Book overdraft..............................          (2,994)          7,802              --
                    Proceeds from borrowings....................         575,264         287,590          99,328
                    Payments on borrowings......................        (489,559)       (197,148)        (41,108)
                    Deferred financing costs....................          (3,400)           (457)         (1,661)
                    Issuance of common stock....................           5,068          51,883           4,434
                    Preferred stock dividend....................              --              --             (30)
                    Preferred stock redemption..................              --              --            (841)
                    Purchase of common stock from dissenters....              --              --            (266)
                    Distributions to S corporation shareholders.              --              --             (77)
                                                                   -------------   -------------    ------------
                       Net cash provided by financing activities          84,379         149,670          59,779
                                                                   -------------   -------------    ------------
                       Increase (decrease) in cash and cash
                        equivalents.............................           3,320            (281)        (31,758)
                    Cash and cash equivalents at beginning
                        of year.................................           5,326           5,607          35,925
                                                                   -------------   -------------    ------------
                    Cash and cash equivalents at end of year....   $       8,646   $       5,326    $      4,167
                                                                   =============   =============    ============


                         (A) See Note 1 for cash flows information related to the three months ended December 31, 1997.


                                  The accompanying notes are an integral part of these financial statements.

</TABLE>


<PAGE>

                                 RENT-WAY, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (all dollars in thousands, except per share data)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

  Business and  Organization--Rent-Way,  Inc. (the "Company") is a corporation
organized  under  the laws of the  Commonwealth  of  Pennsylvania.  The  Company
operates a chain of stores that rent  durable  household  products  such as home
entertainment equipment, furniture, major appliances and jewelry to consumers on
a weekly or monthly basis in forty-one states.  The stores are primarily located
in the Midwestern, Eastern and Southern regions of the United States.

    On January 1, 1999,  the  Company  formed  four  wholly-owned  subsidiaries:
Rent-Way TTIG, L.P., an Indiana limited partnership, Rent-Way of Tomorrow, Inc.,
Rent-Way of  Michigan,  Inc.,  and  Rent-Way  Developments,  Inc.,  all Delaware
corporations (collectively referred to herein as the "Company" or "Rent-Way").

    Basis of Presentation--The Company presents an unclassified balance sheet to
conform to practice in the industry in which it operates.

    The consolidated  financial  statements  include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.

    On December 10, 1998, Rent-Way completed a merger with Home Choice Holdings,
Inc. ("Home  Choice") (see Note 4). Prior to the merger,  Home Choice's year end
was  December  31.  As a result of the  merger  accounted  for as a  pooling  of
interests,  Rent-Way's  financial statements have been restated to retroactively
combine Rent-Way with Home Choice as if the merger had occurred at the beginning
of the earliest period presented.  The consolidated statements of operations and
cash  flows for the year  ended  September  30,  1997  reflect  the  results  of
operations and cash flows of Rent-Way for the twelve months ended  September 30,
1997 combined with Home Choice's for the twelve months ended  December 31, 1997.
As a result of Rent-Way and Home Choice  having  different  fiscal years and the
subsequent  merger of Home  Choice  into  Rent-Way,  Home  Choice's  results  of
operations and cash flows for the three months ended December 31, 1997 have been
included in both fiscal  years 1998 and 1997 results  and,  therefore  have been
reflected as an  adjustment  to the  Company's  retained  earnings at October 1,
1997.  Home Choice had total  revenues,  costs and operating  expenses and a net
loss of $61,242, $67,915, and $5,144,  respectively,  for the three months ended
December  31,  1997.  Cash flows  provided  by (used in)  operating  activities,
investing  activities and financing  activities  were $(10,768),  $(3,085),  and
$13,132, respectively, for the three months ended December 31, 1997.

    On February 26, 1998,  RTO,  Inc.  ("RTO")  completed a merger with Alrenco,
Inc.  ("Alrenco"),  with Alrenco being the surviving  corporation  in the merger
(see Note 4). Alrenco  subsequently changed its name to Home Choice. As a result
of the merger  accounted  for as a pooling  of  interests,  Alrenco's  financial
statements  were restated to  retroactively  combine  Alrenco with RTO as if the
merger had occurred at the beginning of the earliest period presented.

     These consolidated financial statements include the combination of Rent-Way
and Home Choice,  the purchase  acquisitions  and the pooling  acquisitions  (as
described in Note 4) as required by Accounting  Principles Board Opinion ("APB")
No. 16.

    Accounting Estimates--The  preparation of financial statements in conformity
with  generally  accepted  accounting  principles  requires  management  to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities, disclosure of contingent assets and liabilities at the dates of the
financial  statements and the reported  amounts of revenues and expenses  during
the reporting periods. Actual results could differ from those estimates.

    Rental Merchandise,  Rental Revenue and Depreciation--Rental  merchandise is
rented to  customers  pursuant to rental  agreements,  which  provide for either
weekly or monthly  rental  payments  collected  in  advance.  Rental  revenue is
recognized as collected,  since at the time of collection the rental merchandise
has been  placed in service and costs of  installation  and  delivery  have been
incurred.  This  method  of  revenue  recognition  does not  produce  materially
different  results  than if rental  revenue  was  recognized  over the weekly or
monthly  rental term. At the end of each rental  period,  the customer can renew
the rental agreement.

    Merchandise  rented to customers or available  for rent is classified in the
consolidated  balance  sheet as  rental  merchandise  and is valued at cost on a
specific  identification  method.  Write-offs of rental merchandise arising from
customers'  failure to return  merchandise  and losses due to excessive wear and
tear of merchandise are recognized using the direct write-off  method,  which is
materially  consistent  with the  results  that  would be  recognized  under the
allowance method.

    The Company  uses the units of activity  depreciation  method for all rental
merchandise  except  computers.  Under  the  units of  activity  method,  rental
merchandise is depreciated as revenue is collected.  This rental  merchandise is
not depreciated during periods

<PAGE>


                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:

when it is not on rent and therefore not generating  rental revenue.  Computers,
added  to the  Company's  product  line in June  1999,  are  depreciated  on the
straight-line basis over 15 months.

    Effective  January  1,  1997,  RTO  and  its  new  subsidiaries  elected  to
depreciate all additions to rental merchandise  acquired  subsequent to December
31, 1996 using the units of activity method and make other conforming changes to
the estimate of depreciation expense. These changes were made to more accurately
match  revenues  and  expenses.  The  impact of the  changes  on the  results of
operations  for the year ended  September 30, 1997 was to decrease net income by
$400 or $0.02 per basic and diluted share.

    Other  Revenue--Other  revenue  includes  revenue from various  services and
charges  to rental  customers,  including  late  fees,  liability  waiver  fees,
processing  fees, and sales of used  merchandise as well as revenue from prepaid
phone services. Other revenue is recognized as collected. This method of revenue
recognition does not produce materially  different results than if other revenue
was recognized when earned.

    Comprehensive  Income--The  Company  has no  items  of  other  comprehensive
income.

    Statement of Cash Flows  Information--Cash  and cash equivalents  consist of
cash on hand and on deposit and highly  liquid  investments  with  maturities of
three months or less when purchased.  Cash equivalents are stated at cost, which
approximates market value. The Company maintains deposits with several financial
institutions. Deposits in excess of $100 and mutual funds are not insured by the
Federal Deposit Insurance Corporation.

    Supplemental  disclosures  of cash  flow  information  for the  years  ended
September 30, are as follows:

<TABLE>
<CAPTION>

                                                                                      1999           1998            1997
                                                                                      ----           ----            ----
                Cash paid during the year for:
<S>                                                                              <C>              <C>           <C>
                   Interest..................................................... $  16,019        $ 10,240      $   5,044
                   Income taxes, net of refunds.................................       718           5,274          6,824

                 Noncash Investing activities:
                   Debt issued to seller in purchase business combinations

                   (Note 4)..................................................... $      --       $     --      $     7,100
                   Assets acquired by assumption of liabilities in purchase
                    business combinations (Note 4)..............................     6,272          19,744          18,131

                 Also,  in 1998 in  conjunction  with  the  asset  purchase  and exchange  agreement  with SKC the  Company
                 exchanged  cash of $1,100 and five  stores  with  assets  having a net book value of approximately  $964
                 in exchange  for seven  stores  having fair value of $2,385 (Note 4).

                 Noncash financing activities:
                   Common stock issued in purchase business combinations
                    (Note 4).................................................... $   9,943       $     425       $      --
                   Options issued to seller in purchase business combination
                    (Note 4)........................................                    --              --             107
                   Settlement of notes payable with common stock (Notes 7
                    and 12).....................................................        --           7,000             690
                   Issuances of common stock under stock option plans (Note
                    13).........................................................     4,717           4,768           4,434
                   Issuances of common stock to 401(k) plans (Note 15)..........       351             383             272
                   Preferred stock gain on redemption (Note 10).................        --              --             280

</TABLE>



    Property and Equipment and Related  Depreciation and  Amortization--Property
and equipment are stated at cost.  Additions and improvements that significantly
extend  the lives of  depreciable  assets  are  capitalized.  Upon sale or other
retirement of depreciable  property,  the cost and accumulated  depreciation are
removed  from the  related  accounts  and any gain or loss is  reflected  in the
results of operations.  The Company's corporate headquarters and other buildings
are  depreciated  over periods  ranging  from 20 to 40 years on a  straight-line
basis.  Depreciation  of furniture and fixtures,  signs and vehicles is provided
over the estimated  useful lives of the respective  assets (three to five years)
on a straight-line or an accelerated basis. Leasehold improvements are amortized
over the  shorter of the  useful  life of the asset or the term of the lease and
renewal period, if applicable.

    The Company reviews the recoverability of the carrying value of goodwill and
other long-term assets using an undiscounted cash flow method. At this time, the
Company  believes that no significant  impairment of the  long-lived  assets has
occurred and that no reduction of the estimated useful lives is warranted.

    Income  Taxes--Deferred  income  taxes  are  recorded  to  reflect  the  tax
consequences  on  future  years of  differences  between  the tax and  financial
statement  basis of assets and  liabilities  at year end using  income tax rates
under existing legislation expected to be in

<PAGE>
                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued:

effect at the date such  temporary  differences  are  expected  to  reverse.
Deferred income taxes are adjusted for tax rate changes as they occur.

     Intangible   Assets--Goodwill  is  stated  at  cost.  Each  acquisition  is
independently  evaluated to determine the appropriate period for amortization of
the resulting goodwill.  Currently,  amortization of goodwill is calculated on a
straight line basis over periods ranging from ten to thirty years. Periodically,
the Company will determine if there has been permanent impairment of goodwill by
comparing  anticipated   undiscounted  future  net  cash  flows  from  operating
activities  of the  acquired  store  locations  with the  carrying  value of the
related  goodwill.  At September 30, 1999 and 1998,  the Company  concluded that
there was no impairment of goodwill. Deferred financing costs are stated at cost
less  amortization  calculated  on a  straight-line  basis  over the term of the
related  debt  agreements,  which  range  from  four to ten  years.  Non-compete
agreements  and  prepaid  consulting  fees are stated at cost less  amortization
calculated  on a  straight-line  basis over the term of the related  agreements,
which range from two to seven years.  Customer contracts are stated at cost less
amortization calculated on a straight-line basis over 18 months.

    Advertising   Expense--Advertising  costs,  net  of  co-op  recoveries  from
vendors, are expensed the first time the advertising occurs.

    Advertising  Rebates--The  Company participates in vendor advertising rebate
programs  with the  majority of its rental  merchandise  suppliers.  Rebates are
recognized in the period earned. On a quarterly basis, management calculates the
amount of the rebate and either  submits a request  for  payment or credits  the
balance due the respective vendor.

    Earnings (Loss) Per Common Share--Basic  earnings (loss) per common share is
computed using income available to common  shareholders  divided by the weighted
average number of common shares outstanding.  Diluted earnings (loss) per common
share is computed  using income  available to common  shareholders  adjusted for
anticipated interest savings, net of related taxes, for convertible subordinated
notes and  debentures and the weighted  average number of shares  outstanding is
adjusted  for  the  potential  impact  of  options,   warrants  and  convertible
subordinated notes and debentures.

    Fair Value Disclosures--Fair  values of fixed interest debt instruments have
been  determined  through a combination of management's  estimates,  information
obtained from independent third parties, and discounted cash flow analysis. Fair
values of other  assets and  liabilities  are  estimated  to  approximate  their
carrying values.

    Derivative  Financial  Instruments--The  Company uses  derivative  financial
instruments to reduce the impact on interest expense of fluctuations in interest
rates on a portion of its Amended Facility (see Notes 7 and 8). The Company does
not enter into  derivative  financial  instruments  for  trading or  speculative
purposes.

    Extraordinary  Item--As a result of the  refinancing  of its  senior  credit
facility  in December  1998,  the Company  wrote off the  remainder  of deferred
financing costs  associated with its previous credit  facilities,  which totaled
$865 ($519 net of tax benefit) at the time of refinancing.

    As a result of the  refinancing  of its senior  credit  facility in November
1996, the Company incurred an extraordinary charge, net of tax benefit, of $269.
The  extraordinary  charge  was  composed  of a $125  ($75  net of tax  benefit)
prepayment  penalty  for early  retirement  of debt and a $324  ($194 net of tax
benefit) write-off of deferred finance costs associated with the refinanced debt
(see Note 7).

    Stock-Based  Compensation--The Company accounts for stock based compensation
issued to its employees and  non-employee  directors in accordance  with APB No.
25,  "Accounting  For Stock  Issued to  Employees"  and has elected to adopt the
"disclosure  only"  provisions  of Statement of Financial  Accounting  Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation".

    Reclassifications--Certain  amounts  in the  September  30,  1997  and  1998
consolidated  financial statements were reclassified to conform to the September
30, 1999, presentation.

2. NEW ACCOUNTING STANDARDS:

    In June 1997, the Financial  Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income",  effective for fiscal years beginning
after December 15, 1997. This statement  establishes standards for reporting and
display  of   comprehensive   income  and  its  components  in  a  full  set  of
general-purpose financial statements. The Company adopted the provisions of this
standard  effective October 1, 1998 and has had no items of other  comprehensive
income.

<PAGE>

                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


2. NEW ACCOUNTING STANDARDS, Continued:

    In June 1997, the FASB issued SFAS No. 131,  "Disclosures  about Segments of
an Enterprise  and Related  Information"  effective  for fiscal years  beginning
after  December  15,  1997.   This  statement   requires  that  public  business
enterprises  report certain  information about operating  segments in annual and
interim financial statements.  It also requires that public business enterprises
report certain  information  about their  products and services,  the geographic
areas in which they operate, and their major customers. The Company has only one
segment.

    In June 1998,  the FASB  issued  SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging Activities"  effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. This statement  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments   embedded  in  other  contracts,   (collectively   referred  to  as
derivatives)  and for hedging  activities.  It requires that an entity recognize
all  derivatives  as either assets or  liabilities in the statement of financial
position and measure those  instruments  at fair value.  In June 1999,  the FASB
issued  SFAS  No.  137,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities-Deferral of the Effective Date of FASB Statement No. 133-an Amendment
of FASB  Statement  133".  This  Statement  delays the  effective  date for this
standard  until  fiscal  years  beginning  after June 15,  2000.  The Company is
currently evaluating the provisions of these statements.

     The Accounting  Standards  Executive  Committee Statement of Position 98-1,
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal Use" ("SOP 98-1"),  issued in March 1998 and effective for fiscal years
beginning after December 15, 1998 with earlier application  permitted,  provides
guidance on accounting for the costs of computer software  developed or obtained
for  internal  use.  The  Company  adopted  this  statement  for the year  ended
September  30,  1999  resulting  in  no  significant  effect  in  the  Company's
consolidated financial statements.

     The Accounting  Standards  Executive  Committee Statement of Position 98-5,
"Accounting for the Costs of Start-up Activities" ("SOP 98-5"),  issued in April
1998 and  effective  for fiscal  years  beginning  after  December 15, 1998 with
earlier application permitted, provides guidance on financial reporting of start
up costs and  organization  costs.  The  Company  is  currently  evaluating  the
provisions of this statement.

3. PUBLIC STOCK OFFERING:

     On  December  2,  1997,  the  Company  completed  a public  stock  offering
consisting of 2,500,000 shares of common stock offered by the Company and 87,250
shares of common stock offered by certain selling shareholders.  In addition, on
December  30,  1997,  the  underwriters  exercised  a 30 day option to  purchase
388,088 shares of common stock to cover over-allotments. The shares were offered
at a price of  $17.25  per  share.  The  Company  received  net  proceeds  (less
underwriters   discount  and  selling   expenses)  of  $47,053   including   the
underwriters  exercise of the  over-allotment  option.  The  Company  used these
proceeds to repay  outstanding  borrowings of $23,022 under the Company's credit
agreement (see Note 7) and to fund the significant portion of the asset purchase
of South Carolina Rentals, Inc., Paradise Valley Holdings, Inc. and L & B Rents,
Inc. (collectively, "Ace Rentals") (see Note 4).

4. MERGERS, ACQUISITIONS AND DISPOSALS:

Pooling Acquisitions

     On  December  10,  1998,  the  Company  completed a merger with Home Choice
Holdings,  Inc. ("Home Choice").  The merger, as per the terms of the agreement,
was recorded as a pooling of interests, in accordance with APB No. 16. Under the
terms of the agreement the Company  issued 0.588 shares of common stock for each
outstanding  share  of Home  Choice  common  stock.  The  merger  increased  the
outstanding  shares of the  Company  by  approximately  10,025,000  shares.  The
corporate  offices of the  combined  company are located in Erie,  Pennsylvania.
None of Home  Choice's  Board of  Directors  or  executive  officers  retained a
position  with the  combined  company.  Following  the  merger,  Gerald  A. Ryan
remained as  Chairman  of the Board of the  combined  company,  with  William E.
Morgenstern  as President and Chief  Executive  Officer and Jeffrey A. Conway as
Chief  Financial  Officer.  In conjunction  with the merger,  certain costs were
incurred which were recorded by the Company during the year ended  September 30,
1999. These costs aggregated  $16,800 and included (i) investment banker fees of
$6,476, (ii) proxy preparation,  printing and other professional fees of $1,341,
(iii)  employee  severance and stay-put  arrangement  costs of $4,516,  (iv) due
diligence and other costs of $874,  (v) costs related to closing or disposing of
duplicate corporate headquarters, equipment and stores in overlapping markets of
$2,142 and (iv)  write-off of prepaid  assets which could not be used of $1,453.
In addition,  the Company  identified a large number of rental merchandise items
which failed to meet the accepted quality  standards of the Company's  operating
procedures.   Accordingly,  the  Company  experienced  an  excessive  amount  of
inventory  deletions  during the three month period ended December 31, 1998. The
amount of excessive inventory write-offs included in other operating expenses in
the Consolidated Statement of Operations for the

<PAGE>

                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:

year ended September 30, 1999 was approximately  $1,100. In conjunction with the
merger, the Company entered into a new syndicated loan facility (see Note 7).

     On February 26, 1998,  Home Choice  (formerly  Alrenco,  Inc.)  completed a
merger  with  RTO,  Inc.  The  merger,  as per the terms of the  agreement,  was
recorded as a pooling of  interests,  in  accordance  with APB No. 16. Under the
terms of the  agreement,  Alrenco  issued  0.898 shares of common stock for each
outstanding  share of RTO common stock.  The merger  increased  the  outstanding
shares of Alrenco by approximately  12,280,000  shares. The corporate offices of
the combined  company were located in Mesquite,  Texas.  In accordance  with the
terms of the merger  agreement,  the  incumbent  directors  of  Alrenco,  except
Michael D. Walts, resigned and were replaced by George D. Johnson, Jr., Billy W.
White,  Sr.,  Edward W. Phifer,  III, and John S. Rainey.  Mr. Walts remained as
director.  Bill W. White,  Sr.,  James G.  Steckhart,  and K. David Belt,  Chief
Executive  Officer,  Chief  Operating  Officer,  and  Chief  Financial  Officer,
respectively,  of RTO continued in these roles for the combined company.  George
D. Johnson, Jr., Chairman of RTO, was named Chairman of the combined company. In
conjunction with the merger,  certain costs were incurred which were recorded by
the Company  during the year ended  September 30, 1998.  These costs  aggregated
$11,210 and included (i) investment  banker fees, proxy  preparation,  printing,
and other  professional fees, (ii) employee severance and other costs associated
with relocating the corporate  headquarters  from Indiana to Texas,  (iii) costs
related to closing and merging stores in the same markets  following the merger,
(iv)  amortization  expense of stock  awards which vested fully upon the merger,
and (v) costs  associated with  terminating  certain leases.  In addition,  Home
Choice  initiated  a  program  in 1997 to  change  the  name  of its  stores  to
"HomeChoice  Lease  or Own"  from  the  various  trade  names  it  acquired.  In
connection  with this program,  Home Choice  incurred  nonrecurring  costs which
included  the  write-off  of the net  carrying  values of old signs and  branded
supplies  and  the  expensing  of new  vehicles  decals.  The  amount  of  these
nonrecurring costs included in name change expense in the Consolidated Statement
of  Operations  for the years ended  September  30,  1999,  1998,  and 1997 were
approximately $86, $1,770, and $743, respectively.

    Alrenco merged with various other entities,  which were  consummated  during
1997. Under the terms of each merger  agreement,  shares of common stock of each
entity  were  multiplied  by an  exchange  ratio  and  exchanged  for  shares of
Alrenco's common stock. A summary of each merger follows:

<TABLE>
<CAPTION>

                                                                                                   Shares of
                                                                                                   Company
                                        Pooling Acquisitions                   Date of Merger    Stock Issued
                                        --------------------                   --------------    ------------
<S>                                <C>                                                 <C> <C>         <C>
                        ARTO, Inc. ("ARTO")................................   February 28, 1997        186,774
                        National TV Rental, Inc. ("National")..............   February 28, 1997        188,659
                        Seajay Group ("Seajay")............................   February 28, 1997        179,500
                        Showtyme Group ("Showtyme")........................   February 28, 1997        214,520
                        ABC Group ("ABC")..................................   March 11, 1997           170,611
                        Discount Centers of America, Inc. ("Discount").....   May 12, 1997              98,415
                        The Hut Co. ("Hut")................................   May 13, 1997              37,714


</TABLE>

     The mergers,  as per the terms of the merger  agreements,  were recorded as
poolings of interests,  in accordance  with APB No. 16. In conjunction  with the
mergers, certain costs aggregating $935 were incurred by Alrenco during the year
ended December 31, 1997.

     Separate unaudited results of the pooled entities prior to each date of the
merger for the years ended 1999, 1998, and 1997 are as follows:

<TABLE>
<CAPTION>


                                                                   Year ended September 30, 1999
                                                                   -----------------------------
                                                                          Extraordinary      Net Income
                                                              Revenues        Item             (Loss)
                                                              --------    -------------      ----------
                        Rent-Way October 1, 1998 to
<S>                              <C> <C>                      <C>            <C>              <C>
                        November 30, 1998.................... $  37,171      $        --      $    2,231

                        Home Choice October 1, 1998 to
                         November 30, 1998...................    44,270               --            (230)
                        Rent-Way and Home Choice December 1,
                         1998 to September 30, 1999..........   412,910             (519)         12,582
                                                              ---------       ----------      ----------

                             Total........................... $ 494,351       $     (519)     $   14,583
                                                              =========       ==========      ==========

</TABLE>

<PAGE>


                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:

<TABLE>
<CAPTION>



                                                                   Year ended September 30, 1998
                                                              -----------------------------------------
                                                                          Extraordinary      Net Income
                                                              Revenues         Item            (Loss)
                                                              --------    -------------      ----------
<S>                                                         <C>           <C>                <C>
                        Rent-Way.........................   $  177,327    $          --      $   12,577
                        Home Choice......................      258,704               --         (14,415)
                                                            ----------    -------------      ----------
                             Total.......................   $  436,031    $          --      $   (1,838)
                                                            ==========    =============      ==========

</TABLE>




<TABLE>
<CAPTION>


                                                             Year ended September 30, 1997
                                                      -------------------------------------------
                                                                   Extraordinary       Net Income
                                                      Revenues          Item             (Loss)
                                                      --------     -------------       ----------

<S>                                              <C>             <C>                 <C>
                        Rent-Way..............   $       88,446  $        (269)      $    5,416
                        Alrenco...............          103,005             --            3,586
                        RTO...................          123,739             --           (8,736)
                        ARTO..................              687             --               10
                        National..............              853             --              (74)
                        Seajay................            1,224             --              (34)
                        Showtyme..............              635             --               (3)
                        ABC...................              553             --              (77)
                        Discount..............              746             --              (45)
                        Hut...................              442             --               (6)
                        Conforming adjustments               --             --            1,261
                                                 --------------  -------------       ----------
                        Combined..............   $      320,330  $        (269)      $    1,298
                                                 ==============  =============       ==========

                        Conforming  adjustments relate to conforming  amortization  policies, net of the related tax benefit.

</TABLE>

    Since   certain   of   the   business   combinations    accounted   for   as
pooling-of-interests  involved companies which were nontaxable enterprises prior
to acquisition by Alrenco (e.g. S Corporations),  unaudited pro forma income tax
expense (benefit) has been presented below for the year ended September 30, 1997
for  the  nontaxable  enterprises  as if they  had  been a  taxable  enterprise.
Deferred tax assets and liabilities for the tax effects of temporary differences
for the nontaxable  enterprises were established through an adjustment to income
tax expense  (benefit) during the period that the combinations  were consummated
(see Note 11):

<TABLE>
<CAPTION>

                                                                                Unaudited Pro Forma
                                                                                    Information
                                                                             Year Ended September 30,
                                                                                       1997
                                                                            ----------------------------

<S>                                                                         <C>
                        Income before extraordinary item................... $             1,566
                        Pro forma income tax benefit.......................                (214)
                                                                             ------------------
                           Pro forma income before extraordinary item......               1,780
                        Extraordinary item.................................                (269)
                                                                            -------------------
                           Pro forma net income............................               1,511
                        Preferred stock gain on redemption.................                 280
                                                                            -------------------
                           Earnings applicable to common shares............ $             1,791
                                                                            ===================

                        Pro forma earnings per common share:
                        Basic and diluted earnings per share (adjusted to
                        give effect to preferred stock gain on
                        redemption):
                           Income before extraordinary item................ $              0.11
                                                                            ===================
                           Net income...................................... $              0.11
                                                                            ===================

</TABLE>



Purchase Acquisitions

    On September 23, 1999, the Company acquired all of the outstanding shares of
RentaVision, Inc. ("RentaVision"),  a rental-purchase chain located in 16 states
with  annual  revenues  of  approximately  $75,000.  The  consideration  paid in
exchange for all the outstanding shares of RentaVision was $73,874 consisting of
$68,774 in cash and 278,801 shares of the Company's  common stock  (unregistered
shares  subject to the  provisions  of Rule 144 of the  Securities  and Exchange
Act). Pursuant to the terms of the purchase agreement,  181,201 shares of common
stock equivalent to $4,000 of the purchase price was placed in escrow subject to
the  terms  and   conditions  of  the  escrow   agreement  to  secure   seller's
representations   and  warranties  and  any  purchase  price  adjustments.   The
acquisition   was  accounted  for  using  the  purchase  method  of  accounting.
RentaVision's  assets and  liabilities  were recorded at their fair values as of
the date of the acquisition. The purchase price is subject to adjustment pending
completion  of an audit of the  closing  date  balance  sheet and future  rental
revenue  stream as defined in the purchase  agreement.  The final purchase price
allocation is subject to refinement upon  finalization of the purchase price and
completion  of  a  review  of  rental   merchandise,   property  and  equipment,
intangibles and certain accrued liabilities.  The excess of the acquisition cost
over the estimated fair value of the net assets acquired ("goodwill") of $83,712
is being amortized on a straight-line basis over 30 years. The total cost of the
net assets acquired was

<PAGE>


                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:

$73,874 and consisted of assets of $99,260 less  liabilities  assumed of $25,168
and  acquisition  costs of $218.  Assets  acquired  (at fair  value)  other than
goodwill  consisted  primarily  of rental  merchandise  of $12,267,  non-compete
agreement  of $1,000,  customer  contracts  of $1,200,  cash of $725,  and other
assets of $356.  Liabilities assumed (at fair value) consisted primarily of debt
of $21,527,  accrued  liabilities of $2,684, and trade accounts payable of $958.
The  Consolidated  Statement of Operations for the year ended September 30, 1999
includes the results of operations of RentaVision since the date of acquisition.

    On June 30,  1999,  the  Company  acquired  all the  outstanding  shares  of
America's Rent-To-Own Center, Inc.,  ("America's  Rent-To-Own").  At the time of
the acquisition,  America's  Rent-To-Own  operated a chain of 21 rental-purchase
stores located in Arkansas,  Kansas, Missouri, and Oklahoma with annual revenues
of  approximately  $8,000.  The  consideration  paid  in  exchange  for  all the
outstanding shares of America's  Rent-To-Own  consisted of 231,140 shares of the
Company's  common stock  (unregistered  shares subject to the provisions of Rule
144 of the Securities  and Exchange Act).  Pursuant to the terms of the purchase
agreement approximately $800 or 32,454 shares of the Company's common stock were
placed in escrow subject to the terms and conditions of the escrow  agreement to
secure   seller's   representations   and  warranties  and  any  purchase  price
adjustments.  As of September  30, 1999,  the Company had not released any funds
from the escrow  account due to final  settlement  of the  purchase  price.  The
acquisition was accounted for using the purchase method of accounting. America's
Rent-To-Own assets and liabilities were recorded at their fair value at the date
of the  acquisition.  The excess of the acquisition  cost over the fair value of
net assets  acquired,  ("goodwill")  of $4,805 is being  amortized on a straight
line basis over 30 years.  The total cost of the net assets  acquired was $4,838
and  consisted  of assets of  $7,231  less  liabilities  assumed  of $2,149  and
acquisition costs of $244. Assets acquired,  other than goodwill (at fair value)
consisted of rental  merchandise  of $1,269,  receivables  of $632,  prepaid and
other assets of $65, a deferred tax asset of $400,  and a non-compete  agreement
of $60. Liabilities assumed (at fair value) consisted of debt of $1,295, accrued
liabilities of $474 and trade  accounts  payables of $380. The Company is in the
process of finalizing the purchase price allocation.  The Consolidated Statement
of  Operations  for the year ended  September  30, 1999  includes the results of
operations of America's Rent-To-Own since the date of acquisition.

    In March,  April,  May, and August 1999,  the Company  purchased  the rental
merchandise and rental-purchase  contracts of six rental-purchase stores located
in Pennsylvania, North Carolina, Indiana, and Texas, respectively, with combined
annual revenues of approximately  $1,550.  The Company paid cash in exchange for
the assets and each  acquisition  was accounted for using the purchase method of
accounting.  The acquired assets were recorded at their estimated fair values at
the date of acquisition.  The excess of the acquisition cost over the fair value
of net assets  acquired,  ("goodwill")  of $602 is being amortized on a straight
line basis over 20 years.  The total cost of the net assets  acquired  was $602.
The  Consolidated  Statement of Operations for the year ended September 30, 1999
includes  the  results  of  operations   for  these  stores  from  the  date  of
acquisition.

    On September  10, 1998,  the Company  purchased the rental  merchandise  and
rental contracts of Cari Rentals,  Inc. ("Cari"),  a privately owned chain of 23
rental  purchase  stores located in Iowa,  Missouri,  Nebraska and South Dakota,
with annual revenues of  approximately  $7,700 in exchange for  consideration of
$7,325  consisting of 15,620 shares of the Company's common stock  (unregistered
shares subject to the provisions of Rule 144 of the Securities and Exchange Act)
and  $6,900  in cash.  Pursuant  to the  terms of the  acquisition,  $500 of the
purchase  price was placed in escrow  subject to the terms and conditions of the
escrow agreement.  Pursuant to the terms of the escrow agreement, the balance of
the purchase price was released to the sellers.  The  acquisition  was accounted
for using the purchase  method of  accounting.  Cari's  assets were  recorded at
their  fair  values  as of  the  date  of the  acquisition.  The  excess  of the
acquisition  cost over the fair value of net assets  acquired,  ("goodwill")  of
$6,110 is being amortized on a straight-line basis over 30 years. The total cost
of the net assets  acquired  was $7,325 and  consisted  of assets of $7,560 less
acquisition  costs of $235.  Assets acquired (at fair value) other than goodwill
consisted primarily of rental merchandise of $1,400 and a non-compete  agreement
of $50. The Consolidated  Statements of Operations for the years ended September
30, 1999 and 1998  include the results of  operations  of Cari since the date of
the acquisition.

    On July 21, 1998, the Company  acquired all the  outstanding  shares of Fast
Rentals, Inc. ("Fast Rentals"), a privately owned chain of eight rental purchase
stores  located in Alabama and Georgia  with  annual  revenues of  approximately
$3,600 in exchange for consideration of $2,047 in cash. Pursuant to the terms of
the acquisition, $200 of the purchase price was placed in escrow, subject to the
terms of the escrow agreement to satisfy sellers' representations and warranties
and  any  purchase  price  adjustments.  Pursuant  to the  terms  of the  escrow
agreement,  the balance of the purchase  price was released to the sellers.  The
acquisition  was accounted  for using the purchase  method of  accounting.  Fast
Rentals'  assets and  liabilities  were  recorded at their fair values as of the
date of the acquisition.  The excess of the acquisition cost over the fair value
of net assets acquired,  ("goodwill") of $2,321 is being amortized over 30 years
on a straight-line  basis.  The total cost of the net assets acquired was $2,047
and  consisted  of  assets  of  $3,061  less  liabilities  assumed  of $858  and
acquisition  costs of $156.  Assets acquired (at fair value) other than goodwill
consisted  primarily of rental  merchandise  of $620,  prepaid  expenses of $33,
other assets of $12 and a non-compete agreement of $75. Liabilities assumed (at

<PAGE>

                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:

fair value) consisted primarily of trade payables of $29, accrued liabilities of
$43 and debt of $786.  The  Consolidated  Statements of Operations for the years
ended  September  30, 1999 and 1998  include the results of  operations  of Fast
Rentals since the date of the acquisition.

    On February 5, 1998,  the Company  acquired  all the  outstanding  shares of
Champion Rentals, Inc.  ("Champion").  At the time of the acquisition,  Champion
operated a chain of 145  rental-purchase  stores  located in Alabama,  Arkansas,
Florida,  Georgia,  Kentucky,  Louisiana,  North Carolina, Ohio, South Carolina,
Tennessee  and  Virginia  with annual  revenues of  approximately  $75,000.  The
consideration  paid in exchange for all the  outstanding  shares of Champion was
$69,050  in cash.  Pursuant  to terms of the  purchase  agreement  $2,500 of the
purchase price was placed in escrow subject to the terms of the escrow agreement
to  satisfy  sellers'representations  and  warranties  and  any  purchase  price
adjustments.  Per the terms of the  escrow  agreement,  $1,500  of the  escrowed
amount was released in September  1998,  following the completion of an audit of
Champion's closing date financial statements. As a result of this audit, $900 of
the released  amount was given to the sellers with the balance being returned to
the Company.  The balance of $1,000 was released  February 5, 1999 per the terms
of the  escrow  agreement.  The  sellers  received  $800 of this  amount and the
balance was returned to the Company. The acquisition was accounted for using the
purchase method of accounting.  Champion's  assets and liabilities were recorded
at  their  fair  values  at the  date  of the  acquisition.  The  excess  of the
acquisition  cost over the fair value of net assets  acquired,  ("goodwill")  of
$67,550 is being  amortized on a  straight-line  basis over 30 years.  The total
costs of net assets acquired was $69,050 and consisted of assets of $91,030 less
liabilities  assumed of $18,408 and acquisition costs of $3,572. The acquisition
of Champion was funded with  borrowings  drawn on the Company's  existing senior
credit facility.  Assets acquired (at fair value), other than goodwill consisted
primarily of rental  merchandise  of $18,134,  property  and  equipment of $159,
other  assets of $3,219,  prepaid  expenses of $508,  non-compete  agreement  of
$1,000 and  customer  contracts  of $460.  Liabilities  assumed  (at fair value)
consisted  primarily of trade payables of $3,925,  accrued liabilities of $2,356
and debt of $12,127.  The  Consolidated  Statements of Operations  for the years
ended  September 30, 1999 and 1998 include the results of operations of Champion
since the date of the acquisition.

    On  January 7, 1998,  the  Company  completed  the asset  purchase  of South
Carolina Rentals,  Inc., Paradise Valley Holdings,  Inc., and L & B Rents, Inc.,
(collectively,  "Ace  Rentals"),  assuming  effective  control of the results of
operations  as of January 1, 1998. At the time of the  acquisition,  Ace Rentals
operated a chain of 50  rental-purchase  stores  located in California and South
Carolina with annual revenues of approximately  $22,000.  The consideration paid
in exchange  for the assets of Ace Rentals was $25,348 in cash.  Pursuant to the
terms of the  purchase  agreement,  $750 of the  purchase  price  was  placed in
escrow,  subject  to the  terms of the  escrow  agreement  to  satisfy  seller's
representations and warranties and any purchase price adjustments.  In May 1998,
$375 of the $750 escrow was released in accordance with the terms and conditions
of the escrow  agreement.  As of September 30, 1999,  the  remaining  balance is
still held in escrow.  The  acquisition  was  accounted  for using the  purchase
method of accounting.  Ace Rentals' assets and certain liabilities were recorded
at  their  fair  values  at the  date  of the  acquisition.  The  excess  of the
acquisition  cost over the fair value of net assets  acquired,  ("goodwill")  of
$21,495 is being  amortized on a  straight-line  basis over 30 years.  The total
costs of net assets acquired was $25,348 and consisted of assets of $26,767 less
a liability  assumed of $478 and  acquisition  costs of $941. The acquisition of
Ace Rentals was primarily  funded with proceeds  received in connection with the
Company's public stock offering (see Note 3) with the balance being drawn on the
Company's existing senior credit facility. Assets acquired (at fair value) other
than goodwill consisted primarily of rental merchandise of $4,383,  property and
equipment of $249, non-compete agreement of $500 and $140 in customer contracts.
The  liability  assumed (at fair value) was $478 of vehicle  related  debt.  The
Consolidated Statements of Operations for the years ended September 30, 1999 and
1998 include the results of operations of Ace Rentals since January 1, 1998.

     During  calendar year 1998,  the Company also  purchased  from six separate
entities  the rental  merchandise  and  contracts of 17  rental-purchase  stores
located in Arizona,  Florida,  Texas,  and Washington.  The Company paid cash in
exchange for the assets and each  acquisition  was  recorded  using the purchase
method of accounting.  The acquired assets were recorded at their fair values at
the date of the  acquisition.  The excess of the acquisition  cost over the fair
value of net assets  acquired,  ("goodwill")  of $3,052 is being  amortized on a
straight-line  basis over 30 years.  The total cost of net assets  acquired  was
$4,903. The Consolidated  Statements of Operations for the years ended September
30, 1999 and 1998  include the results of  operations  for these stores from the
date of acquisition.

    On January 24, 1997, the Company signed a definitive  purchase  agreement to
acquire all the outstanding shares of Perry Electronics,  Inc. d/b/a Rental King
("Rental  King").  On February 6, 1997, the Company  consummated the transaction
and  acquired all the  outstanding  shares of Rental  King,  assuming  effective
control of the results of  operations  as of  February  1, 1997.  At the time of
acquisition,  Rental King operated a chain of seventy  rental-purchase stores in
Colorado,  Florida,  Indiana,  Kentucky,  Michigan,  Ohio and West Virginia with
annual revenues of approximately $24,000. The consideration paid in exchange for
all the outstanding  shares of Rental King was $17,285 in cash.  Pursuant to the
terms of the purchase agreement, $2,000 of the purchase price was placed in

<PAGE>

                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:

escrow,  subject  to the  terms of the  escrow  agreement  to  satisfy  seller's
representations and warranties and any purchase price adjustments. In June 1997,
the full  amount  of the  escrow  account  was  released.  The  acquisition  was
accounted for using the purchase method of accounting.  Rental King's assets and
liabilities  were recorded at their fair values at the time of the  acquisition.
The excess of the acquisition  cost over the fair value of net assets  acquired,
("goodwill")  of $17,312 is being  amortized  on a  straight-line  basis over 20
years.  The total costs of the net assets  acquired was $17,285 and consisted of
assets of $25,290 less  liabilities  assumed of $6,337 and acquisition  costs of
$1,668.  The acquisition of Rental King was primarily funded by the net proceeds
received  on  a  private  placement  of  $20,000  in  subordinated   convertible
debentures  (see Note 7). The balance of the cash paid on closing was drawn upon
the  Company's  existing line of credit.  Assets  acquired (at fair value) other
than goodwill consisted primarily of rental merchandise of $6,386,  property and
equipment of $745,  other  assets of $347 and  non-compete  agreements  of $500.
Liabilities  assumed (at fair value)  consisted  primarily of trade  payables of
$489,  accrued  liabilities of $2,085,  bank debt of $2,939 and notes payable of
$824. The  Consolidated  Statements of Operations for the years ended  September
30, 1999,  1998 and 1997 include the results of  operations of Rental King since
the date of the acquisition.

    On January 2, 1997, the Company acquired all the outstanding  shares of Bill
Coleman   TV,   Inc.,   ("Coleman"),   a   privately   owned  chain  of  fifteen
rental-purchase   stores   operating  in  Michigan   with  annual   revenues  of
approximately $8,000, in exchange for consideration consisting of $2,680 in cash
and an option to purchase  25,000  shares of the  Company's  common  stock at an
exercise  price of $8.875 per share with a fair market value of $108. The 25,000
stock  options are 100%  exercisable  and expire five years from the date of the
grant.   The  acquisition  was  accounted  for  using  the  purchase  method  of
accounting.  Coleman's assets and liabilities were recorded at their fair values
as of the  acquisition  date. The excess of the  acquisition  cost over the fair
value of net assets  acquired,  ("goodwill")  of $3,797 is being  amortized on a
straight-line basis over 20 years. The total cost of the net assets acquired was
$2,788  ($2,680 in cash and $108 in stock  options)  and  consisted of assets of
$7,992 less liabilities  assumed of $4,549 and acquisition costs of $655. Assets
acquired  (at fair value)  other than  goodwill,  consisted  primarily of rental
merchandise of $2,401, property and equipment of $42, a note receivable of $506,
a non-compete  agreement of $300 and other assets of $946.  Liabilities  assumed
(at fair value) consisted primarily of trade accounts payable of $1,838, debt of
$2,474 and note payable of $237. The  Consolidated  Statements of Operations for
the years ended  September  30, 1999,  1998 and 1997 include the  operations  of
Coleman since the date of the acquisition.

    In July and September 1997, the Company purchased the rental merchandise and
rental-purchase   contracts   of  seven   rental-purchase   stores   located  in
Pennsylvania,   Maryland,  and  Virginia,   with  combined  annual  revenues  of
approximately  $4,300. The Company paid cash in exchange for the assets and each
acquisition was recorded using the purchase  method of accounting.  The acquired
assets were recorded at their fair values at the date of acquisition. The excess
of the acquisition cost over the fair value of net assets acquired, ("goodwill")
of $2,748 is being amortized on a straight-line  basis over 20 years.  The total
cost of the net assets acquired was $3,810 and consisted  primarily of assets of
$3,978 less acquisition costs of $168. The Consolidated Statements of Operations
for the years ended  September  30, 1999,  1998 and 1997  include the  operating
results for these stores since the respective dates of acquisition.

    On January 2, 1997,  the  Company  completed  the  acquisition  of 28 stores
located in 4 states from Fastway Rentals,  Inc. for an aggregate  purchase price
of $11,900.  The Company purchased the assets of 27 rent-to-own  stores from B&L
Concepts,   Inc.  ("B+L")  on  January  6,  1997  for  total   consideration  of
approximately  $13,800 consisting of cash of approximately  $10,800 and a $3,000
convertible note. Additionally, during 1997, the Company acquired 60 stores in 8
unrelated  transactions for an aggregate purchase price of approximately $32,000
consisting of cash of $27,900 and notes totaling  $4,100.  Each  acquisition was
recorded  using the  purchase  method of  accounting.  The  acquired  assets and
liabilities  were recorded at their fair values at the date of the  acquisition.
The excess of the acquisition  cost over the fair value of net assets  acquired,
("goodwill")  of $44,515 is being  amortized  on a  straight-line  basis over 20
years. The total cost of net assets acquired was $57,729 and consisted of assets
of $64,974 less liabilities  assumed of $7,245.  Assets acquired (at fair value)
other than  goodwill  consisted  primarily  of rental  merchandise  of  $17,211,
property and equipment of $2,359, and other assets of $890.  Liabilities assumed
(at fair value) consisted  primarily of trade payables of $1,755,  notes payable
of $5,152,  and income taxes  payable of $338.  The  Consolidated  Statements of
Operations  for the years ended  September 30, 1999,  1998, and 1997 include the
results of operations for these stores from the date of acquisition.

    The following  are  unaudited pro forma results of operations  for the years
ended  September  30, 1999 and 1998  assuming the  acquisitions  of Ace Rentals,
Champion,   and   RentaVision   had  occurred  on  October  1,  1998  and  1997,
respectively.  The unaudited pro forma  information does not include the results
of operations of the Fast Rentals Acquisition in July 1998, the Cari acquisition
in September 1998, and the America's Rent-To-Own acquisition in June 1999, which
were not  significant.  The results  are not  necessarily  indicative  of future
operations or what would have occurred had the acquisitions  been consummated as
of October 1, 1998 and 1997.

<PAGE>


                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


4. MERGERS, ACQUISITIONS AND DISPOSALS, Continued:


<TABLE>
<CAPTION>


                                                                                    Unaudited Pro Forma
                                                                                        Information
                                                                                 Years Ended September 30,
                                                                              -----------------------------
                                                                                   1999           1998
                                                                              -------------- --------------
<S>                                                                           <C>            <C>
                        Total revenues.....................................   $    569,905   $      527,613

                        Net income (loss)..................................   $     14,631   $         (152)

                        Diluted earnings (loss) per common share:
                             Income (loss) before extraordinary item.......   $       0.68   $        (0.01)
                                                                              ============   ==============
                             Net income (loss).............................   $       0.66   $        (0.01)
                                                                              ============   ==============
</TABLE>

Disposals

    On  September  30,  1998,  the Company  entered  into an asset  purchase and
exchange  agreement  with SKC  Enterprises,  Inc.  ("SKC")  whereby  the Company
exchanged five stores and approximately $1,100 in cash for seven SKC stores. The
Company  recognized a gain of approximately  $300 as a result of the transaction
with SKC. The following  table  summarizes the book value of the assets disposed
of and the fair value of the assets purchased from SKC:

<TABLE>
<CAPTION>


                                  Book Value of Assets Sold to SKC
                                  --------------------------------
<S>                                                               <C>
                        Rental merchandise......................  $    837
                        Property and equipment..................       127
                                                                  --------
                                                                  $    964
                                                                  ========

</TABLE>

<TABLE>
<CAPTION>



                               Fair Value of Assets Purchased from SKC
                               ---------------------------------------
<S>                                                               <C>
                        Rental merchandise......................  $  1,147
                        Property and equipment..................        91
                        Intangible assets.......................     1,142
                        Other assets............................         5
                                                                  --------
                                                                  $  2,385
                                                                  ========
</TABLE>




    During 1997,  the Company sold eight stores for $3,032.  In connection  with
the  transaction,  the  Company  sold  assets  with a net book  value of $2,082,
received cash of $3,032, and recorded a gain of $950.



5. RENTAL MERCHANDISE AND PROPERTY AND EQUIPMENT:

    Cost and  accumulated  depreciation  of rental  merchandise  consists of the
following:

<TABLE>
<CAPTION>


                                                                                      September 30,
                                                                              -----------------------------
                                                                                   1999           1998
                                                                              --------------  -------------
<S>                                                                           <C>             <C>
                        Cost..............................................    $    313,304    $     268,509
                        Less accumulated depreciation.....................         111,159           92,487
                                                                              ------------    -------------
                                                                              $    202,145    $     176,022
                                                                              ============    =============
</TABLE>



    The Company uses a direct-ship policy from their vendors to the stores. As a
result,  the  Company  has  eliminated  the need for  internal  warehousing  and
distribution.  The Company has acquired various entities,  including Home Choice
and RentaVision,  that used internal  warehousing and distribution.  The Company
has eliminated  these warehouses and has applied  direct-ship  policies to these
stores.  This policy has minimized the amount of rental merchandise not on rent.
On-rent  and held for rent  levels of net  rental  merchandise  consists  of the
following:

<TABLE>
<CAPTION>

                                                                                      September 30,
                                                                              ----------------------------
                                                                                   1999           1998
                                                                              -----------     ------------
<S>                                                                           <C>             <C>
                        On-rent merchandise...............................    $   226,825     $    185,372
                        Held for rent merchandise.........................         86,479           83,137
                                                                              -----------     ------------
                                                                              $   313,304     $    268,509
                                                                              ===========     ============

</TABLE>

     The Company uses the direct  write-off method in accounting for losses (see
Note 1). These losses are recorded in other operating expenses and were incurred
as follows:

<TABLE>
<CAPTION>

                                                                                         Years ended September 30,
                                                                              -------------------------------------------
                                                                                  1999             1998           1997
                                                                              -----------     ------------   ------------
<S>                                                                           <C>             <C>            <C>
                        Lost merchandise..................................    $     2,048     $      1,380   $        393
                        Stolen merchandise................................         12,077           12,071         10,338
                        Discarded merchandise.............................          3,381            1,541          1,055
                                                                              -----------     ------------   ------------
                                                                              $    17,506     $     14,992   $     11,786
                                                                              ===========     ============   ============
</TABLE>

<PAGE>

                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


5. RENTAL MERCHANDISE AND PROPERTY AND EQUIPMENT, Continued:

    Property and equipment consists of the following:

<TABLE>
<CAPTION>

                                                                                      September 30,
                                                                              ----------------------------
                                                                                  1999            1998
                                                                              -----------     ------------
<S>                                                                           <C>             <C>
                          Signs...........................................    $     7,405     $      5,431
                          Transportation equipment........................          4,551            3,201
                          Furniture and fixtures..........................         25,341           17,626
                          Leasehold improvements..........................         27,189           19,825
                          Buildings.......................................          3,968            4,167
                          Construction in progress........................            351               --
                          Land............................................          2,307            2,423
                                                                              -----------     ------------
                                                                                   71,112           52,673
                        Less accumulated depreciation and amortization....         20,534           14,154
                                                                              -----------     ------------
                                                                              $    50,578     $     38,519
                                                                              ===========     ============
</TABLE>

6. OTHER LIABILITIES:

    Other liabilities consist of the following:


<TABLE>
<CAPTION>
                                                                                      September 30,
                                                                              ---------------------------
                                                                                   1999           1998
                                                                              -----------     -----------
<S>                                                                           <C>             <C>
                        Accrued salaries, wages and payroll taxes.........    $     4,205     $     4,810
                        Accrued property taxes............................          1,536           2,680
                        Sales taxes payable...............................          2,952           2,772
                        Accrued interest..................................            639           1,077
                        Accrued bonuses...................................            344             190
                        Other.............................................          6,185          11,691
                                                                              -----------     -----------
                                                                              $    15,861     $    23,220
                                                                              ===========     ===========
</TABLE>


7. DEBT:

    Debt consists of the following:


<TABLE>
<CAPTION>

                                                                                      September 30,
                                                                              ---------------------------
                                                                                  1999            1998
                                                                              -----------     -----------
<S>                                                                           <C>             <C>
                        Senior Credit Facility............................    $   268,000     $   157,064
                        Convertible Subordinated Debentures...............         20,000          20,000
                        Notes Payable.....................................            130           2,539
                                                                              -----------     -----------
                                                                              $   288,130     $   179,603
                                                                              ===========     ===========
</TABLE>


     On September 23, 1999, the Company amended its existing collateralized term
loan and revolving credit facility  ("Senior Credit  Facility") with a syndicate
of banks led by National City Bank of Pennsylvania (the "Amended Facility"). The
Amended Facility,  co-led by National City Bank, acting as administrative agent,
Bank of America,  N.A., acting as documentation  agent, and Bank of Montreal and
Harris Trust and Savings Bank, acting as syndication agents,  provides for loans
and letters of credit of up to $325,000  (revolving  notes and letters of credit
$100,000,  Term  Loans A  $125,000  and Term Loans B  $100,000).  The  syndicate
members and their ratable share of the Amended Facility are:

<TABLE>
<CAPTION>

<S>                                                                                     <C>
                                   National City Bank of Pennsylvania.............      10.7692%
                                   National City Bank, Cleveland..................      15.3846%
                                   Bank of America, N.A...........................      10.7692%
                                   Harris Trust and Savings Bank..................      10.7692%
                                   Bank of Montreal...............................      15.3846%
                                   Firstar Bank, National Association.............       7.6923%
                                   LaSalle Bank, National Association.............       6.9231%
                                   Sun Trust Bank, Central Florida, National
                                   Association....................................       6.1538%
                                   Manufacturers and Traders Trust Company........       6.1538%
                                   PNC Bank, National Association.................       5.3846%
                                   Bank Austria, Creitanstalt Corporate Finance,
                                   Inc............................................       4.6154%
</TABLE>

    Under the Amended  Facility,  the Company may borrow funds under a base rate
option plan or  euro-rate  option  plan.  Under the base rate option  plan,  the
Company  may  borrow  funds  based on a spread  of prime  rate plus 0.0% to 1.5%
(prime rate at September  30, 1999 of 8.25%).  The actual  spread is  determined
based on the ratio of debt to cash flows  from  operations  during  the  period.
Under the  euro-rate  option,  the Company may borrow funds based on a spread of
the London  Interbank Offer Rate,  ("LIBOR") plus 150 to 300 basis points (LIBOR
at September 30, 1999 of 5.514%).  The actual spread is determined  based on the
ratio  of debt  to cash  flow  generated  from  operations  during  the  period.
Borrowings  under the  euro-rate  option  require  the Company to select a fixed
interest  period  during  which the  euro-rate is  applicable  with the borrowed
amount not to be repaid prior to the last day of the selected  interest  period.
In addition,  borrowing tranches under the euro-rate option must be in multiples
of $1,000. Commitment fees associated with

<PAGE>

                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)

7. DEBT, Continued:

the Amended  Facility  are equal to 0.375% for each banks'  commitment  starting
with this  facility.  Borrowings  under the  base-rate  option  are at the Prime
interest rate plus 50 basis points. These borrowings may be repaid at any time.

    As of September 30, 1999, the Company's debt under both the euro-rate option
and base-rate option plans were as follows:

<TABLE>
<CAPTION>


                              Borrowing option plan                  Amount         Rate      Expiration Date
                              ---------------------                  ------         ----      ---------------
<S>                                                                <C>             <C>           <C>   <C>
                Euro-rate tranche..............................    $ 125,000       8.01375%      12/31/99
                Euro-rate tranche..............................      100,000       8.38250%      10/25/99
                Euro-rate tranche..............................       40,000       8.01375%      12/31/99
                Base-rate......................................        3,000       9.25000%      09/30/04
                                                                   ---------
                                                                   $ 268,000
                                                                   =========
</TABLE>


    The principal  amount of the Term Notes A under the Amended  Facility  (with
maximum  borrowings  of $125,000  outstanding  at  September  30, 1999) shall be
payable in quarterly payments due on the last day of each December, March, June,
and  September,  beginning  with the quarter  ending  December 31, 1999,  and as
follows:


<TABLE>
<CAPTION>


          Quarter (s) Ending on Following                   Amount of Quarterly Payment of
          -------------------------------                   -----------------------------------
          Date or In The Following Period                   Principal Due on Each Payment Date
          -------------------------------                   -----------------------------------
<S>                      <C>   <C>        <C>  <C>                  <C>   <C>
                         12-31-99 through 9-30-00.........          $      3,750
                         12-31-00 through 9-30-01.........                 5,000
                         12-31-01 through 9-30-02.........                 6,250
                         12-31-02 through 9-30-03.........                 7,500
                         12-31-03 through 9-30-04.........                 8,750

</TABLE>

     The principal amount of each of the Term Notes B under the Amended Facility
(with maximum borrowings of $100,000 outstanding at September 30, 1999) shall be
payable in quarterly  payments each in the amount of $250 due on the last day of
each December,  March,  June,  and September,  beginning with the quarter ending
December 31, 1999,  and  continuing  through and  including  September 30, 2004,
followed by two annual  payments on September  30, 2005 and  September 30, 2006,
each in the amount of $47,500.

    At  September  30,  1999,  the Company had $43,000  principal  amount of the
revolving credit facility  outstanding  under the Amended Facility and $1,700 in
letters of credit  outstanding  (see Note 9). At  September  30,  1999 there was
$55,300 of unused  revolving  notes and  letters of credit  available  under the
Amended Facility.

    The  Amended  Facility  requires  the  Company  to  meet  certain  financial
covenants and ratios including  maximum  leverage,  minimum  interest  coverage,
minimum tangible net worth, fixed charge coverage,  and rental merchandise usage
ratios.  In addition,  the Company  must meet  requirements  regarding  monthly,
quarterly,  and annual financial  reporting.  The Amended Facility also contains
non-financial  covenants,  which restrict actions of the Company with respect to
the  payment  of  dividends,  acquisitions,  mergers,  disposition  of assets or
subsidiaries,  issuance of capital stock, and capital expenditures.  The Company
may at any time repay outstanding borrowings,  in whole or part, without premium
or penalty, except with respect to restrictions identified with the selection of
the euro-rate option.

     The Senior  Credit  Facility  (the "Prior  Facility")  prior to the Amended
Facility  was  with  a  syndicate  of  banks  led  by  National   City  Bank  of
Pennsylvania,  NationsBank,  N.A.,  and Harris  Trust and  Savings  Bank and was
signed on December  10,  1998.  On March 10,  1999,  the Company made two Credit
Agreement  Joinders (the  "Joinders") to the Prior  Facility.  The Joinders were
made by PNC Bank, National Association and Bank Austria Creditanstalt  Corporate
Finance,  Inc.  (the  "New  Banks").  Each of the  New  Banks  agreed  to make a
revolving  credit  commitment in the amount of $3,889 and a term loan commitment
in the amount of $4,861.  The Joinders  increased the term loans available under
the Prior  Facility to $125,000  and the  revolving  loans and letters of credit
available  under the Prior  Facility to $100,000.  Following the  Joinders,  the
syndicate members and their ratable share of the Prior Facility were as follows:

<TABLE>
<CAPTION>

<S>                                                                                    <C>
                         National City Bank of Pennsylvania........................... 15.5556%
                         NationsBank, N.A............................................. 15.5556%
                         Harris Trust and Savings Bank................................ 15.5556%
                         Firstar Bank, N.A............................................ 11.1111%
                         LaSalle National Bank........................................ 10.0000%
                         SunTrust Bank, Central Florida, National
                         Association..................................................  8.8889%
                         Manufacturers and Traders Trust Company......................  8.8889%
                         Mercantile Bank of St. Louis, N.A............................  6.6667%
                         PNC Bank, National Association...............................  3.8889%
                         Bank Austria Creditanstalt Corporate Finance, Inc............  3.8889%

</TABLE>

<PAGE>


                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


7. DEBT, Continued:

     On January 1, 1999, the Company  amended the Prior Facility to add Rent-Way
of TTIG, L.P., an Indiana limited partnership,  as a co-borrower.  The amendment
also caused Rent-Way of Tomorrow, Inc., Rent-Way of Michigan, Inc., and Rent-Way
Developments, Inc., new subsidiaries of the Company incorporated in Delaware, to
become guarantors of the Prior Facility.

     The Prior Facility  required the Company to comply with certain  covenants,
including financial covenants.  These covenants generally restricted the Company
from incurring additional indebtedness, granting additional liens on its assets,
making  dividends  or  distributions,  disposing  of  assets  other  than in the
ordinary course,  issuing  additional stock,  making additional  acquisitions or
making capital expenditures,  in each case subject to certain exceptions.  Under
the Prior  Facility,  the  Company  was  restricted  from  incurring  additional
indebtedness  except additional  purchase money indebtedness not exceeding $100,
subordinated intercompany indebtedness, indebtedness incurred in connection with
certain acquisitions permitted under the Facility, certain capitalized leases or
purchases  of fixed  assets  with  payments  that do not  exceed  $10,000 in the
aggregate in any fiscal year,  and any other lease,  which is not a  capitalized
lease,  or the rental of any real or personal  property  of another  entity with
payments  that do not  (other  than for leases of retail  store  sites and motor
vehicles)  exceed $250 in the aggregate in any fiscal year. The Company was also
required to comply with certain financial  covenants including maximum leverage,
minimum interest coverage,  minimum net worth, and minimum fixed charge coverage
ratios.

     As a result of entering into the Prior Facility,  the Company wrote off the
remaining  balance of deferred  financing  costs  associated with Rent-Way's and
Home Choice's previous credit facilities.  The amount of deferred finance costs,
$865 ($519 net of 40% tax) is shown as an  extraordinary  item on the  Company's
Consolidated Statement of Operations for the year ended September 30, 1999.

     The Senior Credit Facility existing in fiscal 1998 (the "1998 Facility") of
Rent-Way  was  with  a  syndicate  of  banks  led  by  National   City  Bank  of
Pennsylvania,  provided  for loans and letters of credit up to $120,000  and was
signed on February 5, 1998.  The  syndicate  was composed of eight  banks,  with
National City Bank  committed for a 15.00%  ratable  share,  NationsBank,  N.A.,
Harris Trust and Savings Bank, LaSalle National Bank,  Manufacturers and Traders
Trust  Company,  and Star Bank,  N.A.  committed  for an equal  ratable share of
14.17%, and Sun Trust Bank, Central Florida, National Association and CoreStates
Bank,  N.A.  committed for an equal  ratable  share of 7.08%.  The 1998 Facility
provided for borrowings at the prime rate plus 0.0% to 0.5% or borrowings  under
an euro-rate option based on a spread of LIBOR plus 100 to 200 basis points, for
a fixed  interest  period.  As of September 30, 1998, the Company had $80,000 of
floating rate debt under the euro-rate  option and $17,264 of floating rate debt
under  the  base  rate  option,  with  interest  rates  of  7.594%  and  8.750%,
respectively.  The 1998 Facility  required the Company to meet certain financial
covenants and ratios including maximum leverage,  minimum interest coverage, and
minimum tangible net worth ratios. In addition, the Company was required to meet
requirements regarding monthly,  quarterly,  and annual financial reporting. The
1998 Facility  also  contained  covenants  which  prohibited  the actions of the
Company  with  respect  to the  payment  of  dividends,  acquisitions,  mergers,
disposition of assets or  subsidiaries,  issuance of capital stock,  and capital
expenditures.  The  Company was  permitted,  at any time,  to repay  outstanding
borrowings, in whole or part, without premium or penalty, except with respect to
restrictions on the selection of the euro-rate interest option.

     On February 26, 1998,  immediately  following the  Alrenco/RTO  merger (see
Note  4),  Home  Choice  entered  into a new  revolving  credit  agreement  (the
"Coamerica  Credit  Agreement")  with  Coamerica  Bank,  as lender and agent for
certain other  lenders,  which  provided for a $50,000  collaterized  three-year
credit facility.  The Coamerica  Credit  Agreement  replaced the existing credit
agreements  of Alrenco and RTO. The  Coamerica  Credit  Agreeement  provided for
interest  rates based on a base rate which was the greater of the agent's  prime
rate, the federal funds rate plus 100 basis points, or a "Eurodollar Rate", plus
an applicable margin. Under the Coamerica Credit Agreeement, Home Choice had the
option,  provided that certain conditions were met, to obtain an increase in the
amount  available under the Coamerica Credit Agreement up to an aggregate amount
of $100,000.  The Coamerica  Credit  Agreement was collaterized by substantially
all  assets  of Home  Choice  and by a  pledge  of the  stock  of Home  Choice's
subsidiaries.  On April 1, 1998, borrowings available under the Coamerica Credit
Agreement  were  increased to $60,000.  On June 22, 1998 Home Choice  signed the
First Amendment to the Coamerica Agreement whereby the borrowings available were
increased to $80,000 and additional financial covenants were provided. On August
17,  1998 Home  Choice  signed  the second  amendment  to the  Coamerica  Credit
Agreement which modified the financial covenants.  As of September 30, 1998 Home
Choice  was  in  compliance  with  these  modified  financial  covenants.  As of
September 30, 1998, Home Choice had $59,800 outstanding under this agreement.

    The Company's $20,000 Convertible Subordinated Debentures ("Debentures") due
February 1, 2007 are  convertible,  at any time,  into  shares of common  stock,
without par value, of the Company at a conversion price of $13.37 per share. The
Debentures  are subject to  redemption at the option of the Company on and after
February 5, 2000 at a price of 103%.  The  redemption  price will  decrease at a
rate of 1% per year,  reaching a price of 100% in the year 2003 and remain fixed
until the date of maturity.  The  indebtedness  evidenced by the  Debentures  is
subordinated  and junior in right of payment  to all  senior  indebtedness.  The
Debentures bear an annual interest

<PAGE>

                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


7. DEBT, Continued:

rate of 7% with semi-annual payments in August and February, beginning August 1,
1997.  The terms of the  Debentures  require the Company to meet certain  annual
financial reporting  obligations.  In addition,  the Company must deliver to the
trustee  compliance  certificates  representing  management's  compliance to all
conditions and covenants in the indenture governing the Debentures. In addition,
the Debentures  contain covenants which prohibit the Company with respect to the
payment of dividends and other distributions.

    The Company's Notes Payable consists of the following:

<TABLE>
<CAPTION>
                                                                                              September 30,
                                                                                              -------------
                                                                                          1999              1998
                                                                                          ----              ----
<S>                                                                       <C>           <C>               <C>
      Note payable to Zurn Industries, Inc. with no interest payable June 1, 1999...    $   --            $ 1,650
      Note payable to an individual with an interest rate of 18.0% payable in
       monthly installments of $3 through December 2006.............................       120                128
      Note payable to individuals with an interest rate of 9.25% payable in equal
       annual installments of $700, plus accrued interest through January 3, 1999...        --                700
      Note payable to individuals with interest rates at 10% and 20%; payments
       ranging from $1,822 to interest only; same maturing on May 2002 and others
       no stated maturity date......................................................        --                 61
      Vehicle notes payable.........................................................        10                 --
                                                                                        ------            -------
                                                                                        $  130            $ 2,539
                                                                                        ======            =======
</TABLE>


     The Company's weighted average interest rate was 7.732%,  7.784% and 8.517%
for the years ended September 30, 1999, 1998 and 1997, respectively.

    At September 30, 1999, the carrying  values and the estimated fair values of
the Company's significant fixed interest debt instruments are as follows:

<TABLE>
<CAPTION>

                                                                             September 30, 1999
                                                                         --------------------------
                                                                          Carrying       Estimated
                                                                           Values       Fair Values
                                                                         -----------    -----------
<S>                                                                <C>   <C>            <C>
                               Convertible Subordinated Debentures 7%..  $    20,000    $    21,516
                                                                         -----------    -----------
                                                                         $    20,000    $    21,516
                                                                         ===========    ===========
</TABLE>

    At September 30, 1999, aggregate annual maturities of debt are as follows:

<TABLE>
<CAPTION>


                                                                               September 30, 1999
                                                                               ------------------
<S>                            <C>                                                   <C>
                               2000.......................................           $     16,000
                               2001.......................................                 21,000
                               2002.......................................                 26,000
                               2003.......................................                 31,000
                               2004.......................................                 79,000
                               Thereafter.................................                115,130
                                                                                     ------------
                                                                                     $    288,130
                                                                                     ============
</TABLE>


    At  September  30,  1999 and 1998,  book  overdrafts  of $2,994 and  $7,802,
respectively, were included in accounts payable in the accompanying Consolidated
Balance Sheets.

8.  DERIVATIVE FINANCIAL INSTRUMENTS:

      The Company uses derivative financial  instruments to reduce the impact on
    interest  expense  of  fluctuations  in  interest  rates on a portion of the
    Amended  Facility  (see  Note  7).  Interest  rate  expense  under  the swap
    agreements,  which  qualify  for hedge  accounting,  is  recorded as the net
    effective  interest  rate of the hedged  transactions.  The Company does not
    enter into  derivative  financial  instruments  for  trading or  speculative
    purposes.  As of September 30, 1999, the Company had in place eight interest
    rate swaps, under which the Company agreed with  counterparties to exchange,
    at quarterly intervals,  the interest payments on a variable pay rate of the
    three-month  LIBOR  and a fixed  pay rate  for the  notional  amount  of the
    interest  rate  swap  agreements.   The  Company   actively   evaluates  the
    creditworthiness  of the financial  institutions which are counterparties to
    interest rate swap agreements,  and it does not appear that any counterparty
    will fail to meet their  obligation.  The following  table  illustrates  the
    notional amounts outstanding,  maturity dates and the fixed pay and variable
    receive rates of each of the interest rate swap  agreements at September 30,
    1999:

<PAGE>



                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


8.  DERIVATIVE FINANCIAL INSTRUMENTS, Continued:

<TABLE>
<CAPTION>

                                                                                                     Fixed        Variable
                                                                       Notional       Maturity        Pay          Receive
                                                                        Amount          Date          Rate          Rate
                                                                     -------------   ---------      -------
<S>                                                                  <C>                  <C>        <C>           <C>
        Interest rate swap, National City Bank....................   $      30,000    May  2003       5.965%        5.514%
        Interest rate swap, Bank of America.......................   $      20,000    May  2003       5.760%        5.514%
        Interest rate swap, Manufacturers and Traders Trust Company  $      10,000    May  2003       5.925%        5.514%
        Interest rate swap, Harris Bank...........................   $      20,000    Dec. 2003       5.090%        5.514%
        Interest rate swap, SunTrust Bank.........................   $      10,000    Dec. 2003       5.105%        5.514%
        Interest rate swap, LaSalle Bank..........................   $      10,000    Dec. 2003       5.095%        5.514%
        Interest rate swap, Bank of America.......................   $      10,000    Dec. 2003       5.120%        5.514%
        Interest rate swap, Harris Bank...........................   $      10,000    Dec. 2003       5.120%        5.514%
</TABLE>

    The fair value of the interest rate swap agreements based on settlement cost
as estimated by a dealer as of September 30, 1999 are as follows:

<TABLE>
<CAPTION>

                                                                             Notional         Fair
                                                                              Amount          Value
                                                                           ------------   ------------
<S>                                                                        <C>            <C>
        Interest rate swap, National City Bank.......................      $     30,000   $      278
        Interest rate swap, Bank of America..........................      $     20,000   $      (21)
        Interest rate swap, Manufacturers and Traders Trust Company..      $     10,000   $      118
        Interest rate swap, Harris Bank..............................      $     20,000   $      943
        Interest rate swap, SunTrust Bank............................      $     10,000   $      485
        Interest rate swap, LaSalle Bank.............................      $     10,000   $      465
        Interest rate swap, Bank of America..........................      $     10,000   $      458
        Interest rate swap, Harris Bank..............................      $     10,000   $      460
</TABLE>

9. COMMITMENTS AND CONTINGENCIES:

    The  Company   leases   substantially   all  of  its  retail   stores  under
non-cancelable  agreements  generally for initial  periods ranging from three to
five years. The store leases  generally  contain renewal options for one or more
periods  of three to five  years.  Most  leases  require  the  payment of taxes,
insurance and maintenance  costs by the Company.  At September 30, 1999,  future
minimum rental payments under non-cancelable operating leases are as follows:

<TABLE>
<CAPTION>


                                                                               September 30, 1999
                                                                               ------------------

<S>                            <C>                                             <C>
                               2000.......................................     $        28,883
                               2001.......................................              22,688
                               2002.......................................              15,729
                               2003.......................................               8,710
                               Thereafter.................................               5,368
                                                                               ---------------
                               Total minimum payments required............     $        81,378
                                                                               ===============
</TABLE>

     Rent expense under operating leases for the years ended September 30, 1999,
1998, and 1997 was $26,495, $25,737, and $18,197, respectively.

    The  Company  is  subject to legal  proceedings  and claims in the  ordinary
course of its business that have not been finally adjudicated.  Certain of these
cases have resulted in contingent liabilities ranging from $2,200 to $4,100. The
majority of such claims are, in the opinion of management,  covered by insurance
policies or indemnification  agreements and therefore should not have a material
effect on the  consolidated  financial  position,  results of operations or cash
flows of the Company.  Additional  claims exist in the range of $1,300 to $1,400
for which  management  believes it has  meritorious  defenses  but for which the
likelihood   of  an   unfavorable   outcome  is  currently   not   determinable.
Additionally,  claims  exist  for which  management  is not able to  estimate  a
potential  loss. In  management's  opinion,  each of these claims will either be
indemnified by the former  shareholders  of companies it has acquired or covered
by  insurance  policies  and  therefore  will not have a material  effect on the
consolidated  financial  position,  results of  operations  or cash flows of the
Company.

    In fiscal 2000, the Company plans to construct a 30,000 square foot addition
to its current corporate  headquarters  facility. The Company estimates the cost
at approximately  $3,500. The Company plans to fund this project with borrowings
on its Senior Credit Facility.

<PAGE>


                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


9. COMMITMENTS AND CONTINGENCIES, Continued:

    The  Company  is  self-insured   for  certain  losses  related  to  workers'
compensation,  employee  medical and  employee  dental  claims.  The Company has
purchased  stop-loss  coverage in order to limit its exposure to any significant
levels of claims.  Self-insurance  reserves are accrued based upon the Company's
estimates of the aggregate liability for uninsured claims incurred using certain
actuarial  assumptions  followed in the  insurance  industry  and the  Company's
historical  experience.  The Company has obtained letters of credit of $1,700 to
guarantee the payment of future claims.  The face value of the letters of credit
approximate their market value at September 30, 1999.

    Also, see Note 12 for related party commitments.

10. REDEEMABLE PREFERRED STOCK:

    On July 21, 1995, in connection  with the  acquisition  of McKenzie  Leasing
Corporation,  the Company issued 27,500 shares of Series A Redeemable  Preferred
Stock ("Preferred  Stock").  In preference to shares of common stock, each share
was entitled to receive  annual  cumulative  cash  dividends in the amount of 7%
payable in quarterly  installments on the first day of January,  April, July and
October.  During 1997 the Company  declared  and paid  dividends  totaling  $30.
Holders of the Preferred Stock had no voting rights; however, there were certain
exceptions including the right to eight votes per share if the Company failed to
pay dividends for two quarters.

    The Company was required to redeem all  outstanding  Preferred Stock on June
30,  2006 at a  redemption  price of $100 per share  plus any  accrued or unpaid
dividends.  The Company had the right to redeem the Preferred  Stock at any time
at the rate of $100 per share plus any accrued or unpaid dividends.  The Company
also  entered into option  agreements  with the holders of the  Preferred  Stock
which provided the holders with  mandatory  redemption  rights.  During 1996 the
following  redemptions  of the  Series A  Preferred  Stock  were  made:  $429 in
January, 1996, $68 in February, 1996, and $1,132 in April, 1996. In addition, on
November 26, 1996, the Company redeemed the remaining 11,207 outstanding shares.
These shares were  redeemed at a twenty-five  percent  discount for an aggregate
purchase price of $841 and have reinstated the status of authorized and unissued
preferred  shares  undesignated  as to series.  As a result of  redemption  on a
discounted  basis, a net gain on redemption of $280 was recognized.  This amount
is added to net income in the calculation of earnings per share.

11. INCOME TAXES:

    The  Company's  income  tax  expense  (benefit)  consists  of the  following
components:

<TABLE>
<CAPTION>
                                                                                      For the Years Ended September 30,
                                                                                ----------------------------------------------
                                                                                    1999            1998           1997
                                                                                    ----            ----           ----
                     Current expense:
<S>                                                                             <C>             <C>            <C>
                       Federal.............................................     $     3,499     $     4,126    $     4,604
                       State and local.....................................             987           1,236          1,379
                                                                                -----------     -----------    -----------
                                                                                      4,486           5,362          5,983
                     Deferred expense (benefit):
                       Federal.............................................           7,843            (438)          (828)
                       State and local.....................................           2,905            (153)          (289)
                                                                                -----------     -----------    -----------
                                                                                     10,748            (591)        (1,117)
                                                                                -----------     -----------    -----------
                     Income tax expense....................................     $    15,234     $     4,771    $     4,866
                                                                                ===========     ===========    ===========

</TABLE>


    A  reconciliation  of the income tax expense compared with the amount at the
U.S. statutory tax rate of 34% (35% for 1999) is shown below:

<TABLE>
<CAPTION>

                                                                                      For the Years Ended September 30,
                                                                                ----------------------------------------------
                                                                                    1999            1998           1997
                                                                                    ----            ----           ----
<S>                                                                             <C>             <C>             <C>
                     Tax provision at U.S. statutory rate...................    $   10,618      $        997    $    2,187
                     State and local income taxes, net of federal benefit...         2,530               715           719
                     Nondeductible goodwill and purchase contracts..........           881               999         1,243
                     Nondeductible acquisition costs........................         2,625             1,917           198
                     Reserves not previously benefited......................        (1,520)                -             -
                     Other..................................................           100               143           519
                                                                                ----------      ------------    ----------
                     Income tax expense.....................................    $   15,234      $      4,771    $    4,866
                                                                                ==========      ============    ==========

</TABLE>

<PAGE>




                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


11. INCOME TAXES, Continued:

    At September 30, 1999 and 1998, the components of the net deferred tax asset
(liability) are as follows:

<TABLE>
<CAPTION>

                                                                                                    1999           1998
                                                                                                -----------    -----------
<S>                                                                                             <C>            <C>
                      Rental merchandise...................................................     $   (21,339)   $   (12,109)
                      Property and equipment...............................................           2,350            181
                      Operating loss carry forwards........................................           8,959         12,969
                      Intangibles..........................................................          (1,115)           206
                      Other................................................................              92          1,129
                      Tax credits..........................................................           5,835          2,926
                                                                                                -----------    -----------
                      Net deferred tax asset(liability)....................................     $    (5,218)   $     5,301
                                                                                                ===========    ===========
</TABLE>


    In 1999, a net deferred tax asset of approximately $229 was established upon
the acquisition of America's  Rent-To-Own for the difference in the tax and book
basis of the net assets acquired.

    As of September 30, 1999, the Company has net operating loss  carry-forwards
of  approximately  $22,731 for income tax  purposes,  expiring in years  through
2018. These losses are subject to annual limitations under Internal Revenue Code
Section 382 due to prior ownership  changes.  Additionally,  as of September 30,
1999, the Company has alternative minimum tax credits of approximately $5,835.

12. RELATED PARTY TRANSACTIONS:

    During  fiscal years ended  September  30,  1999,  1998 and 1997 the Company
leased two locations from a principal  shareholder or a company  controlled by a
principal shareholder.  Rent paid during these years related to these leases was
$65, $87, and $92, respectively.

    The Company has entered into employment contracts with certain directors and
executive officers.  The agreements are for a three year term commencing October
1, 1995.  The Company paid $1,282 and $882 related to these  agreements  for the
years ended September 30, 1998 and 1997, respectively.

     In connection with the acquisition of D.A.M.S.L.  Corp. ("DAMSL") in fiscal
1994, the Company entered into  consulting and  non-compete  agreements with the
former shareholders of DAMSL. The remaining payment terms for the consulting and
non-compete agreements is $319 for 2000.

    In connection with the acquisition of McKenzie Leasing  Corporation  ("MLC")
in fiscal 1995, the Company entered into  consulting and non-compete  agreements
with  McKenzie  Development  Corporation  ("MDC"),  an  affiliate of MLC and the
principal  shareholders  of MDC, the former  owners of MLC. The  consulting  and
non-compete  agreements  are for seven years and have payment terms of $1,250 on
July 21, 1995 and $200 per year for each of the following seven years.

    In  connection  with the merger of Alrenco and RTO,  Alrenco  entered into a
non-compete  agreement and  consulting  agreement  dated  February 26, 1998 with
Michael D. Walts, the Chairman,  President and principal shareholder of Alrenco.
The  consulting  and  non-compete  agreement is for a term of five years and has
payment  terms in the  amount of $400 for each of the next  five,  twelve  month
periods. The Company paid $400 and $200 on this agreement during fiscal 1999 and
1998, respectively.

    During the year ended December 31, 1997,  Home Choice issued common stock to
settle notes payable totaling $690 to certain stockholders.

13. STOCK OPTIONS:

    In March  1999,  the Board of  Directors  of the  Company  adopted,  and the
shareholders  approved,  the  Rent-Way,  Inc.  1999 Stock Option Plan (the "1999
Plan") which  authorizes the issuance of up to 2,500,000  shares of common stock
pursuant  to stock  options  granted  to  officers,  directors,  key  employees,
consultants,  and advisors of the Company.  The option exercise price will be at
least equal to the fair market value of the Company's  common stock on the grant
date. The 1999 Plan will expire in March 2009 unless  terminated  earlier by the
Board of  Directors.  The  authorized  number of shares,  the exercise  price of
outstanding  options,  and the  number of shares  under  option  are  subject to
appropriate adjustment for stock dividends,  stock splits, reverse stock splits,
recapitalizations,  and similar  transactions.  The 1999 Plan is administered by
the Stock Option  Committee of the Board of Directors  who select the  optionees
and  determine  the  terms  and  provisions  of each  option  grant  within  the
parameters set forth in the 1999 Plan. As of September 30, 1999, 550,000 options
at an exercise price of $27.88 were granted under the 1999 Plan.

<PAGE>


                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


13. STOCK OPTIONS, Continued:

    In June  1992,  the  Board of  Directors  of the  Company  adopted,  and the
shareholders  have approved,  the Rent-Way,  Inc. Stock Option Plan of 1992 (the
"1992 Plan")  which  authorizes  the issuance of up to 600,000  shares of common
stock pursuant to stock options granted to officers,  directors,  key employees,
consultants,  and advisors of the Company.  The option exercise price will be at
least equal to the fair market value of the Company's  common stock on the grant
date.  The 1992 Plan will expire in June 2002 unless  terminated  earlier by the
Board of  Directors.  The  authorized  number of shares,  the exercise  price of
outstanding  options  and the  number of shares  under  option  are  subject  to
appropriate adjustment for stock dividends,  stock splits, reverse stock splits,
recapitalizations and similar transactions. The 1992 Plan is administered by the
Compensation  Committee of the Board of Directors  who select the  optionees and
determine the terms and  provisions  of each option grant within the  parameters
set forth in the 1992 Plan.

    The Board of  Directors of the Company also  adopted,  and the  shareholders
have approved the Rent-Way,  Inc. 1995 Stock Option Plan (the "1995 Plan") which
authorizes  the issuance of up to 2,000,000  shares of common stock  pursuant to
stock options  granted to officers,  directors and key employees of the Company.
The 1995 Plan is  administered  by the  Compensation  Committee  of the Board of
Directors and contains  terms and  provisions  substantially  identical to those
contained in the 1992 Plan.

    On November 8, 1995,  Alrenco  approved a stock incentive plan (the "Alrenco
Plan") under which 450,000 common shares were reserved.  Under the Alrenco Plan,
Alrenco  was  entitled  to  grant  its  employees  incentive  stock  options  or
nonqualified  stock  options to purchase a specified  number of shares of common
stock at a price not less than fair market  value on the date of grant and for a
term not to exceed 10 years.  In  addition  to the stock  options,  Alrenco  was
entitled to grant stock appreciation rights ("SAR"), restricted stock awards and
options to directors.  SARs and options to directors were required to be granted
at a minimum  of fair  market  value at the date of grant and  restricted  stock
awards  at a  price  to  be  determined  by  the  Alrenco  Board  of  Directors'
compensation committee. Directors who were not involved in day-to-day management
of Alrenco  were  initially  entitled to a grant of 5,000  shares and on each of
their next five  anniversaries,  an automatic  1,000 share grant. On January 23,
1996,  Alrenco granted 105,000 shares of restricted  stock to two key employees,
which vested at the earlier of a change in control or at the end of seven years.
As a result  of the  merger  with  RTO,  these  shares  automatically  vested on
February 26, 1998. Compensation expense of $988 and $194 was recorded related to
Alrenco Plan for the years ended September 30, 1999 and 1998.

    RTO adopted the 1996 Employee  Stock Option Plan (the "RTO Plan") to attract
and retain  employees.  Under the RTO Plan, RTO was entitled to grant options to
purchase a total of not more than 1,027,973  shares of common stock,  subject to
anti-dilution  and  other  adjustment  provisions  provided,  however,  that the
maximum number of shares subject to all options  granted to an individual  under
the Plan  would not  exceed 50% of the  shares of common  stock  authorized  for
issuance.  No  options  could be  granted  under  the RTO Plan  after  the tenth
anniversary of the RTO Plan. The options vest over a four-year period and expire
on the tenth anniversary  following the date of grant. RTO also adopted the 1996
Stock  Option  Plan for  Non-Employee  Directors  (the  "Director's  Plan") that
provided for the granting to non-employee directors of stock options to purchase
up to 448,975 shares of RTO's common stock.

    Pursuant  to the terms of the merger  agreement  between  Rent-Way  and Home
Choice,  each Home Choice stock option which was  outstanding and unexercised at
the date of the  merger  was  converted  into an option to  purchase  Rent-Way's
common stock.  The number of shares subject to the Home Choice options was equal
to the product of the number of shares of Home Choice  common  stock  subject to
Home Choice options and 0.588, the exchange ratio.

    The following is a summary of activity of the Company's stock options during
the years  ended  September  30,  1999,  1998 and 1997 and has been  restated to
include the activity of Home Choice's  stock options based on an exchange  ratio
of 0.588:

<TABLE>
<CAPTION>
                                                                               Weighted
                                                                                Average
                                                                                 Price
                                              Stock Options         Shares     Per Share
                                           ------------------    -----------   ---------
<S>                                                  <C> <C>       <C>            <C>
                                           September 30, 1996      1,322,113   $   10.51
                                             Granted.........      1,149,522   $   15.54
                                             Exercised.......       (306,278)  $    6.25
                                             Forfeited.......       (172,568)  $   15.30
                                                                 -----------
                                           September 30, 1997      1,992,794   $   13.65
                                             Granted.........      1,070,831   $   23.48
                                             Exercised.......       (299,417)  $   10.27
                                             Forfeited.......       (443,702)  $   19.92
                                                                 -----------
                                           September 30, 1998      2,320,506   $   17.42
                                             Granted.........      1,364,263   $   25.90
                                             Exercised.......       (403,610)  $   14.07
                                             Forfeited.......       (125,950)  $   25.29
                                                                 -----------
                                           September 30, 1999      3,155,209   $   21.21
                                                                 ===========
</TABLE>

<PAGE>



                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


13. STOCK OPTIONS, Continued:

    At September  30, 1999,  stock  options  representing  1,432,515  shares are
exercisable at prices ranging from $5.83 to $33.63 per share.

     The Company accounts for stock based  compensation  issued to its employees
and  directors  in  accordance  with APB No.  25 and has  elected  to adopt  the
"disclosure only" provisions of SFAS No. 123.

    For SFAS No. 123 purposes,  the fair value of each option  granted under the
1992 Plan, the 1995 Plan, and the 1999 Plan is estimated as of the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions  used  for  options  granted  in  fiscal  1999  and  1998:  expected
volatility of 45.43%,  risk-free  interest rates between 6.07% and 4.21%, and an
expected life of five years.

    If the Company had elected to recognize the  compensation  cost of its stock
option  plans  based  on the fair  value  of the  awards  under  those  plans in
accordance  with SFAS No. 123, net income (loss) and earnings  (loss) per common
share would have been reduced to the pro-forma amounts below:

<TABLE>
<CAPTION>

                                                                       September 30,
                                                                     1999          1998
                                                                 ------------ -------------
                   Net income (loss) before extraordinary
                    item:
<S>                                                              <C>          <C>
                     As reported............................     $    15,102  $    (1,838)
                     Pro-forma..............................           9,274       (4,243)

                   Net income (loss):
                     As reported............................     $    14,583  $    (1,838)
                     Pro-forma..............................           8,755       (4,243)

                   Diluted earnings (loss) per common share:
                   Income (loss) before extraordinary item
                     As reported............................     $      0.68  $     (0.09)
                                                                 ===========  ===========
                     Pro-forma..............................     $      0.43  $     (0.21)
                                                                 ===========  ===========

                   Net income (loss)
                     As reported............................     $      0.66  $     (0.09)
                                                                 ===========  ===========
                     Pro-forma..............................     $      0.41  $     (0.21)
                                                                 ===========  ===========

</TABLE>


14. STOCK PURCHASE WARRANTS:

    During  October,  November and December 1992,  Rent-Way  issued  warrants to
purchase up to 112,500  shares of common stock at $4.67 per share.  The warrants
are  exercisable  at any time for a period of five years  from their  respective
issue  dates  and  are  subject  to  anti-dilution   provisions   providing  for
appropriate  adjustment in the event of any  reclassification,  stock  dividend,
stock  split,  or similar  transaction,  and stock  issuances  below the warrant
exercise price.  The agreements will expire five years from the respective dates
on which the warrants  were issued,  subject to earlier  termination  in certain
circumstances.

    Upon the closing of the Company's initial public offering in August 1993 the
underwriters  received  warrants to purchase 105,000 shares of common stock at a
price of $6.77 per share  exercisable for a period of four years  commencing one
year from the date of the offering.

    In July 1995, in connection with Rent-Way's  acquisition of McKenzie Leasing
Corporation  and  the  issuance  of  its  Convertible  Subordinated  Debentures,
Rent-Way issued warrants to purchase 105,000 shares of common stock at $9.94 per
share to the holders  thereof.  The warrants are  exercisable  at any time for a
period of seven years from their  issue  dates and are subject to  anti-dilution
provisions   providing   for   appropriate   adjustment  in  the  event  of  any
reclassification,  stock  dividend,  stock split, or similar  transactions,  and
stock issuances below the warrant exercise price.

    In September  1995,  Rent-Way  issued  warrants to purchase 37,500 shares of
common stock at $10.00 per share. The warrants are exercisable at any time for a
period of five years from their  issue  dates and are  subject to  anti-dilution
provisions   providing   for   appropriate   adjustment  in  the  event  of  any
reclassification,  stock  dividend,  stock split, or similar  transactions,  and
stock issuances below the warrant exercise price.




<PAGE>


                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)



14. STOCK PURCHASE WARRANTS, Continued:

    At September 30, 1999, the following warrants were outstanding:

<TABLE>
<CAPTION>


                                               Number of  Exercise   Expiration      Shares     Shares
                             Warrant Date       shares      Price       Date        Exercised  Remaining
                           ---------------    ----------  -------- --------------   ---------  ---------
<S>                                <C>            <C>      <C>             <C>        <C>
                           October 1992           37,500   $  4.67  October 1997       37,500         --
                           November 1992          37,500   $  4.67  November 1997      37,500         --
                           December 1992          37,500   $  4.67  December 1997      37,500         --
                           August 1993           105,000   $  6.76  August 1998       105,000         --
                           July 1995             105,000   $  9.94  July 2002              --    105,000
                           September 1995         37,500   $ 10.00  September 2000     37,500         --
</TABLE>


15. EMPLOYEE BENEFIT PLANS:

    Effective January 1, 1994,  Rent-Way  established the Rent-Way,  Inc. 401(k)
Retirement  Savings  Plan (the  "RentWay  Plan").  Participation  in the Plan is
available to all Company  employees who meet the necessary  service  criteria as
defined in the Plan Agreement.  Company contributions to the Plan are based on a
percentage  of the  employees'  contributions,  as  determined  by the  Board of
Directors,  and  amounted to $351,  $383 and $272 (in the form of the  Company's
common  stock)  for  the  years  ended   September  30,  1999,  1998  and  1997,
respectively.

    At September 30, 1999, the Company had three other active 401(k)  retirement
savings plans: the America's Sales & Leasing 401(k) Plan (the "America's Plan"),
the  Rent-A-Vision,  Inc.  401(k) Plan (the  "RentaVision  Plan"),  and the Home
Choice  401(k) and Profit  Sharing  Plan (the "Home Choice  Plan").  The Company
incurred $6 of expense  related to the  America's  Plan during  fiscal 1999.  No
expenses were incurred related to the RentaVision Plan. The Company  contributed
$460,  $515 and $338 to the Home Choice Plan for the years ended  September  30,
1999 and 1998, and the twelve months ended December 31, 1997, respectively. Each
plan is  available  to all  Company  employees  who meet the  necessary  service
criteria as defined in the plan agreements.  Company  contributions to the plans
are based on a percentage of the employees'  contributions.  The Company expects
to merge these plans with the RentWay Plan.  The Home Choice Plan will be merged
in January 2000 and the America's  Plan and  RentaVision  Plan will be merged in
July 2000.

     The Company also has a frozen 401(k) retirement  savings plan: the Amigo TV
Rentals,  Inc. 401(K) Plan. The Company is working to dissolve this plan.  There
were no expenses incurred for this plan during fiscal 1999 and 1998.



















<PAGE>



                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)


16.  EARNINGS (LOSS) PER SHARE:

     Basic earnings  (loss) per common share is computed  using earnings  (loss)
available to common  shareholders  divided by weighted  average number of common
shares  outstanding.  Diluted earnings (loss) per common share is computed using
earnings  (loss)  available  to common  shareholders  adjusted  for  anticipated
interest  savings,  net  of  related  taxes,  on  conversion  of  the  Company's
convertible  subordinated  debentures and the weighted  average number of shares
outstanding is adjusted for the potential impact of options,  warrants,  and the
convertible subordinated debentures where the effects are dilutive. The weighted
average  shares  outstanding  prior to December 10, 1998 include the  historical
weighted average shares of Home Choice, adjusted for the exchange ratio of 0.588
(see Note 4).

     The  following  table  discloses  the   reconciliation  of  numerators  and
denominators of the basic and diluted earnings (loss) per share computation:

<TABLE>
<CAPTION>


                                                                                           September 30,
                                                                           ----------------------------------------------
COMPUTATION OF EARNINGS (LOSS) PER SHARE                                        1999           1998            1997
                                                                           ----------------------------------------------

                          BASIC
<S>                                                                        <C>             <C>             <C>
                          Net income (loss)...........................     $    14,583     $    (1,838)    $     1,297
                          Preferred stock gain on redemption..........              --              --             280
                                                                           -----------     -----------     -----------
                          Earnings (loss) applicable to common shares
                          for basic earnings per share................     $    14,583     $    (1,838)    $     1,577
                                                                           ===========     ===========     ===========
                          Weighted average common shares outstanding..          21,341          20,283          16,653
                                                                           ===========     ===========     ===========

                          Earnings (loss) per common share:
                            Income (loss) before extraordinary item...     $      0.71     $     (0.09)    $      0.11
                                                                           ===========     ===========     ===========
                            Earnings (loss) applicable to common shares
                                                                           $      0.68     $     (0.09)    $      0.09
                                                                           ===========     ===========     ===========

                          DILUTED
                          Earnings (loss) applicable to common shares
                          for basic earnings per share................     $    14,583     $    (1,838)    $     1,577
                            Interest on 7% convertible debentures (net
                            of tax) (1).................................           840              --              --
                                                                           -----------     -----------     -----------
                          Earnings (loss) applicable to common shares
                          for diluted earnings per share..............     $    15,423     $    (1,838)    $     1,577
                                                                           ===========     ===========     ===========
                          Weighted average common shares used in
                          calculating basic earnings per share........          21,341          20,283          16,653

                          Add-incremental shares representing:
                          Shares issuable upon exercise of stock
                          options, stock warrants and escrowed shares
                          (1).........................................             508              --              --
                          Shares issued on conversion of 7%
                           convertible debentures (1).................           1,496              --              --
                                                                           -----------     -----------     -----------

                          Weighted average number of shares used in
                          calculation of diluted earnings (loss)  per
                          share.......................................          23,345          20,283          16,653
                                                                           ===========     ===========     ===========
                          Earnings (loss) per common share:
                            Income (loss) before extraordinary item...     $      0.68     $     (0.09)    $      0.11
                                                                           ===========     ===========     ===========
                            Earnings (loss) applicable to common shares    $      0.66     $     (0.09)    $      0.09
                                                                           ===========     ===========     ===========



     (1) Including the effects of these items for the years ended  September 30, 1997 and 1998 would be  anti-dilutive.
         Therefore,  they are  excluded  from the calculation of diluted earnings (loss) per share for those periods.

</TABLE>











<PAGE>



                                 RENT-WAY, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                (all dollars in thousands, except per share data)

<TABLE>
<CAPTION>


17. SELECTED QUARTERLY FINANCIAL DATA (unaudited):

--------------------------------------------- ------------------ ------------------ ------------------- ---------------------
Quarter Ended (9)                               September 30 (1)        June 30            March 31        December 31 (2)(3)
--------------------------------------------- ------------------ ------------------ ------------------- ---------------------
1999:
<S>                                           <C>                <C>                 <C>                <C>
Total revenues                                $       122,690    $       121,951     $       125,750    $       123,959
Gross profit (loss)                                    19,784             17,666              16,353             (7,088)
Income (loss) before extraordinary item                 9,395              8,123               7,115             (9,531)
Net income (loss)                                       9,395              8,123               7,115            (10,050)
Earnings (loss) applicable to common shares             9,395              8,123               7,115            (10,050)
Earnings (loss) per common share
Basic
  Income (loss) before extraordinary item (8) $          0.43    $          0.38     $          0.34     $        (0.45)
  Net income (loss) (8)                                  0.43               0.38                0.34              (0.48)
Diluted
  Income (loss) before extraordinary item (8) $          0.41    $          0.36     $          0.32     $        (0.45)
  Net income (loss) (8)                                  0.41               0.36                0.32              (0.48)
Weighted average shares outstanding
  Basic                                                21,771             21,335              21,125             21,088
  Diluted                                              23,678             23,378              23,142             21,088

--------------------------------------------- ------------------ ------------------ ------------------- ----------------------
Quarter Ended (9)                               September 30 (4)(5)(6)   June 30 (4)(5)     March 31 (4)(7)  December 31
--------------------------------------------- ------------------ ------------------ ------------------- ----------------------
1998:
Total revenues                                $       117,917    $       118,546     $       111,660    $        87,908
Gross profit (loss)                                    11,033              7,394              (1,501)            (2,397)
Income (loss) before extraordinary item                 4,577              1,675              (4,982)            (3,107)
Net income (loss)                                       4,577              1,675              (4,982)            (3,107)
Earnings (loss) applicable to common shares             4,577              1,675              (4,982)            (3,107)
Earnings (loss) per common share
Basic
  Income (loss) before extraordinary item (8) $          0.22    $          0.08     $         (0.24)     $       (0.17)
  Net income (loss) (8)                                  0.22               0.08               (0.24)             (0.17)
Diluted
  Income (loss) before extraordinary item (8) $          0.21    $          0.08     $         (0.24)     $       (0.17)
  Net income (loss) (8)                                  0.21               0.08               (0.24)             (0.17)
Weighted average shares outstanding
  Basic                                                20,734             20,681              20,701             18,507
  Diluted                                              22,899             22,945              20,701             18,507

(1)     Includes the results of  operations  of America's  Rent-To-Own  Center since June 30, 1999 and  RentaVision
        since September 23, 1999. (see Note 4).
(2)     In conjunction with the Merger,  the Company incurred $16,800 in business  combination costs and $1,100 in
        inventory write-offs. (see Note 4).
(3)     As a result of the refinancing of its senior credit facility in December
        1998, the Company incurred an  extraordinary  charge of $519, net of tax
        benefit. (see Notes 1 and 7).
(4)     Includes the results of operations of Ace Rentals  since  January 1, 1998, Champion  since  February 5,
        1998, 3 stores acquired by Home Choice. (see Note 4).
(5)     Includes the results of operations of 7 stores acquired by Home Choice. (see Note 4).
(6)     Includes the results of operations  of Fast Rentals since July 21, 1998, Cari since  September 10, 1998,
        and Northwest Rent-to-Own.(see Note 4).
(7)     Includes  $11,210  in  business  combination  charges  related  to  Home
        Choice's  predecessor's  merger with Alrenco, which  occurred in February 1998.
(8)     The sum of the 1999 and 1998  quarterly  per share  amounts does not equal annual per share amounts due to
        the effect of rounding.
(9)     All periods have been restated to reflect the merger with Home Choice (see Note 4).

</TABLE>


<PAGE>


ITEM 9 CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING  AND
FINANCIAL DISCLOSURES

    There has been no change of  accountants or reporting  disagreements  on any
matter of accounting  principle,  practice,  financial  statement  disclosure or
auditing scope or procedure within the Company's two most recent fiscal years or
the current interim period.


<PAGE>


                                 RENT-WAY, INC.

                                    PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  in response to this item is  incorporated  herein by reference from
the Company's  definitive proxy statement for the annual meeting of shareholders
to be held on March  8,  2000,  which  will be filed  with  the  Securities  and
Exchange Commission within 120 days after September 30, 1999.

ITEM 11 EXECUTIVE COMPENSATION

Information  in response to this item is  incorporated  herein by reference from
the Company's  definitive proxy statement for the annual meeting of shareholders
to be held on March  8,  2000,  which  will be filed  with  the  Securities  and
Exchange Commission within 120 days after September 30, 1999.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information  in response to this item is  incorporated  herein by reference from
the Company's  definitive proxy statement for the annual meeting of shareholders
to be held on March  8,  2000,  which  will be filed  with  the  Securities  and
Exchange Commission within 120 days after September 30, 1999.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  in response to this item is  incorporated  herein by reference from
the Company's  definitive proxy statement for the annual meeting of shareholders
to be held on March  8,  2000,  which  will be filed  with  the  Securities  and
Exchange Commission within 120 days after September 30, 1999.

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a)(1.)Financial Statements.

    See Index to Financial Statements appearing at Item 8 of this Report.

    (a)(2.) Financial Statement Schedules

        Financial  Statement  schedules  have  been  omitted  because  they  are
    inapplicable  or the  information  is  included in the  Company's  financial
    statements and notes thereto.

    (a)(3.) Exhibits




<PAGE>




Exhibit No.                                  Description
-------------------------------------------------------------------------------
2.1(1)     Asset Purchase Agreement among the Company, AV Rentals/Warren, Inc.,
           AV Rentals/Garystown, Inc., Best Rentals Northside, Inc. and C.
           Dennis Goldman, dated February 24, 1995.
2.2(4)     Agreement   and  Plan  of  Merger  among  the
           Company, McKenzie Leasing Corporation,  Steve
           A.  McKenzie,  Brenda G. McKenzie and others,
           dated June 9, 1995.
2.3(7)     Stock  Purchase  Agreement  by and  among the
           Company, Diamond Leasing Corporation, Kenneth
           H. Moye and Lee Brady, dated July 20, 1996.
2.4(9)     Stock Purchase Agreement by and among the Company, Bill Coleman TV,
           Inc. and David Coleman, dated January 2, 1997.
2.5(6)     Stock Purchase Agreement by and among the Company, Perry Electronics,
           Inc., Robert L. Thomas, Norma J. Thomas, Randall D. Snyder and Niki
           L. Snyder, dated January 24, 1997.
2.6(6)     Closing  Letter  Agreement  dated February 6,
           1997 amending Stock Purchase Agreement by and
           among the Company,  Perry Electronics,  Inc.,
           Robert L.Thomas, Norma J. Thomas, Randall D. Snyder and Niki L.
           Snyder.
2.7(10)    Asset Purchase Agreement by and among the Company, South Carolina
           Rentals,Inc., Paradise Valley Holdings, Inc., L & B Rents, Inc. and
           James S. Archer, dated November 21, 1997.
2.8(11)    Stock Purchase Agreement by and among the Company, Champion Rentals,
           Inc., Bill C. Ogle, Sr. and others, dated as of January 30, 1998.
2.9(12)    Agreement and Plan of Merger dated  September 1, 1998  between  the
           Company and Home Choice Holdings, Inc.
2.10(14)   Stock Purchase Agreement between the Company, RentaVision, Inc. and
           Robert Natoli dated September 15, 1999.
3.1(13)    Articles of Incorporation of the Company, as amended.
3.2(2)     By-Laws of the Company, as amended.
4.1(1)     Form of Stock Option Agreement between the Company and each of the
           shareholders of McKenzie Leasing Corporation, dated July 21, 1995.
4.2(1)     Registration Rights Agreement among the Company, Massachusetts
           Mutual Life Insurance Co. and affiliates thereof ("MassMutual"),
           dated July 15, 1995.
4.3(9)     Shareholder's  Agreement  between the Company
           and Lee Brady, dated July 20, 1996.
4.4(9)     Stock  Option  Agreement  between the Company
           and David Coleman, dated January 2, 1997.
10.1(2)    Company's Stock Option Plan of 1992.
10.2(1)    Company's 1995 Stock Option Plan.
10.3(2)    Form of Non-Plan Stock Option Agreement.
10.4(15)   Company's 1999 Stock Option Plan.
10.4*      Employment   Agreement   between  William  E. Morgenstern and the
           Company, dated October 1, 1998.
10.5*      Employment   Agreement   between  Jeffrey  A. Conway  and the
           Company,  dated  October  1, 1998.
10.6*      Engagement  Agreement  between Gerald A.Ryan and the Company,
           dated  October 1, 1999.
10.7(1)    Consulting  Agreement  between the Company and Marc Joseffer,
           dated May 18, 1994.
10.8(1)    Non-Competition  Agreement  between  Marc Joseffer and the  Company,
           dated May 18, 1994.
10.9(1)    Consulting  Agreement between the Company and
           McKenzie Development Corporation,  dated July
           21, 1995.
10.10(1)   Non-Competition Agreement between the Company
           and Steve A. McKenzie, dated July 21, 1995.
10.11(1)   Non-Competition Agreement between the Company
           and Brenda G. McKenzie, dated July 21, 1995.
10.12(4)   Subordinated Note Agreement among the
           Company and MassMutual, dated July 15, 1995.
10.13(1)   Form of MassMutual Subordinated Note, dated July 15, 1995.
10.14(1)   Form of MassMutual Warrant, dated July 15, 1995.
10.15(12)  Non competition Agreement between the Company and George D. Johnson,
           Jr.
10.16*     Credit Agreement by and among Rent-Way, Inc., RentaVision, Inc., and
           Rent-Way of TTIG, L.P. and the lenders party thereto and National
           City Bank of Pennsylvania, Bank of America, N.A. and Bank
           of Montreal and Harris Trust and Savings
           Bank, as agents dated September 23, 1999, as
           amended by Amendment No. 1 to Credit
           Agreement dated November 17, 1999.
10.17(8)   Form of the Company's 7% Convertible Subordinated Debentures due 2007
           (the "Debentures").
10.18(8)   Indenture, dated February 4, 1997, between
           the Company and Manufacturers and Traders
           Trust Company, as Trustee, in respect of the
           Debentures.
10.19(13)  Non-Compete Agreement between the Company, South Carolina Rentals,
           Inc., Paradise Valley Holdings, Inc., L & B Rents, Inc. and James S.
           Archer, dated January 7, 1998.
10.20(13)   Non-Compete Agreement between Bill C. Ogle, Sr., Gary E. Jackson,
           J. Lee Ogle, Bill C. Ogle, Jr., Cindy Harper, Teresa Ogle and the
           Company, dated February 5, 1998.
10.21(13)  Consulting Agreement between Paul N. Upchurch
           and the Company, dated February 5, 1998.
21*        Subsidiaries of the Company
23*        Consent of PricewaterhouseCoopers LLP.
27*        Financial Data Schedule.
----------

    * Filed herewith

(1)  Previously  filed,  as of January 5, 1996,  pursuant to the  Company's
     Registration Statement on Form SB-2 (No. 333-116).

(2)  Previously  filed,  as of December 8, 1992,  pursuant to the Company's
     Registration Statement on Form S-18 (No. 33-55562-NY).

<PAGE>

(3)  Previously  filed,  as of July 9, 1993,  pursuant to Amendment No. 2 to
     the Company's Registration Statement of
     Form S-18 (No. 33-55562-NY).

(4)  Previously  filed,  as of August 15, 1995,  as an exhibit to the  Company's
     Current Report on Form 8-K.

(5)  Previously  filed,  as of December 28, 1995, as an exhibit to the Company's
     Current Report on Form 10-KSB.

(6)  Previously  filed,  as of February 21, 1997, as an exhibit to the Company's
     Current Report on Form 8-K.

(7)  Previously  filed,  as of August 8, 1996,  as an  exhibit to the  Company's
     Current Report on Form 8-K.

(8)  Previously  filed,  as of  May 9,  1997,  pursuant  to  the  Company's
     Registration Statement on Form S-3 (No. 333-26835).

(9)  Previously  filed,  as of  November  6,  1997,  as an  exhibit  to the
     Company's Annual Report on Form 10-K.

(10)  Previously  filed,  as of  January  20,  1998,  as an  exhibit to the
      Company's Current Report on Form 8-K.

(11)  Previously  filed,  as of  February  19,  1998,  as an exhibit to the
      Company's Current Report on Form 8-K.

(12) Previously  filed,  as of  November  6,  1998,  pursuant  to the  Company's
     Registration Statement on Form S-4 (No. 333-66955).

(13) Previously  filed,  as of  December  29,  1998,  as an exhibit to the
     Company's Annual Report on Form 10-K.

(14) Previously  filed,  as of  October  12,  1999,  as an  exhibit to the
     Company's Current Report on Form 8-K.

(15) Previously  filed,  as of  February  12,  1999,  as  Exhibit A to the
     Company's Proxy Statement on Schedule 14A.

    (b) Reports on Form 8-K:

          (1)     On July 27, 1999,  the Company filed a Current  Report on Form
                  8-K which reported the issuance of a press release on June 30,
                  1999  announcing  the  acquisition  of  America's  Rent-To-Own
                  Center, Inc.

          (2)     On August 16, 1999, the Company filed a Current Report on Form
                  8-K  announcing  the  election of  Jacqueline  E. Woods to the
                  Board of Directors.

          (3)     On August 31, 1999, the Company filed a Current Report on Form
                  8-K announcing  the  resignation of Gerald A. Ryan as Chairman
                  of the Board of the Company.

          (4)     On September 24, 1999,  the Company filed a Current  Report on
                  Form 8-K which  reported  the  issuance of a press  release on
                  September  15, 1999  announcing  the  signing of a  definitive
                  agreement to acquire the stock of RentaVision, Inc.

          (5)     On October 12,  1999,  the Company  filed a Current  Report on
                  Form  8-K  disclosing   the  completion  of  the   RentaVision
                  acquisition and attaching the exhibits required under Item 7.

          (6)     On October 21,  1999,  the Company  filed a Current  Report on
                  Form 8-K in  response  to  numerous  inquiries  regarding  the
                  decline in the price of its common stock.

          (7)     On December 3, 1999,  the  Company  filed a Current  Report on
                  Form  8-K/A  amending  the  Current  Report  on Form 8-K filed
                  October  12,  1999 to file the  financial  statements  and pro
                  forma financial information required under Item 7.




<PAGE>


                                 RENT-WAY, INC.

                                   SIGNATURES

    Pursuant  to the  requirements  of  Section  13 or 15 (d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Registrant: RENT-WAY, INC.

By:     /s/ WILLIAM E. MORGENSTERN               By:    /s/ JEFFREY A. CONWAY
--------------------------------------------     ------------------------------
Chairman of the Board, President and Chief       Senior Vice President and Chief
 Executive Officer(Principal Executive Officer)  Financial Officer
                                                 (Principal Financial Officer)
December 22, 1999
--------------------------------------------     December 22, 1999
Date                                             ------------------------------
                                                 Date
By:    /s/ MATTHEW J. MARINI
--------------------------------------------
Controller and Chief Accounting Officer
(Principal Accounting Officer)

December 22, 1999
--------------------------------------------
Date


    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.

         Signature                        Title                  Date
 ----------------------------      -------------------     -----------------

     /s/ GERALD A. RYAN            Director                December 22, 1999
 ----------------------------
         Gerald A. Ryan

  /s/ WILLIAM E. MORGENSTERN       Director                December 22, 1999
 ----------------------------
      William E. Morgenstern

     /s/ VINCENT CARRINO           Director                December 22, 1999
 -----------------------------
         Vincent Carrino

     /s/ ROBERT FAGENSON           Director                December 22, 1999
 -----------------------------
         Robert Fagenson

    /s/ MARC W. JOSEFFER           Director                December 22, 1999
 -----------------------------
        Marc W. Joseffer

     /s/ WILLIAM LERNER            Director                December 22, 1999
 -----------------------------
         William Lerner

     /s/ PAUL N. UPCHURCH          Director                December 22, 1999
 -----------------------------
         Paul N. Upchurch

     /s/ JACQUELINE E. WOODS       Director                December 22, 1999
 -----------------------------
         Jacqueline E. Woods












<PAGE>

                                 EXHIBIT INDEX


Exhibit No.                                  Description
-------------------------------------------------------------------------------
2.1(1)     Asset Purchase Agreement among the Company, AV Rentals/Warren, Inc.,
           AV Rentals/Garystown, Inc., Best Rentals Northside, Inc. and C.
           Dennis Goldman, dated February 24, 1995.
2.2(4)     Agreement   and  Plan  of  Merger  among  the
           Company, McKenzie Leasing Corporation,  Steve
           A.  McKenzie,  Brenda G. McKenzie and others,
           dated June 9, 1995.
2.3(7)     Stock  Purchase  Agreement  by and  among the
           Company, Diamond Leasing Corporation, Kenneth
           H. Moye and Lee Brady, dated July 20, 1996.
2.4(9)     Stock Purchase Agreement by and among the Company, Bill Coleman TV,
           Inc. and David Coleman, dated January 2, 1997.
2.5(6)     Stock Purchase Agreement by and among the Company, Perry Electronics,
           Inc., Robert L. Thomas, Norma J. Thomas, Randall D. Snyder and Niki
           L. Snyder, dated January 24, 1997.
2.6(6)     Closing  Letter  Agreement  dated February 6,
           1997 amending Stock Purchase Agreement by and
           among the Company,  Perry Electronics,  Inc.,
           Robert L.Thomas, Norma J. Thomas, Randall D. Snyder and Niki L.
           Snyder.
2.7(10)    Asset Purchase Agreement by and among the Company, South Carolina
           Rentals,Inc., Paradise Valley Holdings, Inc., L & B Rents, Inc. and
           James S. Archer, dated November 21, 1997.
2.8(11)    Stock Purchase Agreement by and among the Company, Champion Rentals,
           Inc., Bill C. Ogle, Sr. and others, dated as of January 30, 1998.
2.9(12)    Agreement and Plan of Merger dated  September 1, 1998  between  the
           Company and Home Choice Holdings, Inc.
2.10(14)   Stock Purchase Agreement between the Company, RentaVision, Inc. and
           Robert Natoli dated September 15, 1999.
3.1(13)    Articles of Incorporation of the Company, as amended.
3.2(2)     By-Laws of the Company, as amended.
4.1(1)     Form of Stock Option Agreement between the Company and each of the
           shareholders of McKenzie Leasing Corporation, dated July 21, 1995.
4.2(1)     Registration Rights Agreement among the Company, Massachusetts
           Mutual Life Insurance Co. and affiliates thereof ("MassMutual"),
           dated July 15, 1995.
4.3(9)     Shareholder's  Agreement  between the Company
           and Lee Brady, dated July 20, 1996.
4.4(9)     Stock  Option  Agreement  between the Company
           and David Coleman, dated January 2, 1997.
10.1(2)    Company's Stock Option Plan of 1992.
10.2(1)    Company's 1995 Stock Option Plan.
10.3(2)    Form of Non-Plan Stock Option Agreement.
10.4(15)   Company's 1999 Stock Option Plan.
10.4*      Employment   Agreement   between  William  E. Morgenstern and the
           Company, dated October 1, 1998.
10.5*      Employment   Agreement   between  Jeffrey  A. Conway  and the
           Company,  dated  October  1, 1998.
10.6*      Engagement  Agreement  between Gerald A.Ryan and the Company,
           dated  October 1, 1999.
10.7(1)    Consulting  Agreement  between the Company and Marc Joseffer,
           dated May 18, 1994.
10.8(1)    Non-Competition  Agreement  between  Marc Joseffer and the  Company,
           dated May 18, 1994.
10.9(1)    Consulting  Agreement between the Company and
           McKenzie Development Corporation,  dated July
           21, 1995.
10.10(1)   Non-Competition Agreement between the Company
           and Steve A. McKenzie, dated July 21, 1995.
10.11(1)   Non-Competition Agreement between the Company
           and Brenda G. McKenzie, dated July 21, 1995.
10.12(4)   Subordinated Note Agreement among the
           Company and MassMutual, dated July 15, 1995.
10.13(1)   Form of MassMutual Subordinated Note, dated July 15, 1995.
10.14(1)   Form of MassMutual Warrant, dated July 15, 1995.
10.15(12)  Non competition Agreement between the Company and George D. Johnson,
           Jr.
10.16*     Credit Agreement by and among Rent-Way, Inc., RentaVision, Inc., and
           Rent-Way of TTIG, L.P. and the lenders party thereto and National
           City Bank of Pennsylvania, Bank of America, N.A. and Bank
           of Montreal and Harris Trust and Savings
           Bank, as agents dated September 23, 1999, as
           amended by Amendment No. 1 to Credit
           Agreement dated November 17, 1999.
10.17(8)   Form of the Company's 7% Convertible Subordinated Debentures due 2007
           (the "Debentures").
10.18(8)   Indenture, dated February 4, 1997, between
           the Company and Manufacturers and Traders
           Trust Company, as Trustee, in respect of the
           Debentures.
10.19(13)  Non-Compete Agreement between the Company, South Carolina Rentals,
           Inc., Paradise Valley Holdings, Inc., L & B Rents, Inc. and James S.
           Archer, dated January 7, 1998.
10.20(13)   Non-Compete Agreement between Bill C. Ogle, Sr., Gary E. Jackson,
           J. Lee Ogle, Bill C. Ogle, Jr., Cindy Harper, Teresa Ogle and the
           Company, dated February 5, 1998.
10.21(13)  Consulting Agreement between Paul N. Upchurch
           and the Company, dated February 5, 1998.
21*        Subsidiaries of the Company
23*        Consent of PricewaterhouseCoopers LLP.
27*        Financial Data Schedule.
----------

    * Filed herewith

(1)  Previously  filed,  as of January 5, 1996,  pursuant to the  Company's
     Registration Statement on Form SB-2 (No. 333-116).

(2)  Previously  filed,  as of December 8, 1992,  pursuant to the Company's
     Registration Statement on Form S-18 (No. 33-55562-NY).

<PAGE>

(3)  Previously  filed,  as of July 9, 1993,  pursuant to Amendment No. 2 to
     the Company's Registration Statement of
     Form S-18 (No. 33-55562-NY).

(4)  Previously  filed,  as of August 15, 1995,  as an exhibit to the  Company's
     Current Report on Form 8-K.

(5)  Previously  filed,  as of December 28, 1995, as an exhibit to the Company's
     Current Report on Form 10-KSB.

(6)  Previously  filed,  as of February 21, 1997, as an exhibit to the Company's
     Current Report on Form 8-K.

(7)  Previously  filed,  as of August 8, 1996,  as an  exhibit to the  Company's
     Current Report on Form 8-K.

(8)  Previously  filed,  as of  May 9,  1997,  pursuant  to  the  Company's
     Registration Statement on Form S-3 (No. 333-26835).

(9)  Previously  filed,  as of  November  6,  1997,  as an  exhibit  to the
     Company's Annual Report on Form 10-K.

(10)  Previously  filed,  as of  January  20,  1998,  as an  exhibit to the
      Company's Current Report on Form 8-K.

(11)  Previously  filed,  as of  February  19,  1998,  as an exhibit to the
      Company's Current Report on Form 8-K.

(12) Previously  filed,  as of  November  6,  1998,  pursuant  to the  Company's
     Registration Statement on Form S-4 (No. 333-66955).

(13) Previously  filed,  as of  December  29,  1998,  as an exhibit to the
     Company's Annual Report on Form 10-K.

(14) Previously  filed,  as of  October  12,  1999,  as an  exhibit to the
     Company's Current Report on Form 8-K.

(15) Previously  filed,  as of  February  12,  1999,  as  Exhibit A to the
     Company's Proxy Statement on Schedule 14A.

    (b) Reports on Form 8-K:

          (1)     On July 27, 1999,  the Company filed a Current  Report on Form
                  8-K which reported the issuance of a press release on June 30,
                  1999  announcing  the  acquisition  of  America's  Rent-To-Own
                  Center, Inc.

          (2)     On August 16, 1999, the Company filed a Current Report on Form
                  8-K  announcing  the  election of  Jacqueline  E. Woods to the
                  Board of Directors.

          (3)     On August 31, 1999, the Company filed a Current Report on Form
                  8-K announcing  the  resignation of Gerald A. Ryan as Chairman
                  of the Board of the Company.

          (4)     On September 24, 1999,  the Company filed a Current  Report on
                  Form 8-K which  reported  the  issuance of a press  release on
                  September  15, 1999  announcing  the  signing of a  definitive
                  agreement to acquire the stock of RentaVision, Inc.

          (5)     On October 12,  1999,  the Company  filed a Current  Report on
                  Form  8-K  disclosing   the  completion  of  the   RentaVision
                  acquisition and attaching the exhibits required under Item 7.

          (6)     On October 21,  1999,  the Company  filed a Current  Report on
                  Form 8-K in  response  to  numerous  inquiries  regarding  the
                  decline in the price of its common stock.

          (7)     On December 3, 1999,  the  Company  filed a Current  Report on
                  Form  8-K/A  amending  the  Current  Report  on Form 8-K filed
                  October  12,  1999 to file the  financial  statements  and pro
                  forma financial information required under Item 7.




<PAGE>



                                  Exhibit 10.4

                                 RENT-WAY, INC.

                              EMPLOYMENT AGREEMENT
                              --------------------

         THIS AGREEMENT is made as of October 1, 1998, and has been entered into
between Rent-Way, Inc., a Pennsylvania corporation with its principal offices at
One RentWay Place, Erie,  Pennsylvania 16505 (the "Employer" or "Company"),  and
William E. Morgenstern (the "Employee").

     WHEREAS,  the  Company  desires  to employ  the  Employee  on the terms and
conditions set forth herein; and

     WHEREAS,  the  Employee  desires to be employed by the Company on the terms
and conditions set forth herein;

         NOW, THEREFORE, the Company and the Employee agree as follows:

     I.  EMPLOYMENT.
         ----------
The Company hereby employs the Employee,  and the Employee hereby accepts
continue  employment,  upon the terms and conditions  hereinafter set forth.

     II. TERM.
         ----
Subject to the provisions of termination as hereinafter provided, the term of
this Agreement  shall begin on October 1, 1998 and shall terminate on
September 30, 2001 (being three years after the  commencement  date);  provided,
however,  that  commencing  on the date  which is one year  prior to the date of
termination,  and on each  anniversary  of such date  (such date and the date of
each  anniversary   thereof  being  a  "Renewal   Date"),   the  term  shall  be
automatically  extended so to terminate  two (2) years from such  Renewal  Date,
unless at least sixty (60) days prior to such  Renewal  Date either party hereto
gives notice to the other that the term shall not be so extended.

     III. POSITION AND DUTIES.
          -------------------
During the term of this Agreement,  the Employee shall serve as  a President and
Chief  Executive  Officer of the Company with at least such statutory duties and
responsibilities as exist as of the date hereof and with such duties and
responsibilities  as may be provided in the By-Laws of the Company. The place of
employment shall be at the principal executive offices of the Company in Erie,
Pennsylvania.  The Employee agrees to devote all of his business time, skill,
attention and best efforts during normal business hours to the  business  of
the  Company  to  the  extent   necessary  to  discharge  the responsibilities
assigned during the term of employment  hereunder,  except for service on other
corporation,  civic or  charitable  boards or  committees  not significantly
interfering  with the  Employee's  duties  hereunder  and  usual, ordinary and
customary periods of vacation.

<PAGE>


                                      - 2 -



IV.      COMPENSATION.
         ------------
     A. Base Salary.
        -----------
For all services rendered by Employee under this Agreement,
the Company  shall pay a base salary of $300,000  per year during the first year
of the  Agreement.  The Employee will receive  annual  salary  increases for the
second and the third years of the Agreement  equivalent to 5% of the base salary
for each 10% increase in annual revenues. (For instance, if FY1998 revenues were
$200 million and FY1999  revenues are $400 million (a 100%  increase),  then for
FY1999  the  Employee's   compensation  would  increase  by  50%  to  $450,000).
Commencing  the fourth year of the  Agreement  (if extended in  accordance  with
paragraph 2 herein),  the  Employee's  salary will be  increased  to reflect the
percentage  increase in the Consumer Price Index for Western  Pennsylvania  (the
"CPI") for the most recently  completed  year.  Upon issuance of the CPI for the
Western   Pennsylvania   region,   Employee's  Base  Salary  will  be  increased
retroactively  to  October of the year  following  the year for which the CPI is
issued.  The Employee's  salary will be paid in  installments in conformity with
the regular payroll  practices of the Company.  The Employee's salary shall also
be reviewed annually by the Compensation  Committee of the Board of Directors of
the  Company  and may be  increased  on the basis of  individual  and  corporate
performance, by criteria and standards determined by the Compensation Committee.
Any increase in Salary or other compensation shall in no way limit or reduce any
other obligation of the Company to the Employee,  and once established,  and the
Employee's increased Base Salary shall not thereafter be reduced.

     B. Incentive  Compensation;  Bonuses.
        ---------------------------------
In addition to the Base Salary,  the
Employee shall be entitled to (i) participate in such incentive plans (including
the right to defer such bonus) made  available by the Company to its  executives
and key employees  and (ii) to receive such  additional  bonus or  discretionary
compensation  payments  as  the  Board  of  Directors  of  the  Company  or  the
Compensation   Committee  may  determine  from  time  to  time.  Incentive  plan
participation and additional bonus or discretionary  compensation payments shall
be reviewed annually by the Compensation Committee of the Board of Directors and
shall be  awarded,  on the  basis of  corporate  performance,  by  criteria  and
standards established by the Board of Directors of the Compensation Committee of
the Board, in their sole discretion.



<PAGE>


     C. Expenses.
        --------
During the term of employment hereunder, the Employee shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred in
accordance  with the policies and procedures of the Company,  as may be in force
from time to time.

     D. Benefits.
        --------
During the term of employment,  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,  as long as such
programs, plans and perquisites are continued by the Company.

         V.TERMINATION.
           -----------
     A.  Termination for Disability.
         --------------------------
In the event that Employee shall have been
prevented  from  substantially   rendering  the  services  required  under  this
Agreement  by  reason of his  disability  (as  confirmed  by  medical  authority
satisfactory to the Company and Social Security  guidelines) for a period of six
(6)  consecutive  months  (or 180  days),  the  Company  shall have the right to
terminate  this Agreement  upon thirty (30) days written  notice,  provided such
disability continues during said notice period.

     B. Termination for Employee's  Breach.
        ----------------------------------
The Company shall have the right to
terminate this Agreement and the employment  hereunder if Employee  violates his
responsibilities  under  paragraph  3  of  this  Agreement  and  such  violation
continues  after the  Employee's  having  received  notice of such violation and
thirty (30) days to cure such  violation(s) to the satisfaction of the Company's
Board of Directors.  The Company may  immediately  terminate this Agreement upon
(i)  determination  by the  Company's  Board  of  Directors  that  Employee  has
willfully   defaulted  on  a  material   obligation  of  this  Agreement,   (ii)
determination  by the  Company's  Board  of  Directors  that  there  has  been a
defalcation of the Company's funds by the Employee, (iii) conviction of Employee
on a felony charge or conviction of a misdemeanor  which impairs the  Employee's
ability  to  substantially   perform  his  duties  with  the  Company,  or  (iv)
determination  by the  Company's  Board of  Directors  that the Employee has had
unauthorized  discussions  of the  Company's  business  activities or improperly
disclosed  trade secrets or  confidential  information  concerning the Company's
business  activities  or  proposed  business  activities.  At  such  time as the
Company's Board of Directors  addresses such charges,  the Employee may submit a
written  statement  regarding  such  claims and present a defense  against  such
claims.


<PAGE>



     C.  Termination  for  Employer's  Breach.
         ------------------------------------
Employee shall have the right to
terminate  this  Agreement  if  the  Company  materially  breaches  any  of  the
provisions hereof and such breach is not cured within thirty (30) days after the
Company has received written notice from the Employee.  In such event, or in the
event of a wrongful termination of the Employee,  all moneys due to the Employee
through  the term of this  Agreement  shall be paid by the Company in a lump sum
amount within thirty (30) days of the Employee's termination, with bonuses to be
paid when earned through the remainder of the term of this  Agreement.  Employee
shall have no obligation to mitigate any losses or damages  incurred as a result
of such termination.

     D.  Termination  by  Death.  If  employment  terminates  by  reason  of the
Employee's  death, the Company will pay the Employee's estate a lump sum payment
equivalent  to six (6) months  salary;  other  benefits  will be  determined  in
accordance  with  the  Company's  survivor's   benefits,   insurance  and  other
applicable programs and plans, then in effect.

     VI. CONFIDENTIAL AND PROPRITARY INFORMATION.
         ---------------------------------------
     Employee agrees to keep secret all confidential information,  trade secrets
or proprietary information acquired by the Employee during his employment
concerning the business and affairs of the
Company  (the  "Information")  and  further  agrees for a period of one (1) year
after the  termination of his  employment,  for any reason,  not to disclose any
such  Information to any person,  firm or corporation  other than as directed by
the  Employer,  unless and until such  Information  becomes known outside of the
company  (other than  through a  violation  by the  Employee of his  obligations
hereunder).   Employee  agrees,   upon  the  Company's  request,  to  execute  a
confidential nondisclosure agreement, if requested.

         VII. MISCELLANEOUS PROVISIONS.
              ------------------------


<PAGE>


     A. Successors.
        ----------
The Company will require any successor  (whether
direct or indirect, by purchase,  merger,  consolidation or otherwise) to all or
substantially  all of the  business  and/or  assets of the Company 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.  Failure of the Company to obtain such  assumption  and  agreement
prior to the  effectiveness  of any such  succession  shall be a breach  of this
Agreement and shall entitle the Employee to compensation from the Company in the
same amount and on the same terms as the  Employee is entitled to  hereunder  if
the Employee terminated his employment for good cause.

     B. Binding Agreement.
        ------------------
This Agreement shall inure to the benefit  of  and  be   enforceable   by  the
Employee's   personal   or  legal representatives,  executors,  administrators,
successors,  heirs, distributees, devisees and legatees.  If the Employee
should die while any amount would still be payable to the Employee  hereunder
if the Employee had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the  terms  of this
Agreement,  to the  employee's  devisee,  legatee  or other designee, or,
if there is not such designee, to the Employees's estate.

     C. Notices and Communications.
        ------------------------------
All notices and communications  hereunder shall be in writing and shall be hand
delivered or sent postage prepaid by registered or certified mail, return
receipt  requested, to the  addresses  first  written or to such other address
of which notice shall have been given in the manner herein provided.

     D. Entire Agreement; Non-Assignment.
        ---------------------------------
This Agreement may not be modified, amended, changed or discharged, except by
writing signed by the parties  hereto,  and then and only to the extent set
forth in the writing.  This  Agreement  shall be binding upon and inure to the
benefit of the parties hereto,  and any  administrator,  executor and successor
of the Company. This  Agreement  may not be assigned by either of the parties
without the prior written consent of the other party.

     E. Validity; Governing Law.
        ------------------------
The invalidity or unenforceability  of any  provision  of this  Agreement
shall  not  affect  the validity or enforceability of any other provision of
this Agreement, which shallremain in full force and effect. The validity,
interpretation,  construction and performance  of this  Agreement  shall be
governed by and under the laws of the Commonwealth of Pennsylvania.

     (6) Legal Expenses.
         --------------
All legal fees and expenses incurred by
the Employee in attempts to receive the benefits granted hereunder or to enforce
this  Agreement or any of its terms will be paid by the Company  providing  that
Employee's claims are not dismissed in a summary proceeding.


<PAGE>


         IN WITNESS WHEREOF, the parties have executed this Employment Agreement
to be effective as of the day and the year first written above.


EMPLOYEE:                                   RENT-WAY, INC.


__________________________          By: ______________________________
William E. Morgenstern                    (Authorized Officer)
















































<PAGE>

                                  Exhibit 10.5

                                 RENT-WAY, INC.

                              EMPLOYMENT AGREEMENT


         THIS AGREEMENT is made as of October 1, 1998, and has been entered into
between Rent-Way, Inc., a Pennsylvania corporation with its principal offices at
One RentWay Place, Erie,  Pennsylvania 16505 (the "Employer" or "Company"),  and
Jeffrey A. Conway (the "Employee").

     WHEREAS,  the  Company  desires  to employ  the  Employee  on the terms and
conditions set forth herein; and

     WHEREAS,  the  Employee  desires to be employed by the Company on the terms
and conditions set forth herein;

         NOW, THEREFORE, the Company and the Employee agree as follows:

     I.  EMPLOYMENT.
         ----------
The Company hereby employs the Employee,  and the Employee
hereby accepts continue  employment,  upon the terms and conditions  hereinafter
set forth.

     II. TERM.
         ----
Subject to the  provisions of  termination  as  hereinafter
provided,  the term of this  Agreement  shall begin on October 1, 1998 and shall
terminate on September 30, 2001 (being three years after the commencement date);
provided,  however,  that  commencing on the date which is one year prior to the
date of  termination,  and on each  anniversary  of such date (such date and the
date of each  anniversary  thereof  being a "Renewal  Date"),  the term shall be
automatically  extended so to terminate  two (2) years from such  Renewal  Date,
unless at least sixty (60) days prior to such  Renewal  Date either party hereto
gives notice to the other that the term shall not be so extended.

     III.  POSITION  AND  DUTIES.
           ---------------------
During  the term of this
Agreement,  the Employee  shall serve as a  Vice-President  and Chief  Financial
Officer of the Company with at least such statutory duties and  responsibilities
as exist as of the date hereof and with such duties and  responsibilities as may
be provided in the By-Laws of the Company.  The place of employment  shall be at
the  principal  executive  offices  of the  Company in Erie,  Pennsylvania.  The
Employee  agrees to devote all of his business time,  skill,  attention and best
efforts  during  normal  business  hours to the  business  of the Company to the
extent necessary to discharge the  responsibilities  assigned during the term of
employment  hereunder,  except  for  service  on  other  corporation,  civic  or
charitable  boards  or  committees  not   significantly   interfering  with  the
Employee's  duties  hereunder  and  usual,  ordinary  and  customary  periods of
vacation.


<PAGE>


                                                        - 7 -



         IV.      COMPENSATION.
                  ------------
     A. Base Salary.
        -----------
For all services  rendered by Employee  under
this Agreement,  the Company shall pay a base salary of $180,000 per year during
the first  year of the  Agreement.  The  Employee  will  receive  annual  salary
increases for the second and the third years of the  Agreement  equivalent to 5%
of the base salary for each 10% increase in annual revenues.  (For instance,  if
FY1998  revenues were $200 million and FY1999  revenues are $400 million (a 100%
increase),  then for FY1999 the Employee's compensation would increase by 50% to
$270,000).  Commencing  the  fourth  year  of  the  Agreement  (if  extended  in
accordance with paragraph 2 herein),  the Employee's salary will be increased to
reflect  the  percentage  increase  in the  Consumer  Price  Index  for  Western
Pennsylvania (the "CPI") for the most recently  completed year. Upon issuance of
the CPI for the  Western  Pennsylvania  region  Employee's  Base  Salary will be
increased  retroactively to October of the year following the year for which the
CPI is issued.  The Employee's salary will be paid in installments in conformity
with the regular payroll  practices of the Company.  The Employee's salary shall
also  be  reviewed  annually  by the  Compensation  Committee  of the  Board  of
Directors  of the Company and may be increased  on the basis of  individual  and
corporate performance,  by criteria and standards determined by the Compensation
Committee. Any increase in Salary or other compensation shall in no way limit or
reduce any other obligation of the Company to the Employee and once established,
and the Employee's increased Base Salary shall not thereafter be reduced.

     B.  Incentive  Compensation;  Bonuses.
         ---------------------------------
In
addition to the Base Salary,  the Employee shall be entitled to (i)  participate
in such incentive plans (including the right to defer such bonus) made available
by the Company to its  executives  and key  employees  and (ii) to receive  such
additional  bonus  or  discretionary  compensation  payments  as  the  Board  of
Directors of the Company or the  Compensation  Committee may determine from time
to time.  Incentive plan  participation  and additional  bonus or  discretionary
compensation  payments shall be reviewed annually by the Compensation  Committee
of the Board of  Directors  and  shall be  awarded,  on the  basis of  corporate
performance,  by criteria and standards established by the Board of Directors of
the Compensation Committee of the Board, in their sole discretion.



<PAGE>


     C. Expenses.
        --------
During the term of employment hereunder, the Employee
shall be entitled to receive prompt  reimbursement  for all reasonable  expenses
incurred in accordance  with the policies and procedures of the Company,  as may
be in force from time to time.

     D. Benefits.
        --------
During the term of employment, 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,  as
long as such programs, plans and perquisites are continued by the Company.

         V.TERMINATION.
           -----------

     A. Termination for Disability.
        ---------------------------
In the event
that  Employee  shall  have been  prevented  from  substantially  rendering  the
services required under this Agreement by reason of his disability (as confirmed
by medical authority satisfactory to the Company and Social Security guidelines)
for a period of six (6) consecutive months (or 180 days), the Company shall have
the right to terminate  this  Agreement  upon thirty (30) days  written  notice,
provided such disability continues during said notice period.

     B.  Termination for Employee's  Breach.
         ----------------------------------
The Company shall have the right to terminate  this Agreement and the employment
hereunder if Employee  violates his  responsibilities  under paragraph 3 of this
Agreement and such  violation  continues  after the Employee's  having  received
notice of such violation and thirty (30) days to cure such  violation(s)  to the
satisfaction  of the Company's  Board of Directors.  The Company may immediately
terminate  this  Agreement  upon (i)  determination  by the  Company's  Board of
Directors that Employee has willfully defaulted on a material obligation of this
Agreement, (ii) determination by the Company's Board of Directors that there has
been a defalcation of the Company's funds by the Employee,  (iii)  conviction of
Employee on a felony charge or  conviction  of a  misdemeanor  which impairs the
Employee's ability to substantially perform his duties with the Company, or (iv)
determination  by the  Company's  Board of  Directors  that the Employee has had
unauthorized  discussions  of the  Company's  business  activities or improperly
disclosed  trade secrets or  confidential  information  concerning the Company's
business  activities  or  proposed  business  activities.  At  such  time as the
Company's Board of Directors  addresses such charges,  the Employee may submit a
written  statement  regarding  such  claims and present a defense  against  such
claims.



<PAGE>


     C.  Termination  for Employer's  Breach.
         -----------------------------------
Employee  shall  have the  right to  terminate  this  Agreement  if the  Company
materially  breaches any of the  provisions  hereof and such breach is not cured
within thirty (30) days after the Company has received  written  notice from the
Employee.  In such  event,  or in the  event of a  wrongful  termination  of the
Employee,  all moneys due to the  Employee  through  the term of this  Agreement
shall be paid by the Company in a lump sum amount within thirty (30) days of the
Employee's  termination,  with  bonuses  to be  paid  when  earned  through  the
remainder of the term of this  Agreement.  Employee  shall have no obligation to
mitigate any losses or damages incurred as a result of such termination.

     D. Termination by Death.
        ---------------------
If employment terminates by
reason of the Employee's  death,  the Company will pay the  Employee's  estate a
lump sum payment  equivalent to six (6) months  salary;  other  benefits will be
determined in accordance with the Company's survivor's  benefits,  insurance and
other applicable programs and plans, then in effect.

     VI. CONFIDENTIAL AND PROPRITARY INFORMATION.
         ---------------------------------------
Employee  agrees  to  keep  secret  all
confidential  information,  trade secrets or proprietary information acquired by
the Employee  during his  employment  concerning the business and affairs of the
Company  (the  "Information")  and  further  agrees for a period of one (1) year
after the  termination of his  employment,  for any reason,  not to disclose any
such  Information to any person,  firm or corporation  other than as directed by
the  Employer,  unless and until such  Information  becomes known outside of the
company  (other than  through a  violation  by the  Employee of his  obligations
hereunder).   Employee  agrees,   upon  the  Company's  request,  to  execute  a
confidential nondisclosure agreement, if requested.

         VII.MISCELLANEOUS PROVISIONS.
             ------------------------



<PAGE>


     A. Successors.
        ----------
The Company will require any successor  (whether
direct or indirect, by purchase,  merger,  consolidation or otherwise) to all or
substantially  all of the  business  and/or  assets of the Company 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.  Failure of the Company to obtain such  assumption  and  agreement
prior to the  effectiveness  of any such  succession  shall be a breach  of this
Agreement and shall entitle the Employee to compensation from the Company in the
same amount and on the same terms as the  Employee is entitled to  hereunder  if
the Employee terminated his employment for good cause.

     B. Binding Agreement.
        -----------------
This Agreement shall inure to the
benefit  of  and  be   enforceable   by  the   Employee's   personal   or  legal
representatives,  executors,  administrators,  successors,  heirs, distributees,
devisees and legatees.  If the Employee  should die while any amount would still
be payable to the Employee  hereunder if the Employee had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with
the  terms  of this  Agreement,  to the  employee's  devisee,  legatee  or other
designee, or, if there is not such designee, to the Employees's estate.

     C. Notices and Communications.
        ---------------------------
All notices
and communications  hereunder shall be in writing and shall be hand delivered or
sent postage prepaid by registered or certified mail, return receipt  requested,
to the  addresses  first  written or to such other address of which notice shall
have been given in the manner herein provided.

     D. Entire Agreement; Non-Assignment.
        ---------------------------------
This
Agreement may not be modified, amended, changed or discharged, except by writing
signed by the parties  hereto,  and then and only to the extent set forth in the
writing.  This  Agreement  shall be binding upon and inure to the benefit of the
parties hereto,  and any  administrator,  executor and successor of the Company.
This  Agreement  may not be assigned by either of the parties  without the prior
written consent of the other party.

     E.  Validity;  Governing  Law.
         -------------------------
The invalidity or
unenforceability  of any  provision  of this  Agreement  shall  not  affect  the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect. The validity, interpretation,  construction and
performance  of this  Agreement  shall be  governed by and under the laws of the
Commonwealth of Pennsylvania.

     (6) Legal Expenses.
         --------------
All legal fees and expenses incurred by
the Employee in attempts to receive the benefits granted hereunder or to enforce
this  Agreement or any of its terms will be paid by the Company  providing  that
Employee's claims are not dismissed in a summary proceeding.


<PAGE>


         IN WITNESS WHEREOF, the parties have executed this Employment Agreement
to be effective as of the day and the year first written above.


EMPLOYEE:                                   RENT-WAY, INC.


__________________________          By: ______________________________
Jeffrey A. Conway                            (Authorized Officer)

















































<PAGE>

                                  Exhibit 10.6

                                 RENT-WAY, INC.

                              ENGAGEMENT AGREEMENT


     THIS  AGREEMENT  is made as of October 1, 1999,  and has been  entered into
between Rent-Way, Inc., a Pennsylvania corporation with its principal offices at
One RentWay Place,  Erie,  Pennsylvania  16505 (the  "Company"),  and G. A. Ryan
("Ryan"), 10 Peninsula Drive, Erie, Pa. 16505.

     WHEREAS,  the Company  desires to engage the  services of Ryan on the terms
and conditions set forth herein; and

     WHEREAS,  Ryan  desires  to be  engaged  by the  Company  on the  terms and
conditions set forth herein;

         NOW, THEREFORE, the Company and Ryan agree as follows:

     I.  ENGAGEMENT.
         ----------
The Company  hereby engages the services of Ryan, and Ryan hereby accepts
continued engagement,  upon the terms and conditions  hereinafter set forth.

     II. TERM.
         ----
Subject to the provisions of termination as hereinafter provided,
the term of this Agreement  shall begin on October 1, 1999, and shall  terminate
on September 30, 2009 (being ten (10) years after the commencement date).

     III.  POSITION AND DUTIES.
           -------------------
During the term of this  Agreement,  Ryan shall
serve as a Consultant  to the Company with such duties and  responsibilities  as
may be assigned by the  Company's  Board of  Directors.  The place of engagement
shall  be  at  the  principal   executive   offices  of  the  Company  in  Erie,
Pennsylvania.  Ryan agrees to devote a sufficient  amount of his business  time,
skill,  attention and best efforts during normal  business hours to the business
of the  Company  to the  extent  necessary  to  discharge  the  responsibilities
assigned during the term of engagement hereunder,  it being understood that Ryan
is  involved  with  various  other  business   activities.   However,  no  other
work-related  activities  of  Ryan  shall  be in  competition  with  any  of the
Company's  activities  and such  activities  shall be disclosed to the Company's
Board of Directors.

         IV.      COMPENSATION.
                  ------------


<PAGE>


                                     - 15 -




     A.  Base  Compensation.
         ------------------
For  all  services  rendered  by Ryan  under  this
Agreement, the Company shall pay Ryan compensation of $100,000
per year ("Base  Compensation"),  which Base  Compensation  will be increased to
reflect  the  percentage  increase  in the  Consumer  Price  Index  for  Western
Pennsylvania (the "CPI") for the most recently  completed year. Upon issuance of
the CPI for the Western  Pennsylvania  region,  Ryan's Base Compensation will be
increased  retroactively to January of the year following the year for which the
CPI is issued.  The Base Compensation will be paid in installments in conformity
with the regular payroll practices of the Company.  The Base Compensation  shall
also  be  reviewed  annually  by the  Compensation  Committee  of the  Board  of
Directors  of the Company and may be increased  on the basis of  individual  and
corporate performance,  by criteria and standards determined by the Compensation
Committee.  Any increase in Base Compensation or other  compensation shall in no
way limit or reduce any other  obligation  of the Company,  hereunder,  and once
established at an increased  specified rate, Ryan's Base Compensation  hereunder
shall not thereafter be reduced.

     B.  Expenses.
         --------
During  the  term of  engagement  hereunder,  Ryan  shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred in
accordance  with the policies and procedures of the Company,  as may be in force
from time to time.

     C.  Benefits.
         --------
During  the  term of  engagement  hereunder,  Ryan  shall be
entitled to receive a package of benefits  that  includes  all of the  programs,
plans and perquisites currently provided to Ryan by the Company, as long as such
programs, plans and perquisites are continued by the Company.

     V.  TERMINATION.
         -----------

     A.  Termination  for  Disability.
         ----------------------------
In the event  that Ryan  shall have been
prevented  from  substantially   rendering  the  services  required  under  this
Agreement  by  reason of his  disability  (as  confirmed  by  medical  authority
satisfactory to the Company and Social Security  guidelines) for a period of six
(6)  consecutive  months  (or 180  days),  the  Company  shall have the right to
terminate  this Agreement  upon thirty (30) days written  notice,  provided such
disability continues during said notice period.




<PAGE>


     B.  Termination  for Ryan's  Breach.
         -------------------------------
The  Company  shall have the right to
terminate  this Agreement  and  the  employment
hereunder  if Ryan  violates  his  responsibilities  under  paragraph  3 of this
Agreement and such violation  continues  after Ryan's having  received notice of
such  violation  and  thirty  (30)  days  to  cure  such   violation(s)  to  the
satisfaction  of the Company's  Board of Directors.  The Company may immediately
terminate  this  Agreement  upon (i)  determination  by the  Company's  Board of
Directors  that Ryan has  willfully  defaulted on a material  obligation of this
Agreement, (ii) determination by the Company's Board of Directors that there has
been a defalcation of the Company's funds by Ryan, (iii) conviction of Ryan on a
felony charge or conviction of a  misdemeanor  which impairs  Ryan's  ability to
substantially  perform his duties with the Company, or (iv) determination by the
Company's Board of Directors that Ryan has had  unauthorized  discussions of the
Company's  business   activities  or  improperly   disclosed  trade  secrets  or
confidential   information  concerning  the  Company's  business  activities  or
proposed business  activities.  At such time as the Company's Board of Directors
addresses  such  charges,  Ryan may submit a written  statement  regarding  such
claims and present a defense against such claims.

     C. Termination for Company's Breach.
        --------------------------------
Ryan
shall have the right to  terminate  this  Agreement  if the  Company  materially
breaches any of the provisions hereof and such breach is not cured within thirty
(30) days after the  Company has  received  written  notice  from Ryan.  In such
event, or in the event of a wrongful termination of Ryan, all moneys due to Ryan
through  the term of this  Agreement  shall be paid by the Company in a lump sum
amount  within  thirty (30) days of Ryan's  termination  with bonuses to be paid
when earned through the remainder of the term of this Agreement. Ryan shall have
no  obligation  to mitigate  any losses or damages  incurred as a result of such
termination.

     D. Termination by Death.
        ---------------------
If employment terminates by
reason of Ryan's  death,  the Company will pay Ryan's  estate a lump sum payment
equivalent to twelve (12) months compensation; other benefits will be determined
in  accordance  with the  Company's  survivor's  benefits,  insurance  and other
applicable programs and plans, then in effect.

     VI.  CONFIDENTIAL AND PROPRIETARY  INFORMATION.
          -----------------------------------------
Ryan agrees to keep secret
all confidential information,  trade secrets or proprietary information acquired
by Ryan during his employment concerning the business and affairs of the Company
(the  "Information")  and further  agrees for a period of one (1) year after the
termination  of his  employment,  for  any  reason,  not to  disclose  any  such
Information  to any person,  firm or  corporation  other than as directed by the
Company,  unless and until such Information becomes known outside of the Company
(other than through a violation by Ryan of his obligations hereunder). Ryan also
agrees,  upon the Company's  request,  to execute a  confidential  nondisclosure
agreement if requested.

     VII. MISCELLANEOUS PROVISIONS.
          ------------------------
A. Successors.
   ----------
The Company will require any successor  (whether  direct or indirect,  by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business  and/or assets of the Company 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 it if no such succession had taken place.  Failure of the
Company to obtain such  assumption and agreement prior to the  effectiveness  of
any such  succession  shall be a breach of this Agreement and shall entitle Ryan
to  compensation  from the  Company in the same  amount and on the same terms as
Ryan is entitled to hereunder if Ryan terminated his engagement for good cause.



<PAGE>


     B. Binding  Agreement.
        ------------------
This Agreement shall inure to the benefit of and be
enforceable   by   Ryan's   personal   or  legal   representatives,   executors,
administrators,  successors, heirs, distributees, devisees and legatees. If Ryan
should die while any amount would still be payable to Ryan hereunder if Ryan had
continued to live, all such amounts,  unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement, to Ryan's devisee,  legatee
or other designee or, if there is not such designee, to Ryan's estate.

     C. Notices and  Communications.
        ---------------------------
All notices and  communications  hereunder
shall be in  writing  and shall be hand  delivered  or sent  postage  prepaid by
registered or certified mail, return receipt  requested,  to the addresses first
written or to such other  address of which  notice  shall have been given in the
manner herein provided.

     D. Entire  Agreement;  Non-Assignment.
        ----------------------------------
This Agreement may not be modified,
amended,  changed or discharged,  except by writing signed by the parties hereto
and then and only to the extent set forth.  This Agreement shall be binding upon
and inure to the benefit of the parties hereto, and any administrator,  executor
and  successor of the Company.  This  Agreement may not be assigned by either of
the parties without the prior written consent of the other party.

     E.  Validity;  Governing  Law.
         -------------------------
The  invalidity or  unenforceability  of any
provision of this Agreement shall not affect the validity or  enforceability  of
any other  provision  of this  Agreement,  which shall  remain in full force and
effect.  The validity,  interpretation,  construction  and  performance  of this
Agreement  shall  be  governed  by and  under  the laws of the  Commonwealth  of
Pennsylvania.


     (6)  Legal  Expenses.
          ---------------
All  legal  fees and  expenses  incurred  by Ryan in
attempts to receive the benefits granted  hereunder or to enforce this Agreement
or any of its terms will be paid by the Company providing that Ryan's claims are
not dismissed in a summary proceeding.


<PAGE>


         IN WITNESS WHEREOF, the parties have executed this Employment Agreement
to be effective as of the day and year first written above.


ATTEST:                                     RENT-WAY, INC.


__________________________          By: ___________________________
                                           (Authorized Officer)


ATTEST:


--------------------------           ------------------------------
                                          G. A. Ryan




















<PAGE>




                                  Exhibit 10.16


                     $100,000,000 REVOLVING CREDIT FACILITY
                            $125,000,000 TERM LOAN A
                            $100,000,000 TERM LOAN B



                                CREDIT AGREEMENT

                                  by and among

                      RENT-WAY, INC., RENTAVISION INC. and
                             RENT-WAY OF TTIG, L.P.

                                       and

                            THE LENDERS PARTY HERETO

                                       and

           NATIONAL CITY BANK OF PENNSYLVANIA, as Administrative Agent

                                       and

                  BANK OF AMERICA, N.A. as Documentation Agent

                                       and

                        BANK OF MONTREAL and HARRIS TRUST
                     AND SAVINGS BANK, as Syndication Agents







                         Dated as of September 23, 1999






<PAGE>
<TABLE>
<CAPTION>


                                TABLE OF CONTENTS

Section                                                                                                        Page

                                     - vii




1.    CERTAIN DEFINITIONS.........................................................................................1
<S>                                                                                                              <C>
   1.1   Certain Definitions......................................................................................1
   1.2   Construction............................................................................................22
      1.2.1    Number; Inclusion.................................................................................22
      -----    -----------------
      1.2.2    Determination.....................................................................................22
      -----    -------------
      1.2.3    Administrative Agent's Discretion and Consent.....................................................22
      -----    ---------------------------------------------
      1.2.4    Documents Taken as a Whole........................................................................22
      -----    --------------------------
      1.2.5    Headings..........................................................................................22
      -----    --------
      1.2.6    Implied References to this Agreement..............................................................23
      -----    ------------------------------------
      1.2.7    Persons...........................................................................................23
      -----    -------
      1.2.8    Modifications to Documents........................................................................23
      -----    --------------------------
      1.2.9    From, To and Through..............................................................................23
      -----    --------------------
      1.2.10   Shall; Will.......................................................................................23
      ------   -----------
   1.3   Accounting Principles...................................................................................23
   ---   ---------------------


2.    REVOLVING CREDIT AND SWING LOAN FACILITIES.................................................................24
   2.1   Revolving Credit Commitments............................................................................24
      2.1.1    Revolving Credit Loans............................................................................24
      2.1.2    Swing Loan Commitments............................................................................24
   2.2   Nature of Lenders' Obligations with Respect to Revolving Credit Loans...................................24
   ---   ---------------------------------------------------------------------
   2.3   Commitment Fees.........................................................................................25
   ---   ---------------
   2.4   [Intentionally Omitted].................................................................................25
   ---   ------------------------
   2.5   Revolving Credit Loan Requests; Swing Loan Requests.....................................................25
   ---   ---------------------------------------------------
      2.5.1    Revolving Credit Loan Requests....................................................................25
      2.5.2    Swing Loan Requests...............................................................................26
   2.6   Making Revolving Credit Loans and Swing Loans...........................................................26
      2.6.1    Making Revolving Credit Loans.....................................................................26
      2.6.2    Making Swing Loans................................................................................26
   2.7   Revolving Credit Notes; Swing Loan Note.................................................................27
      2.7.1    Revolving Credit Notes............................................................................27
      2.7.2    Swing Loan Note; Borrowings to Repay Swing Loans..................................................27
   2.8   Use of Proceeds.........................................................................................27
   ---   ---------------
   2.9   Letter of Credit Subfacility............................................................................28
   ---   ----------------------------
      2.9.1    Issuance of Letters of Credit.....................................................................28
      -----    -----------------------------
      2.9.2    Letter of Credit Fees.............................................................................28
      -----    ---------------------
      2.9.3    Disbursements, Reimbursement......................................................................28
      -----    ----------------------------
      2.9.4    Repayment of Participation Advances...............................................................30
      -----    -----------------------------------
      2.9.5    Documentation.....................................................................................30
      -----    -------------
      2.9.6    Determinations to Honor Drawing Requests..........................................................31
      -----    ----------------------------------------
      2.9.7    Nature of Participation and Reimbursement Obligations.............................................31
      -----    -----------------------------------------------------
      2.9.8    Indemnity.........................................................................................32
      -----    ---------
      2.9.9    Liability for Acts and Omissions..................................................................32
      -----    --------------------------------


3.    TERM LOANS.................................................................................................33
   3.1   Term Loan Commitments...................................................................................33
      3.1.1    Term Loan A Commitments...........................................................................33
      3.1.2    Term Loan B Commitments...........................................................................33
   3.2   Nature of Lenders' Obligations with Respect to Term Loans...............................................33
   ---   ---------------------------------------------------------
   3.3   Term Loan Notes.........................................................................................34
   ---   ---------------
   3.4   Use of Proceeds.........................................................................................34
   ---   ---------------


4.    INTEREST RATES.............................................................................................34
   4.1   Interest Rate Options...................................................................................35
      4.1.1    Revolving Credit Interest Rate Options............................................................35
      -----    --------------------------------------
      4.1.2    Term Loan A Interest Rate Options.................................................................35
      -----    ---------------------------------
      4.1.3    Term Loan B Interest Rate Options.................................................................36
      -----    ---------------------------------
      4.1.4    Rate Quotations...................................................................................36
      -----    ---------------
   4.2   Interest Periods........................................................................................36
      4.2.1    Ending Date and Business Day......................................................................37
      4.2.2    Amount of Borrowing Tranche.......................................................................37
      4.2.3    Termination Before Expiration Date................................................................37
      4.2.4    Renewals..........................................................................................37
   4.3   Interest After Default..................................................................................37
      4.3.1    Letter of Credit Fees, Interest Rate..............................................................37
      4.3.2    Other Obligations.................................................................................37
      4.3.3    Acknowledgment....................................................................................37
   4.4   Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available..........................38
      4.4.1    Unascertainable...................................................................................38
      4.4.2    Illegality; Increased Costs; Deposits Not Available...............................................38
      4.4.3    Administrative Agent's and Lender's Rights........................................................38
   4.5   Selection of Interest Rate Options......................................................................39
   ---   ----------------------------------


5.    PAYMENTS...................................................................................................39
   5.1   Payments................................................................................................39
   5.2   Pro Rata Treatment of Lenders...........................................................................40
   5.3   Interest Payment Dates..................................................................................40
   5.4   Voluntary Repayments....................................................................................40
      5.4.1    Right to Repay....................................................................................40
      -----    --------------
      5.4.2    Commitment Reductions.............................................................................42
      -----    ---------------------
      5.4.3    Replacement of a Lender...........................................................................42
      -----    -----------------------
      5.4.4    Change of Lending Office..........................................................................42
      -----    ------------------------
   5.5   Mandatory Prepayments...................................................................................43
      5.5.1    Excess Cash Flow..................................................................................43
      5.5.2    Sale of Assets; Issuance of Stock ................................................................43
      5.5.3    Application Among Interest Rate Options...........................................................44
   5.6   Additional Compensation in Certain Circumstances........................................................44
      5.6.1    Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy Requirements,
      Expenses, Etc..............................................................................................44
      5.6.2    Indemnity.........................................................................................45


6.    REPRESENTATIONS AND WARRANTIES.............................................................................46
   6.1   Representations and Warranties..........................................................................46
      6.1.1    Organization and Qualification....................................................................46
      -----    ------------------------------
      6.1.2    Capitalization and Ownership......................................................................46
      -----    ----------------------------
      6.1.3    Subsidiaries......................................................................................46
      -----    ------------
      6.1.4    Power and Authority...............................................................................47
      -----    -------------------
      6.1.5    Validity and Binding Effect.......................................................................47
      -----    ---------------------------
      6.1.6    No Conflict.......................................................................................47
      -----    -----------
      6.1.7    Litigation........................................................................................48
      -----    ----------
      6.1.8    Title to Properties...............................................................................48
      -----    -------------------
      6.1.9    Financial Statements..............................................................................48
      -----    --------------------
      6.1.10   Use of Proceeds; Margin Stock.....................................................................49
      ------   -----------------------------
      6.1.11   Full Disclosure...................................................................................49
      ------   ---------------
      6.1.12   Taxes.............................................................................................49
      ------   -----
      6.1.13   Consents and Approvals............................................................................50
      ------   ----------------------
      6.1.14   No Event of Default; Compliance with Instruments..................................................50
      ------   ------------------------------------------------
      6.1.15   Patents, Trademarks, Copyrights, Licenses, Etc....................................................50
      ------   ----------------------------------------------
      6.1.16   Security Interests................................................................................50
      ------   ------------------
      6.1.17   Mortgage Liens....................................................................................51
      ------   --------------
      6.1.18   Status of the Pledge Collateral...................................................................51
      ------   -------------------------------
      6.1.19   Insurance.........................................................................................51
      ------   ---------
      6.1.20   Compliance with Laws..............................................................................52
      ------   --------------------
      6.1.21   Material Contracts; Burdensome Restrictions.......................................................52
      ------   -------------------------------------------
      6.1.22   Investment Companies; Regulated Entities..........................................................52
      ------   ----------------------------------------
      6.1.23   Plans and Benefit Arrangements....................................................................52
      ------   ------------------------------
      6.1.24   Employment Matters................................................................................53
      ------   ------------------
      6.1.25   Environmental Matters.............................................................................54
      ------   ---------------------
      6.1.26   Senior Debt Status................................................................................56
      ------   ------------------
      6.1.27   Year 2000.........................................................................................56
      ------   ---------
   6.2   Updates to Schedules....................................................................................56
   ---   --------------------


7.    CONDITIONS OF LENDING......................................................................................56
   7.1   First Loans.............................................................................................57
      7.1.1    Officer's Certificate.............................................................................57
      -----    ---------------------
      7.1.2    Secretary's Certificate...........................................................................57
      -----    -----------------------
      7.1.3    Delivery of Loan Documents........................................................................58
      -----    --------------------------
      7.1.4    Opinion of Counsel................................................................................58
      -----    ------------------
      7.1.5    Legal Details.....................................................................................58
      -----    -------------
      7.1.6    Payment of Fees...................................................................................59
      -----    ---------------
      7.1.7    Consents..........................................................................................59
      -----    --------
      7.1.8    Officer's Certificate Regarding MACs..............................................................59
      -----    ------------------------------------
      7.1.9    No Violation of Laws..............................................................................59
      -----    --------------------
      7.1.10   No Actions or Proceedings.........................................................................59
      ------   -------------------------
      7.1.11   Insurance Policies; Certificates of Insurance; Endorsements.......................................59
      ------   -----------------------------------------------------------
      7.1.12   Title Insurance...................................................................................60
      ------   ---------------
      7.1.13   Filing Receipts...................................................................................60
      ------   ---------------
      7.1.14   Amendment and Restatement of Existing Credit Agreement............................................60
      ------   ------------------------------------------------------
      7.1.15   Continuation of Subordination.....................................................................60
      ------   -----------------------------
      7.1.16   Consummation of Acquisition.......................................................................61
      ------   ---------------------------
   7.2   Each Additional Loan....................................................................................61
   ---   --------------------


8.    COVENANTS..................................................................................................61
   8.1   Affirmative Covenants...................................................................................61
      8.1.1    Preservation of Existence, Etc....................................................................61
      -----    ------------------------------
      8.1.2    Payment of Liabilities, Including Taxes, Etc......................................................62
      -----    --------------------------------------------
      8.1.3    Maintenance of Insurance..........................................................................62
      -----    ------------------------
      8.1.4    Maintenance of Properties and Leases..............................................................63
      -----    ------------------------------------
      8.1.5    Maintenance of Patents, Trademarks, Etc...........................................................63
      -----    ---------------------------------------
      8.1.6    Visitation Rights.................................................................................63
      -----    -----------------
      8.1.7    Keeping of Records and Books of Account...........................................................64
      -----    ---------------------------------------
      8.1.8    Plans and Benefit Arrangements....................................................................64
      -----    ------------------------------
      8.1.9    Compliance with Laws..............................................................................64
      -----    --------------------
      8.1.10   Use of Proceeds...................................................................................64
      ------   ---------------
      8.1.11   Further Assurances................................................................................65
      ------   ------------------
      8.1.12   Subordination of Intercompany Loans...............................................................65
      ------   -----------------------------------
      8.1.13   Interest Rate Protection..........................................................................65
      ------   ------------------------
   8.2   Negative Covenants......................................................................................66
      8.2.1    Indebtedness......................................................................................66
      8.2.2    Liens.............................................................................................66
      8.2.3    Guaranties........................................................................................66
      8.2.4    Loans and Investments.............................................................................67
      8.2.5    Dividends and Related Distributions...............................................................67
      8.2.6    Liquidations, Mergers, Consolidations, Acquisitions...............................................67
      8.2.7    Dispositions of Assets or Subsidiaries............................................................69
      8.2.8    Affiliate Transactions............................................................................70
      8.2.9    Subsidiaries, Partnerships and Joint Ventures.....................................................70
      8.2.10   Continuation of or Change in Business.............................................................70
      8.2.11   Plans and Benefit Arrangements....................................................................70
      8.2.12   Fiscal Year.......................................................................................71
      8.2.13   Issuance of Stock.................................................................................71
      8.2.14   Changes in Organizational Documents...............................................................72
      8.2.15   Capital Expenditures and Leases...................................................................72
      8.2.16   Maximum Leverage Ratio (Total Funded Debt)........................................................72
      8.2.17   Subordinated Loan Document Amendments.............................................................73
      8.2.18   Minimum Interest Coverage Ratio...................................................................73
      8.2.19   Minimum Net Worth.................................................................................73
      8.2.20   Fixed Charge Coverage Ratio.......................................................................73
      8.2.21   Rental Merchandise Usage..........................................................................73
      8.2.22   Prepayments on Subordinated Debt..................................................................74
   8.3   Reporting Requirements..................................................................................74
      8.3.1    Monthly Financial Statements......................................................................74
      8.3.2    Quarterly Financial Statements....................................................................74
      8.3.3    Annual Financial Statements.......................................................................75
      8.3.4    Certificate of the Borrower.......................................................................75
      8.3.5    Notice of Default.................................................................................76
      8.3.6    Notice of Litigation..............................................................................76
      8.3.7    Certain Events....................................................................................76
      8.3.8    Budgets, Forecasts, Other Reports and Information.................................................76
      8.3.9    Notices Regarding Plans and Benefit Arrangements..................................................77


9.    DEFAULT....................................................................................................79

</TABLE>



<PAGE>


<TABLE>
<CAPTION>

                                                      - 101 -
                                          LIST OF SCHEDULES AND EXHIBITS

SCHEDULES

<S>      <C>
SCHEDULE 1.1(A)              -      PRICING GRID
SCHEDULE 1.1(B)              -      COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(P)              -      PERMITTED LIENS
SCHEDULE 6.1.1               -      QUALIFICATIONS TO DO BUSINESS
SCHEDULE 6.1.3               -      SUBSIDIARIES
SCHEDULE 6.1.7               -      LITIGATION
SCHEDULE 6.1.8               -      OWNED AND LEASED REAL PROPERTY
SCHEDULE 6.1.13              -      CONSENTS AND APPROVALS
SCHEDULE 6.1.15              -      PATENTS, TRADEMARKS, COPYRIGHTS, LICENSES, ETC.
SCHEDULE 6.1.18              -      PARTNERSHIP AGREEMENTS; LLC AGREEMENTS
SCHEDULE 6.1.19              -      INSURANCE POLICIES
SCHEDULE 6.1.21              -      MATERIAL CONTRACTS
SCHEDULE 6.1.23              -      EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 6.1.25              -      ENVIRONMENTAL DISCLOSURES
SCHEDULE 8.2.1               -      PERMITTED INDEBTEDNESS

EXHIBITS

EXHIBIT 1.1(A)               -      ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT 1.1(C)(1)            -      COLLATERAL ASSIGNMENT
EXHIBIT 1.1(G)(1)            -      GUARANTOR JOINDER
EXHIBIT 1.1(G)(2)            -      GUARANTY AGREEMENT
EXHIBIT 1.1(I)(1)            -      INDEMNITY AGREEMENT
EXHIBIT 1.1(I)(2)            -      INTERCOMPANY SUBORDINATION AGREEMENT
EXHIBIT 1.1(M)               -      MORTGAGE
EXHIBIT 1.1(P)(1)            -      PATENT, TRADEMARK AND COPYRIGHT SECURITY AGREEMENT
EXHIBIT 1.1(P)(2)            -      PLEDGE AGREEMENT
EXHIBIT 1.1(R)               -      REVOLVING CREDIT NOTE
EXHIBIT 1.1(S)(1)            -      SECURITY AGREEMENT
EXHIBIT 1.1(S)(2)            -      SWING LOAN NOTE
EXHIBIT 1.1(T)(1)            -      TERM NOTE A
EXHIBIT 1.1(T)(2)            -      TERM NOTE B
EXHIBIT 2.5                  -      LOAN REQUEST
EXHIBIT 2.5.2                -      SWING LOAN REQUEST
EXHIBIT 7.1.4                -      OPINION OF COUNSEL
EXHIBIT 8.3.4                -      QUARTERLY COMPLIANCE CERTIFICATE
</TABLE>


<PAGE>




                                                 CREDIT AGREEMENT

                  THIS CREDIT AGREEMENT is dated as of September 23, 1999 and is
made by and among RENT-WAY,  INC., a Pennsylvania  corporation (the "Borrower"),
RENT-WAY OF TTIG, L.P., an Indiana Limited Partnership,  and RENTAVISION INC., a
New York  corporation  (Rent-Way of TTIG, L.P. and Rentavision Inc. are referred
to  herein   collectively  as  the  "Co-Borrowers"  and  each  separately  as  a
"Co-Borrower"), each of the Guarantors (as hereinafter defined), the LENDERS (as
hereinafter  defined),  NATIONAL CITY BANK OF  PENNSYLVANIA,  in its capacity as
administrative agent for the Lenders under this Agreement  (hereinafter referred
to in such capacity as the "Administrative Agent"), BANK OF AMERICA, N.A. in its
capacity as documentation agent for the Lenders, and BANK OF MONTREAL and HARRIS
TRUST AND SAVINGS BANK, in their capacity as syndication agents.

                                                    WITNESSETH:

                  WHEREAS,  the Borrower and the Co-Borrowers have requested the
Administrative  Agent and the Lenders to provide (i) a revolving credit facility
in an aggregate principal amount not to exceed $100,000,000, (ii) a term loan in
the amount of  $125,000,000  ("Term Loan A") and (iii) a term loan in the amount
of $100,000,000 ("Term Loan B"); and

                  WHEREAS,  the  revolving  credit  facility  shall  be  used to
refinance  certain  existing  indebtedness,  for working  capital  purposes  and
general  corporate  purposes of the Borrower and its Subsidiaries  including the
development of additional retail locations;  and the Term Loan A and Term Loan B
shall be used to  refinance  certain  existing  indebtedness  and to finance the
Borrower's acquisition of the outstanding capital stock of Rentavision Inc.

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

1.       CERTAIN DEFINITIONS

                  1.1      Certain Definitions.

                  In  addition  to words and  terms  defined  elsewhere  in this
Agreement,  the  following  words and terms shall have the  following  meanings,
respectively, unless the context hereof clearly requires otherwise:

     Acquiring  Person  shall  mean any  Person or group of two or more  Persons
(excluding the Management Group) acting as a partnership,  limited  partnership,
syndicate, or other group for the purpose of acquiring,  holding or disposing of
Voting Stock of the Borrower,  together with all  affiliates  and associates (as
defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as amended)
of such Person or Persons.



     Acquisition  shall mean the purchase by the Borrower of all the outstanding
capital stock of Rentavision pursuant to the Acquisition Agreement.

     Acquisition  Agreement shall mean the Stock Purchase  Agreement dated as of
September 15, 1999, among the Borrower, Rentavision and Robert J. Natoli.

     Acquisition  Consideration shall mean, without  duplication,  the aggregate
amount of cash and cash equivalents paid to the stockholders of Rentavision, the
value of the shares of the Borrower  issued to the  stockholders of Rentavision,
the value of any other property  received by the  stockholders of Rentavision in
connection with the Acquisition and any Indebtedness  incurred or assumed by the
Borrower or its Subsidiaries  pursuant to the Acquisition Agreement or any other
Acquisition Document.

     Acquisition  Documents shall mean the Acquisition Agreement and each of the
other  documents  executed  or  delivered  in  connection  with the  Acquisition
Agreement or relating to the Acquisition.

     Administrative Agent shall mean National City Bank of Pennsylvania, and its
successors and assigns.

     Affiliate as to any Person  shall mean any other Person (i) which  directly
or indirectly  controls,  is controlled by, or is under common control with such
Person,  (ii)  which  beneficially  owns or holds 5% or more of any class of the
voting or other  equity  interests  of such  Person,  or (iii) 5% or more of any
class of voting  interests  or other equity  interests of which is  beneficially
owned or held, directly or indirectly,  by such Person. Control, as used in this
definition,  shall mean the possession,  directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise,  including
the power to elect a majority of the directors or trustees of a  corporation  or
trust, as the case may be.

     Agreement shall mean this Credit Agreement, as the same may be supplemented
or amended
from time to time, including all schedules and exhibits.

                           Annual  Statements shall have the meaning assigned to
that term in Section 6.1.9((i)).

     Applicable  Commitment  Fee Rate shall mean the  percentage  rate per annum
based on the  Leverage  Ratio then in effect  according  to the pricing  grid on
Schedule 1.1(A) below the heading  "Commitment  Fee." The Applicable  Commitment
Fee Rate  shall be  computed  in  accordance  with the  parameters  set forth on
Schedule 1.1(A).

                           Applicable Margin shall mean, as applicable:

     (A)......the  percentage  spread  set forth on the  pricing  grid  attached
hereto  as  Schedule  1.1(A)  to be added to the Base  Rate  under the Base Rate
Option based upon the Leverage Ratio.

     (B)......the  percentage  spread  set forth on the  pricing  grid  attached
hereto as  Schedule  1.1(A)  to be added to the  Euro-Rate  under the  Euro-Rate
Option based upon the Leverage Ratio.

     Assignment and Assumption Agreement shall mean an Assignment and Assumption
Agreement
by and among a Purchasing  Lender,  a Transferor  Lender and the  Administrative
Agent,  as  Administrative  Agent  and  on  behalf  of  the  remaining  Lenders,
substantially in the form of Exhibit 1.1(A).

     Authorized  Officer  shall mean those  individuals,  designated  by written
notice to the
Administrative  Agent from the  Borrower  and the  Co-Borrowers,  authorized  to
execute  notices,  reports  and other  documents  on behalf of the Loan  Parties
required  hereunder.  The Borrower and the  Co-Borrowers  may amend such list of
individuals  from time to time by giving written notice of such amendment to the
Administrative Agent.

     Base Net Worth  shall mean the sum of  $240,000,000  plus the  amounts  set
forth in (i) (ii) and (iii) below which occur during the period from the Closing
Date through the date of  determination:  (i) 75% of consolidated  net income of
the Borrower and its  Subsidiaries  for each fiscal year in which net income was
earned  (as  opposed  to a net  loss)  commencing  with the  fiscal  year  ended
September  30,  2000,  (ii) 90% of any  increase in the  Consolidated  Net Worth
resulting  from a Permitted  Acquisition  and (iii) 90% of the amount of the net
proceeds received by the Loan Parties from any offering consummated with respect
to equity securities of the Borrower.

     Base  Rate  shall  mean the  greater  of (i) the  interest  rate per  annum
announced from time to time by the Administrative  Agent at its Principal Office
as its then prime rate, which rate may not be the lowest rate then being charged
commercial  borrowers by the  Administrative  Agent,  or (ii) the Federal  Funds
Effective Rate plus one half percent (1/2%) per annum.

     Base Rate Option shall mean either the  Revolving  Credit Base Rate Option,
the Term Loan A Base Rate Option or the Term Loan B Base Rate Option.

     Benefit  Arrangement  shall mean at any time an  "employee  benefit  plan,"
within the
meaning of Section  3(3) of ERISA,  which is neither a Plan nor a  Multiemployer
Plan and which is  maintained,  sponsored  or  otherwise  contributed  to by any
member of the ERISA Group.

     Borrower  shall mean Rent-Way,  Inc., a corporation  organized and existing
under the
laws of the Commonwealth of Pennsylvania.

     Borrowing  Date shall  mean,  with  respect  to any Loan,  the date for the
making  thereof  or the  renewal  or  conversion  thereof at or to the same or a
different Interest Rate Option, which shall be a Business Day.

     Borrowing  Tranche shall mean  specified  portions of Loans  outstanding as
follows:  (i) any Loans to which a Euro-Rate Option applies which become subject
to the same

Interest  Rate  Option  under the same  Loan  Request  and  which  have the same
Interest Period shall  constitute one Borrowing  Tranche,  and (ii) all Loans to
which the Base Rate Option applies shall constitute one Borrowing Tranche.

     Business  Day shall mean any day other than a Saturday or Sunday or a legal
holiday on which  commercial  banks are  authorized or required to be closed for
business in Pittsburgh, Pennsylvania.

     Co-Borrowers   shall  mean   collectively,   and  Co-Borrower   shall  mean
separately, Rent-Way
of TTIG,  L.P., a limited  partnership  organized and existing under the laws of
the State of Indiana, and Rentavision Inc., a corporation organized and existing
under the laws of the State of New York,  provided  however,  that after  giving
effect to any merger of Rentavision into the Borrower in accordance with Section
8.2.6(1),  all references to "Co-Borrowers" and "Co-Borrower" shall be deemed to
be solely references to Rent-Way of TTIG, L.P.

                           Closing Date shall mean the Business Day on which the
first Loan shall be made, which
shall be  September  23, 1999 or, if all the  conditions  specified in Section 7
have not been  satisfied or waived by such date, not later than October 6, 1999,
as  designated  by the  Borrower by at least three (3)  Business  Days'  advance
notice to the  Administrative  Agent at its Principal Office, or such other date
as the  parties  agree.  The closing  shall take place at 9:00 a.m.,  Pittsburgh
time,  on the Closing  Date at the offices of  Buchanan  Ingersoll  Professional
Corporation, 301 Grant Street, Pittsburgh,  Pennsylvania 15219, or at such other
time and place as the parties agree.

     Collateral  shall  mean the  Pledge  Collateral,  the UCC  Collateral,  the
Intellectual Property Collateral and the Real Property.

     Collateral Assignments shall mean the Collateral Assignments in the form of
Exhibit
1.1(C).

     Commitment  shall  mean as to any  Lender the  aggregate  of its  Revolving
Credit
Commitments,  Term Loan A Commitments  and Term Loan B  Commitments,  and in the
case of National City, its Swing Loan Commitment, and Commitments shall mean the
aggregate of the Revolving  Credit  Commitments,  Term Loan A Commitments,  Term
Loan B Commitments and Swing Loan Commitment of all of the Lenders.

                           Commitment  Fee shall have the  meaning  assigned  to
that term in Section 2.3.

     Consideration  shall mean with respect to any  Permitted  Acquisition,  the
aggregate  of  (i)  the  cash  paid  by any of the  Loan  Parties,  directly  or
indirectly, to the seller in connection therewith, (ii) the capital stock of the
Borrower or any Loan Party issued to the seller in connection  therewith,  (iii)
the  Indebtedness  incurred  or assumed by any of the Loan  Parties,  whether in
favor of the seller or  otherwise  and  whether  fixed or  contingent,  (iv) any
Guaranty



given or incurred by any Loan Party in connection  therewith,  and (v) any other
consideration  given  or  obligation  incurred  by any of the  Loan  Parties  in
connection therewith.

     Consolidated   Adjusted  Cash  Flow  from  Operations  for  any  period  of
determination  shall  mean  (i) the sum of net  income,  amortization,  interest
expense and income tax expense  minus (ii)  non-cash  credits to net income,  in
each case of the Borrower and its  Subsidiaries  for such period  determined and
consolidated  in  accordance  with GAAP. If the Borrower or any Loan Party shall
have made one or more Permitted Acquisitions as permitted under Section 8.2.6(2)
during  the  period  of  determination,  Consolidated  Adjusted  Cash  Flow from
Operations  for such period  shall be  adjusted on a pro forma basis  reasonably
acceptable to the Administrative  Agent and based upon the historical  financial
statements  reasonably  acceptable to the Administrative  Agent of the Person or
assets  acquired to give effect to such  Permitted  Acquisitions  as if they had
occurred at the beginning of such period. The pro forma adjustment shall include
any income or loss attributable to the ownership  interests or assets purchased,
excluding in the case of a stock  acquisition of the Person  acquired any income
on  the  historical  financial   statements   attributable  to  stock  or  asset
dispositions made prior to the time of the Permitted Acquisition.  The pro forma
adjustment  shall  exclude  any income on the  historical  financial  statements
attributable to stock or assets acquired under the Permitted  Acquisition  which
the Borrower or the Loan Party contemplate  disposing of following the Permitted
Acquisition.  The pro forma  adjustment  shall not  include any  projected  cost
savings,  cost reductions or similar synergistic  adjustments  forecasted by the
Borrower based upon the Permitted  Acquisition.  Consolidated Adjusted Cash Flow
from  Operations  shall  also  be  adjusted  on a  pro  forma  basis  reasonably
acceptable  to the  Administrative  Agent  based upon the  historical  financial
statements  of  Rentavision  in the same manner and subject to the same criteria
described above with respect to Permitted Acquisitions.

     Consolidated  Cash Flow from  Operations  for any  period of  determination
shall mean (i) the sum of net income,  depreciation  (excluding  depreciation of
Rental  Merchandise),  amortization,  other  non-cash  charges  to  net  income,
interest  expense  and income tax  expense  minus (ii)  non-cash  credits to net
income,  in each  case of the  Borrower  and its  Subsidiaries  for such  period
determined and consolidated in accordance with GAAP. If the Borrower or any Loan
Party shall have made one or more  Permitted  Acquisitions  as  permitted  under
Section 8.2.6(2) during the period of determination, Consolidated Cash Flow from
Operations  for such period  shall be  adjusted on a pro forma basis  reasonably
acceptable to the Administrative  Agent and based upon the historical  financial
statements  reasonably  acceptable to the Administrative  Agent of the Person or
assets  acquired to give effect to such  Permitted  Acquisitions  as if they had
occurred at the beginning of such period. The pro forma adjustment shall include
any income or loss attributable to the ownership  interests or assets purchased,
excluding in the case of a stock  acquisition of the Person  acquired any income
on  the  historical  financial   statements   attributable  to  stock  or  asset
dispositions made prior to the time of the Permitted Acquisition.  The pro forma
adjustment  shall  exclude  any income on the  historical  financial  statements
attributable to stock or assets acquired under the Permitted  Acquisition  which
the Borrower or the Loan Party contemplate  disposing of following the Permitted
Acquisition.  The pro forma  adjustment  shall not  include any  projected  cost
savings,  cost reductions or similar synergistic  adjustments  forecasted by the
Borrower  based  upon the  Permitted  Acquisition.  Consolidated  Cash Flow from
Operations shall also be adjusted on a pro

forma basis  reasonably  acceptable to the  Administrative  Agent based upon the
historical financial statements of Rentavision in the same manner and subject to
the same criteria described above with respect to Permitted Acquisitions.

     Consolidated  Funded Debt shall mean as of any date of  determination,  the
sum of
Indebtedness  for borrowed money (including  capitalized  leases) and Letters of
Credit Outstanding, in each case of the Borrower and its Subsidiaries determined
and consolidated in accordance with GAAP.

     Consolidated  Net Worth shall mean as of any date of  determination,  total
stockholders'  equity  plus  preferred  stock (to the  extent it is not  already
included in the stockholders'  equity),  of the Borrower and its Subsidiaries as
of such date determined and consolidated in accordance with GAAP.

     Dollar,  Dollars,  U.S. Dollars and the symbol $ shall mean lawful money of
the United States of America.

                           Drawing Date shall have the meaning  assigned to that
term in Section 2.9.3.2.

     Environmental  Complaint shall mean any written  complaint  setting forth a
cause of action for personal or property  damage or natural  resource  damage or
equitable relief, order, notice of violation,  citation, request for information
issued pursuant to any Environmental Laws by an Official Body, subpoena or other
written notice of any type relating to,  arising out of, or issued  pursuant to,
any of the Environmental Laws or any Environmental  Conditions,  as the case may
be.

     Environmental  Conditions  shall mean any  conditions  of the  environment,
including  the  workplace,  the ocean,  natural  resources  (including  flora or
fauna), soil, surface water, groundwater, any actual or potential drinking water
supply sources,  substrata or the ambient air, relating to or arising out of, or
caused  by,  the  use,  handling,  storage,  treatment,  recycling,  generation,
transportation,  release,  spilling,  leaking, pumping,  emptying,  discharging,
injecting,  escaping,  leaching,  disposal, dumping, threatened release or other
management or mismanagement of Regulated  Substances  resulting from the use of,
or operations on, any Property.

     Environmental  Laws shall mean all federal,  state,  local and foreign Laws
and regulations,  including permits,  licenses,  authorizations,  bonds, orders,
judgments,  and consent  decrees  issued,  or entered  into,  pursuant  thereto,
relating to  pollution  or  protection  of human  health or the  environment  or
employee safety in the workplace.

     ERISA shall mean the Employee  Retirement  Income  Security Act of 1974, as
the same may be amended or  supplemented  from time to time,  and any  successor
statute of similar  import,  and the rules and regulations  thereunder,  as from
time to time in effect.

     ERISA Group  shall mean,  at any time,  the  Borrower  and all members of a
controlled  group of corporations  and all trades or businesses  (whether or not
incorporated)  under common control and all other entities which,  together with
the Borrower, are treated as a single employer under Section 414 of the Internal
Revenue Code.

     Euro-Rate  shall mean,  with respect to any Loan  comprising  any Borrowing
Tranche to which the  Euro-Rate  Option  applies for any  Interest  Period,  the
interest rate per annum determined by the  Administrative  Agent by dividing (i)
the rate of interest  determined by the Administrative  Agent in accordance with
its usual procedures  (which  determination  shall be conclusive absent manifest
error) to be the eurodollar rate at 11:00 a.m.  Pittsburgh time two (2) Business
Days prior to the first day of such Interest Period for an amount  comparable to
such Loan and having a borrowing date and a maturity comparable to such Interest
Period by (ii) a number equal to 1.00 minus the  Euro-Rate  Reserve  Percentage.
The Euro-Rate shall be adjusted with respect to any Euro-Rate Option outstanding
on the effective  date of any change in the Euro-Rate  Reserve  Percentage as of
such effective  date. The  Administrative  Agent shall give prompt notice to the
Borrower,  the  Co-Borrowers  and the Lenders of the  Euro-Rate as determined or
adjusted in accordance herewith,  which determination shall be conclusive absent
manifest error.

     Euro-Rate Option shall mean either the Revolving  Credit Euro-Rate  Option,
the Term Loan A Euro-Rate Option or the Term Loan B Euro-Rate Option.

     Euro-Rate Reserve Percentage shall mean the maximum  percentage  (expressed
as a decimal
rounded  upward to the nearest 1/100 of 1%) as determined by the  Administrative
Agent which is in effect during any relevant period,  as prescribed by the Board
of Governors of the Federal  Reserve System (or any  successor) for  determining
the reserve requirements (including supplemental, marginal and emergency reserve
requirements)  with respect to eurocurrency  funding  (currently  referred to as
"Eurocurrency Liabilities") of a member bank in such System.

     Event of Default shall mean any of the events  described in Section 9.1 and
referred to therein as an "Event of Default."

     Excess  Cash Flow shall be  computed as of the close of each fiscal year by
taking  the  difference  between  Consolidated  Cash Flow from  Operations  plus
depreciation of Rental  Merchandise for such fiscal year and the sum of (i)Fixed
Charges, (ii) capital expenditures and (iii) expenditures in connection with the
purchase of Rental  Merchandise,  each as calculated  for such fiscal year.  All
determinations  of Excess Cash Flow shall be based on the immediately  preceding
fiscal year and shall be made  following  the  delivery  by the  Borrower to the
Administrative  Agent of the Borrower's  audited  financial  statements for such
preceding year.

     Existing  Credit  Agreement  shall  mean the Credit  Agreement  dated as of
January 1, 1999,  among the  Borrower,  Rent-Way of TTIG,  L.P.,  certain of the
Guarantors, certain of the Lenders, and National City, as administrative agent.

     Expiration  Date  shall  mean,   with  respect  to  the  Revolving   Credit
Commitments, September 23, 2004.



     Federal  Funds  Effective  Rate for any day  shall  mean the rate per annum
(based on a year of 360 days and actual days  elapsed and rounded  upward to the
nearest 1/100 of 1%)  announced by the Federal  Reserve Bank of New York (or any
successor)  on such day as being the weighted  average of the rates on overnight
federal  funds  transactions  arranged by federal  funds brokers on the previous
trading  day, as computed and  announced  by such  Federal  Reserve Bank (or any
successor)  in  substantially  the same  manner  as such  Federal  Reserve  Bank
computes and announces the weighted  average it refers to as the "Federal  Funds
Effective  Rate" as of the date of this  Agreement;  provided,  if such  Federal
Reserve  Bank (or its  successor)  does not  announce  such rate on any day, the
"Federal Funds Effective Rate" for such day shall be the Federal Funds Effective
Rate for the last day on which such rate was announced.

     Financial  Projections  shall  have the  meaning  assigned  to that term in
Section 6.1.9((ii)).

     Fixed Charge  Coverage Ratio shall mean,  for any period of  determination,
the ratio of
(i) Consolidated Cash Flow from Operations minus capital expenditures (excluding
Rental  Merchandise) to (ii) Fixed Charges, in each case of the Borrower and its
Subsidiaries  for such period  determined and  consolidated  in accordance  with
GAAP.

     Fixed  Charges  shall  mean,  for any period of  determination,  the sum of
interest   expense,   income  taxes,  and  the  current  portion  of  long  term
Indebtedness  (including  capitalized  leases), in each case of the Borrower and
its Subsidiaries for such period  determined and consolidated in accordance with
GAAP.

     GAAP shall mean generally accepted  accounting  principles as are in effect
from time to
time,  subject to the  provisions  of Section  1.3,  and applied on a consistent
basis both as to classification of items and amounts.

                           Governmental  Acts shall have the meaning assigned to
that term in Section 2.9.8.

     Guarantor  shall  mean  each of the  parties  to this  Agreement  which  is
designated as a "Guarantor"  on the signature  page hereof and each other Person
which  joins this  Agreement  as a Guarantor  after the date hereof  pursuant to
Section 11.18.

     Guarantor  Joinder  shall mean a joinder by a Person as a  Guarantor  under
this Agreement,  the Guaranty Agreement and the other Loan Documents in the form
of Exhibit 1.1(G)(1).

     Guaranty  of  any  Person  shall  mean  any   obligation   of  such  Person
guaranteeing or in effect  guaranteeing any liability or obligation of any other
Person in any manner, whether directly or indirectly, including any agreement to
indemnify  or hold  harmless any other  Person,  any  performance  bond or other
suretyship  arrangement  and any other form of assurance  against  loss,  except
endorsement of negotiable or other  instruments for deposit or collection in the
ordinary course of business.

     Guaranty  Agreement  shall mean the  Guaranty and  Suretyship  Agreement in
substantially  the form of Exhibit  1.1(G)(2)  executed and delivered by each of
the Guarantors to the Administrative Agent for the benefit of the Lenders.

     Historical  Statements  shall  have the  meaning  assigned  to that term in
Section 6.1.9((i)).

     Indebtedness  shall  mean,  as to any  Person  at any  time,  any  and  all
indebtedness,   obligations  or  liabilities   (whether  matured  or  unmatured,
liquidated or unliquidated, direct or indirect, absolute or contingent, or joint
or  several)  of such  Person for or in respect  of: (i)  borrowed  money,  (ii)
amounts  raised  under  or  liabilities  in  respect  of any  note  purchase  or
acceptance  credit  facility,  (iii)  reimbursement  obligations  (contingent or
otherwise)  under any letter of credit,  currency swap agreement,  interest rate
swap, cap,  collar or floor agreement or other interest rate management  device,
(iv) any other  transaction  (including  forward  sale or  purchase  agreements,
capitalized  leases and  conditional  sales  agreements)  having the  commercial
effect of a  borrowing  of money  entered  into by such  Person to  finance  its
operations or capital requirements (but not including trade payables and accrued
expenses  incurred in the ordinary  course of business which are not represented
by a promissory  note or other evidence of  indebtedness  and which are not more
than  thirty  (30) days past  due),  or (v) any  Guaranty  of  Indebtedness  for
borrowed money.

     Indemnity  Agreement  shall  mean the  Indemnity  Agreement  in the form of
Exhibit  1.1(I)(1)  among the  Lenders,  the  Administrative  Agent and the Loan
Parties relating to possible  environmental  liabilities  associated with any of
the Property.

     Ineligible  Security shall mean any security which may not be  underwritten
or dealt in by member banks of the Federal  Reserve  System under  Section 16 of
the Banking Act of 1933 (12 U.S.C. Section 24, Seventh), as amended.

     Insolvency  Proceeding  shall mean,  with respect to any Person,  (a) case,
action or  proceeding  with  respect to such  Person (i) before any court or any
other Official Body under any bankruptcy,  insolvency,  reorganization  or other
similar  Law now or  hereafter  in  effect,  or (ii)  for the  appointment  of a
receiver, liquidator,  assignee, custodian, trustee,  sequestrator,  conservator
(or similar  official) of any Loan Party or otherwise  relating to  liquidation,
dissolution,  winding-up or relief of such Person, or (b) any general assignment
for the benefit of creditors,  composition,  marshaling of assets for creditors,
or other, similar arrangement in respect of such Person's creditors generally or
any substantial portion of its creditors; undertaken under any Law.

     Intellectual  Property  Collateral shall mean all of the property described
in the Patent, Trademark and Copyright Security Agreement.

     Intercompany  Subordination  Agreement shall mean a Subordination Agreement
among the Loan Parties in the form attached hereto as Exhibit 1.1(I)(2).



     Interest  Coverage  Ratio for any  period of  determination  shall mean the
ratio of Consolidated Adjusted Cash Flow from Operations to interest expense, in
each case of the Borrower and its  Subsidiaries  for such period  determined and
consolidated in accordance with GAAP.

                           Interest  Period  shall have the meaning  assigned to
such term in Section 4.2.

                           Interest Rate Option shall mean any Euro-Rate  Option
or the Base Rate Option.

                           Interest Rate  Protection  Agreements  shall have the
meaning set forth in Section 8.1.13.

                           Interim Statements shall have the meaning assigned to
that term in Section 6.1.9((i)).

     Internal  Revenue Code shall mean the Internal Revenue Code of 1986, as the
same may be amended or supplemented from time to time, and any successor statute
of similar  import,  and the rules and regulations  thereunder,  as from time to
time in effect.

     Labor Contracts shall mean all employment agreements, employment contracts,
collective  bargaining  agreements and other  agreements among any Loan Party or
Subsidiary of a Loan Party and its employees.

     Law shall  mean any law  (including  common  law),  constitution,  statute,
treaty,   regulation,   rule,  ordinance,   opinion,   release,  ruling,  order,
injunction, writ, decree or award of any Official Body.

     Lenders shall mean the financial  institutions named on Schedule 1.1(B) and
their
respective  successors  and  assigns as  permitted  hereunder,  each of which is
referred to herein as a Lender.

                           Letter of Credit  shall have the meaning  assigned to
that term in Section 2.9.1.

     Letter of Credit Borrowing shall mean an extension of credit resulting from
a drawing under any Letter of Credit which shall not have been reimbursed on the
date  when made and shall not have  been  converted  into a Loan  under  Section
2.9.3.2.

                           Letter of Credit Fee shall have the meaning  assigned
to that term in Section 2.9.2.

     Letters  of Credit  Outstanding  shall  mean at any time the sum of (i) the
aggregate  undrawn  face  amount of  outstanding  Letters of Credit and (ii) the
aggregate  amount  of  all  unpaid  and  outstanding  Reimbursement  Obligations
(including Letter of Credit Borrowings).

     Leverage Ratio shall mean the ratio of (i) the sum of  Consolidated  Funded
Debt plus
three times the Occupancy Expense, as measured at the end of each fiscal quarter
of the Borrower for the four quarters then ended, to (ii) Consolidated Cash Flow
from  Operations plus Occupancy  Expense,  as measured at the end of each fiscal
quarter of the Borrower for the four quarters then ended.

     Lien  shall  mean any  mortgage,  deed of  trust,  pledge,  lien,  security
interest,  charge or other  encumbrance  or security  arrangement  of any nature
whatsoever,   whether   voluntarily  or  involuntarily   given,   including  any
conditional  sale or title retention  arrangement,  and any assignment,  deposit
arrangement  or lease  intended  as, or having the effect of,  security  and any
filed  financing  statement or other notice of any of the foregoing  (whether or
not a lien or other encumbrance is created or exists at the time of the filing).

     Line of Business shall mean the rent-to-own  business,  the rental purchase
business, the rental business and related lines of business.

                           LLC  Interests  shall have the meaning  given to such
term in Section 6.1.3.

     Loan Documents shall mean this Credit Agreement, the Administrative Agent's
Fee Letter, the Collateral  Assignment,  the Guaranty  Agreement,  the Indemnity
Agreement,  the Intercompany  Subordination Agreement, the Mortgages, the Notes,
the Patent,  Trademark and Copyright Security  Agreement,  the Pledge Agreement,
the Security Agreement, all Interest Rate Protection Agreements between any Loan
Party and any Lender or an Affiliate of any Lender,  and any other  instruments,
certificates or documents delivered or contemplated to be delivered hereunder or
thereunder  or  in  connection  herewith  or  therewith,  as  the  same  may  be
supplemented  or amended from time to time in accordance  herewith or therewith,
and Loan Document shall mean any of the Loan Documents.

                           Loan   Parties   shall   mean   the   Borrower,   the
Co-Borrowers and the Guarantors.

                           Loan  Request  shall have the  meaning  given to such
term in Section 2.5.

     Loans shall mean  collectively and Loan shall mean separately all Revolving
Credit  Loans,  Swing  Loans,  the  Term  Loans A and the  Term  Loans B, or any
Revolving Credit Loan, Swing Loan, Term Loan A or Term Loan B.

     Management Group shall mean William E. Morgenstern and all other members of
the  board  of  directors  of  the  Borrower  and  their   respective   Spouses,
descendants,  Spouses of descendants and trustees of trusts  established for the
benefit of such Persons, and the executors of estates of such Persons. "Spouses"
shall include widows and widowers until first remarried.

     Managing Agents shall mean National City, in its capacity as Administrative
Agent, Bank of America,  N.A., in its capacity as Documentation  Agent, and Bank
of Montreal and Harris Trust and Savings Bank, in their  capacity as Syndication
Agents.

     Mass Mutual  Warrants  shall mean the warrants dated July 15, 1995, and all
modifications and replacements thereof,  issued by the Borrower to Massachusetts
Mutual Life Insurance Company and its Affiliates to purchase common stock of the
Borrower.

     Material Adverse Change shall mean any set of circumstances or events which
(a) has or
could reasonably be expected to have any material adverse effect whatsoever upon
the validity or enforceability of this Agreement or any other Loan Document, (b)
is or could  reasonably  be expected to be material and adverse to the business,
properties,  assets, financial condition,  results of operations or prospects of
the Loan Parties taken as a whole, (c) impairs materially or could reasonably be
expected to impair  materially  the ability of the Loan Parties taken as a whole
to  duly  and  punctually  pay or  perform  its  Indebtedness,  or  (d)  impairs
materially or could  reasonably be expected to impair  materially the ability of
the  Administrative  Agent or any of the Lenders,  to the extent  permitted,  to
enforce  their  legal  remedies  pursuant  to this  Agreement  or any other Loan
Document.

     Month, with respect to an Interest Period under the Euro-Rate Option, shall
mean the interval  between the days in consecutive  calendar months  numerically
corresponding  to the  first  day of  such  Interest  Period.  If any  Euro-Rate
Interest  Period  begins on a day of a  calendar  month  for  which  there is no
numerically  corresponding  day in the month in which such Interest Period is to
end, the final month of such Interest  Period shall be deemed to end on the last
Business Day of such final month.

     Mortgage  shall mean the  Mortgages  in  substantially  the form of Exhibit
1.1(M) with respect to the Real Property  executed and delivered by the Borrower
to the Administrative Agent for the benefit of the Lenders.

     Multiemployer  Plan  shall  mean  any  employee  benefit  plan  which  is a
"multiemployer  plan" within the meaning of Section  4001(a)(3)  of ERISA and to
which the  Borrower  or any member of the ERISA Group is then making or accruing
an obligation to make  contributions  or, within the preceding  five Plan years,
has made or had an obligation to make such contributions.

     Multiple Employer Plan shall mean a Plan which has two or more contributing
sponsors
(including  the  Borrower or any member of the ERISA Group) at least two of whom
are not under common  control,  as such a plan is described in Sections 4063 and
4064 of ERISA.

     National  City shall mean National  City Bank of  Pennsylvania,  a national
banking association, its successors and assigns.

                           Notes  shall mean the  Revolving  Credit  Notes,  the
Swing Loan Note and the Term Notes.

                           Notices shall have the meaning  assigned to that term
in Section 11.6.



     NWB shall mean National Westminster Bank, Plc., its successors and assigns.
NWB is the placement agent with respect to the securities to be issued under the
NWB Indenture.

     NWB Indenture  shall mean the Indenture dated as of February 4, 1997 by and
between the  Borrower  and  Manufacturers  and  Traders  Trust  Company,  as the
trustee, with respect to $20,000,000 of Subordinated  Debentures due 2007 issued
by the  Borrower.  NWB is the  Placement  Administrative  Agent  under  the  NWB
Indenture.

     NWB  Subordinated  Loan  Documents  shall  mean the NWB  Indenture  and the
Securities (as defined in the NWB  Indenture)  issued  pursuant  thereto and any
other documents evidencing or relating to the obligations of the Borrower or any
Loan Party to the Securityholders (as defined in the NWB Indenture).

     Obligations  shall mean  collectively  and Obligation shall mean separately
any  obligation  or liability  of any of the Loan Parties to the  Administrative
Agent or any of the Lenders or their Affiliates,  howsoever created,  arising or
evidenced,  whether direct or indirect, absolute or contingent, now or hereafter
existing,  or due or to become due, under or in connection  with this Agreement,
the Notes, the Letters of Credit, the Administrative Agent's Letter or any other
Loan Document.

     Occupancy   Expense  for  any  period  of  determination   shall  mean  the
consolidated rental
expense under operating leases for the retail store sites (including common area
maintenance charges,  taxes and other amounts payable under lease agreements) of
the Borrower and its  Subsidiaries  as lessees,  determined and  consolidated in
accordance  with GAAP.  If the Borrower or any Loan Party shall have made one or
more  Permitted  Acquisitions  as permitted  under Section  8.2.6(2)  during the
period of determination, the Occupancy Expense for such period shall be adjusted
on a pro forma basis acceptable to the  Administrative  Agent and based upon the
historical  financial statements of the Person or assets acquired to give effect
to such Permitted  Acquisitions as if they had occurred at the beginning of such
period.

     Official  Body  shall mean any  national,  federal,  state,  local or other
government or
political  subdivision  or  any  agency,   authority,   bureau,   central  bank,
commission,  department or  instrumentality  of either, or any court,  tribunal,
grand jury or arbitrator, in each case whether foreign or domestic.

     Participation Advance shall mean, with respect to any Lender, such Lender's
payment  in  respect  of its  participation  in a  Letter  of  Credit  Borrowing
according to its Ratable Share pursuant to Section 2.9.4.

                           Partnership Interests shall have the meaning given to
such term in Section 6.1.3.

     Patent,  Trademark and Copyright  Security Agreement shall mean the Patent,
Trademark and Copyright Security Agreement in substantially the form of Exhibit



1.1(P)(1)   executed  and   delivered  by  each  of  the  Loan  Parties  to  the
Administrative Agent for the benefit of the Lenders.

     PBGC  shall  mean the  Pension  Benefit  Guaranty  Corporation  established
pursuant to Subtitle A of Title IV of ERISA or any successor.

                           Permitted   Acquisitions   shall  have  the   meaning
assigned to such term in Section 8.2.6.

                           Permitted Investments shall mean:

     (i) direct  obligations  of the  United  States of America or any agency or
instrumentality  thereof or  obligations  backed by the full faith and credit of
the United  States of America  maturing  in twelve  (12) months or less from the
date of acquisition;

                                    (ii)  commercial  paper maturing in 180 days
or less rated not lower than
     A-1 by Standard & Poor's or P-1 by Moody's Investors  Service,  Inc. on the
date of acquisition;

     (iii) demand deposits, time deposits or certificates of deposit maturing
within one year in commercial  banks whose  obligations  are rated A-1, A or the
equivalent or better by Standard & Poor's on the date of acquisition;

     (iv)  repurchase  agreements  collaterized  by securities  described in (i)
above with any  registered  broker/dealer  or any  commercial  bank described in
(iii) above; and

     (v)  investments  in money market  funds  registered  under the  Investment
Company Act of 1940 whose shares are registered under the Securities Act of 1933
and rated AAAm or AAAm-G by Standard & Poor's on the date of acquisition.

                           Permitted Liens shall mean:

     (i) Liens for taxes,  assessments,  or  similar  charges,  incurred  in the
ordinary course of business and which are not yet due and payable;

     (ii) Pledges or deposits made in the ordinary  course of business to secure
payment of workmen's  compensation,  or to participate in any fund in connection
with workmen's compensation,  unemployment insurance,  old-age pensions or other
social security programs;

     (iii) Liens of mechanics,  materialmen,  warehousemen,  carriers,  or other
like Liens,  securing  obligations  incurred in the ordinary  course of business
that are not yet due and payable and Liens of landlords securing  obligations to
pay lease payments that are not yet due and payable or in default;



     (iv) Good-faith pledges or deposits made in the ordinary course of business
to secure performance of bids, tenders,  contracts (other than for the repayment
of  borrowed  money)  or  leases,  not in  excess of the  aggregate  amount  due
thereunder,  or to secure statutory obligations,  or surety, appeal,  indemnity,
performance or other similar bonds required in the ordinary course of business;

     (v)  Encumbrances  consisting  of zoning  restrictions,  easements or other
restrictions on the use of real property,  none of which materially  impairs the
use of such property or the value thereof,  and none of which is violated in any
material respect by existing or proposed structures or land use;

     (vi) Liens, security interests and mortgages in favor of the Administrative
Agent for the benefit of the Lenders;

     (vii) Liens on property leased by any Loan Party or Subsidiary of a Loan
Party under capital and operating  leases  permitted in Section 8.2.15  securing
obligations of such Loan Party or Subsidiary to the lessor under such leases;

     (viii) Any Lien  existing on the date of this  Agreement  and  described on
Schedule  1.1(P),  provided that the  principal  amount  secured  thereby is not
hereafter increased, and no additional assets become subject to such Lien;

     (ix) Purchase Money Security Interests,  provided that the aggregate amount
of loans and deferred payments secured by such Purchase Money Security Interests
shall not exceed  $100,000  (excluding for the purpose of this  computation  any
loans or deferred payments secured by Liens described on Schedule 1.1(P)); and

     (x) The following, (A) if the validity or amount thereof is being
contested  in good  faith  by  appropriate  and  lawful  proceedings  diligently
conducted so long as levy and execution thereon have been stayed and continue to
be stayed or (B) if a final  judgment is entered and such judgment is discharged
within  thirty  (30) days of entry,  and in either  case they do not  affect the
Collateral or, in the aggregate, materially impair the ability of any Loan Party
to perform its Obligations hereunder or under the other Loan Documents:

     (1) Claims or Liens for taxes,  assessments  or charges due and payable and
subject  to  interest  or  penalty,  provided  that the  applicable  Loan  Party
maintains such reserves or other appropriate  provisions as shall be required by
GAAP  and pays  all  such  taxes,  assessments  or  charges  forthwith  upon the
commencement of proceedings to foreclose any such Lien;

     (2) Claims,  Liens or  encumbrances  upon, and defects of title to, real or
personal  property  other  than the  Collateral,  including  any  attachment  of
personal or real  property or other legal  process  prior to  adjudication  of a
dispute on the merits; or

     (3) Claims or Liens of mechanics, materialmen,  warehousemen,  carriers, or
other statutory nonconsensual Liens.

     (4) Liens  resulting  from final  judgments or orders  described in Section
9.1.6.

                                    (xi)  Liens in  favor of the  Administrative
                  Agent for the benefit of the Lenders to secure  Interest  Rate
                  Protection  Agreements  entered into by the Borrower  with the
                  Lenders.

     Person  shall  mean  any  individual,  corporation,   partnership,  limited
liability  company,  association,  joint-stock  company,  trust,  unincorporated
organization,  joint  venture,  government  or political  subdivision  or agency
thereof, or any other entity.

     Plan shall mean at any time an employee  pension  benefit plan (including a
Multiple Employer Plan, but not a Multiemployer  Plan) which is covered by Title
IV of ERISA or is subject to the minimum funding  standards under Section 412 of
the  Internal  Revenue  Code and either (i) is  maintained  by any member of the
ERISA  Group for  employees  of any member of the ERISA Group or (ii) has at any
time within the preceding five years been  maintained by any entity which was at
such time a member of the ERISA Group for  employees  of any entity which was at
such time a member of the ERISA Group.

     Pledge Agreement shall mean the Pledge Agreement in substantially  the form
of Exhibit  1.1(P)(2)  to be executed  and  delivered by the Loan Parties to the
Administrative Agent for the benefit of the Lenders.

     Pledge  Collateral  shall mean the  property  of the Loan  Parties in which
security  interests  are  to be  granted  under  the  Pledge  Agreement  or  the
Collateral Assignment.

     Potential  Default  shall mean any event or  condition  which with  notice,
passage of time or a determination by the  Administrative  Agent or the Required
Lenders,  or any  combination  of the  foregoing,  would  constitute an Event of
Default.

     Principal  Office shall mean the main banking office of the  Administrative
Agent in Pittsburgh, Pennsylvania.

     Prior  Security  Interest  shall  mean a valid  and  enforceable  perfected
first-priority
security  interest under the Uniform  Commercial  Code in the UCC Collateral and
the Pledge  Collateral  which is subject only to Liens for taxes not yet due and
payable to the extent  such  prospective  tax  payments  are given  priority  by
statute or Purchase Money Security Interests as permitted hereunder.

     Prohibited Transaction shall mean any prohibited transaction as defined in
Section  4975 of the  Internal  Revenue  Code or Section  406 of ERISA for which
neither an individual nor a class exemption has been issued by the United States
Department of Labor.

     Property shall mean all real property,  both owned and leased,  of any Loan
Party or
Subsidiary of a Loan Party.



     Purchase  Money Security  Interest shall mean Liens upon tangible  personal
property  securing  loans to any Loan  Party or  Subsidiary  of a Loan  Party or
deferred  payments  by such Loan Party or  Subsidiary  for the  purchase of such
tangible personal property,  provided that the Liens are limited to the property
acquired with the proceeds of the loan.

     Purchasing  Lender  shall  mean a  Lender  which  becomes  a party  to this
Agreement by executing an Assignment and Assumption Agreement.

     Quoted  Rates  shall  mean   collectively,   and  Quoted  Rate  shall  mean
separately, an
overnight  rate of interest  quoted by  National  City to the  Borrower  and the
Co-Borrowers  applicable  to any  proposed  Swing Loans  which may be  requested
pursuant to Section  2.5.2,  which rate shall be a margin over the Federal Funds
Effective Rate or a commercial paper, call money,  overnight repurchase or other
commonly  quoted  rate,  in each case to be  selected  in  National  City's sole
discretion as the basis for National City's quote.

     Quoted  Rate  Option  shall  mean  the  option  of  the  Borrower  and  the
Co-Borrowers to have Swing Loans bear interest at the Quoted Rates.

     Ratable  Share  shall  mean  the  proportion  that  a  Lender's  Commitment
(excluding the Swing Loan  Commitment)  bears to the Commitments  (excluding the
Swing Loan Commitments) of all of the Lenders.

     Real Property  shall mean the real estate owned by the Borrower and located
in Millcreek Township, Erie County, Pennsylvania,  and in the City of Erie, Erie
County, Pennsylvania, each of which shall be encumbered by a Mortgage.

     Regulated Substances shall mean any substance, including any solid, liquid,
semisolid, gaseous, thermal, thoriated or radioactive material, refuse, garbage,
wastes,  chemicals,  petroleum products,  by-products,  coproducts,  impurities,
dust,  scrap,  heavy metals,  defined as a "hazardous  substance,"  "pollutant,"
"pollution," "contaminant," "hazardous or toxic substance," "extremely hazardous
substance,"  "toxic chemical,"  "toxic waste,"  "hazardous  waste,"  "industrial
waste,"  "residual  waste,"  "solid  waste,"  "municipal  waste," "mixed waste,"
"infectious  waste,"  "chemotherapeutic  waste,"  "medical waste," or "regulated
substance"  or any related  materials,  substances or wastes as now or hereafter
defined pursuant to any Environmental Laws,  ordinances,  rules,  regulations or
other directives of any Official Body, the generation, manufacture,  extraction,
processing,  distribution,  treatment, storage, disposal, transport,  recycling,
reclamation,   use,  reuse,  spilling,  leaking,  dumping,  injection,  pumping,
leaching,   emptying,   discharge,   escape,  release  or  other  management  or
mismanagement of which is regulated by the Environmental Laws.

     Regulation U shall mean  Regulation U, T, or X as  promulgated by the Board
of Governors of the Federal Reserve System, as amended from time to time.

     Reimbursement  Obligation  shall have the meaning  assigned to such term in
Section 2.9.3.2.

     Rental Contracts shall mean all rental and rental-purchase contracts of the
Loan
Parties  made in the  ordinary  course of business  providing  for the rental to
customers of Rental Merchandise.

     Rental  Merchandise  shall  mean  the  furniture,  appliances,   electronic
equipment  and other  personal  property of the Loan  Parties  acquired  for the
purpose of lease or sale under the Rental Contracts.

     Rentavision shall mean Rentavision Inc., a New York corporation.

     Reportable Event shall mean a reportable event described in Section 4043 of
ERISA and regulations thereunder with respect to a Plan or Multiemployer Plan.

                           Required Lenders shall mean

     (i) if there are no Loans, Reimbursement Obligations or Letter of Credit
Borrowings outstanding,  Lenders whose Revolving Credit Commitments aggregate at
least 51% of the Commitments of all of the Lenders, or

     (ii) if there are  Loans,  Reimbursement  Obligations,  or Letter of Credit
Borrowings  outstanding,  any  Lender or group of Lenders if both (i) the sum of
the Revolving Credit Loans, Term Loans A,  Reimbursement  Obligations and Letter
of Credit Borrowings of such Lenders then outstanding aggregates at least 51% of
the total principal amount of all of such Revolving Credit Loans,  Term Loans A,
Reimbursement  Obligations and Letter of Credit  Borrowings then outstanding and
(ii) the sum of the Term Loans B of such Lenders then outstanding  aggregates at
least 51% of the total principal amount of all of Term Loans B then outstanding.
Reimbursement  Obligations and Letter of Credit Borrowings shall be deemed,  for
purposes of this definition,  to be in favor of the Administrative Agent and not
a participating Lender if such Lender has not made its Participation  Advance in
respect  thereof and shall be deemed to be in favor of such Lender to the extent
of its Participation Advance if it has made its Participation Advance in respect
thereof.

     Revolving Credit Base Rate Option shall mean the option of the Borrower and
the  Co-Borrowers  to have Revolving  Credit Loans bear interest at the rate and
under the terms and conditions set forth in Section 4.1.1((i)).

     Revolving  Credit  Commitment shall mean, as to any Lender at any time, the
amount  initially set forth  opposite its name on Schedule  1.1(B) in the column
labeled  "Amount of Commitment  for Revolving  Credit  Loans," and thereafter on
Schedule I to the most recent Assignment and Assumption Agreement, and Revolving
Credit Commitments shall mean the aggregate  Revolving Credit Commitments of all
of the Lenders.

     Revolving Credit Euro-Rate Option shall mean the option of the Borrower and
the
Co-Borrowers to have Revolving  Credit Loans bear interest at the rate and under
the terms and conditions set forth in Section 4.1.1((ii)).



     Revolving  Credit Loans shall mean  collectively  and Revolving Credit Loan
shall mean  separately all Revolving  Credit Loans or any Revolving  Credit Loan
made by the  Lenders or one of the Lenders to the  Borrower or the  Co-Borrowers
pursuant to Section 2.1 or 2.9.3.

     Revolving  Credit Notes shall mean  collectively  and Revolving Credit Note
shall mean
separately all the Revolving  Credit Notes of the Borrower and the  Co-Borrowers
in the form of Exhibit  1.1(R)  evidencing  the Revolving  Credit Loans together
with  all  amendments,  extensions,  renewals,  replacements,   refinancings  or
refundings thereof in whole or in part.

     Revolving  Credit Ratable Share shall mean the  proportion  that a Lender's
Revolving Credit Commitment bears to the Revolving Credit  Commitments of all of
the Lenders.

     Revolving  Facility  Usage shall mean at any time the sum of the  Revolving
Credit Loans outstanding,  the Swing Loans outstanding and the Letters of Credit
Outstanding.

     Section 20 Subsidiary shall mean the Subsidiary of the bank holding company
controlling  any Lender,  which  Subsidiary  has been  granted  authority by the
Federal Reserve Board to underwrite and deal in certain Ineligible Securities.

     Security  Agreement shall mean the Security  Agreement in substantially the
form of Exhibit 1.1(S)(1)  executed and delivered by each of the Loan Parties to
the Administrative Agent for the benefit of the Lenders.

                           Shares  shall have the meaning  assigned to that term
in Section 6.1.2.

                           Standard  &  Poor's  shall  mean  Standard  &  Poor's
Ratings Services, a division of The
McGraw-Hill Companies, Inc.

     Standby  Letter of Credit  shall mean a Letter of Credit  issued to support
obligations of one or more of the Loan Parties,  contingent or otherwise,  which
finance the working  capital and business needs of the Loan Parties  incurred in
the ordinary course of business.

     Subordinated  Debt  shall  mean (i)  Indebtedness  of the  Borrower  to the
Securityholders
(as such term is defined in the NWB Indenture) and their successors and assigns,
evidenced  by  the  NWB   Subordinated   Loan   Documents  and  subject  to  the
subordination  terms set forth in Section 11 thereof,  and (ii)  Indebtedness of
the Loan Parties to Persons which sell ownership interests or assets to the Loan
Parties under a Permitted Acquisition in accordance with Section 8.2.6.

     Subordinated  Loan  Documents  shall  mean  (i) the NWB  Subordinated  Loan
Documents,  and (ii) all  agreements  evidencing the  Subordinated  Debt owed to
Persons  which sell  ownership  interests or assets to the Loan Parties  under a
Permitted Acquisition in accordance with Section 8.2.6.

     Subsidiary  of any  Person at any time shall  mean (i) any  corporation  or
trust of which  50% or more (by  number  of  shares  or  number of votes) of the
outstanding  capital stock or shares of beneficial interest normally entitled to
vote for the election of one or more  directors or trustees  (regardless  of any
contingency  which does or may  suspend or dilute the voting  rights) is at such
time owned directly or indirectly by such Person or one or more of such Person's
Subsidiaries,  (ii) any partnership of which such Person is a general partner or
of which 50% or more of the  partnership  interests  is at the time  directly or
indirectly  owned by such Person or one or more of such  Person's  Subsidiaries,
(iii) any limited liability company of which such Person is a member or of which
50% or more of the limited  liability  company interests is at the time directly
or indirectly owned by such Person or one or more of such Person's  Subsidiaries
or (iv) any corporation, trust, partnership,  limited liability company or other
entity which is controlled or capable of being  controlled by such Person or one
or more of such Person's Subsidiaries.

                           Subsidiary  Shares shall have the meaning assigned to
that term in Section 6.1.3.

     Swing Loan Commitment  shall mean National City's  commitment to make Swing
Loans to the Borrower and the  Co-Borrowers  pursuant to Section 2.1.2 hereof in
an aggregate principal amount up to $5,000,000.

     Swing  Loan Note shall  mean the Swing  Loan Note of the  Borrower  and the
Co-Borrowers in the form of Exhibit (S)(2) evidencing the Swing Loans,  together
with  all  amendments,  extensions,  renewals,  replacements,   refinancings  or
refundings thereof in whole or in part.

     Swing Loan Request  shall mean a request for Swing Loans made in accordance
with Section 2.5.2 hereof.

     Swing Loans shall mean  collectively  and Swing Loan shall mean  separately
all Swing Loans or any Swing Loan made by National  City to the Borrower and the
Co-Borrowers pursuant to Section 2.6.2 hereof.

                           Syndication  Agents  shall mean Bank of Montreal  and
Harris Trust and Savings Bank.

     Syndications  Period shall mean the period between the Closing Date and the
date upon  which the  Syndication  Agents  and  National  City Bank  notify  the
Borrower  and the  Co-Borrowers  in writing that the  syndication  of the Term B
Loans is completed.

                           Term Loan A shall have the meaning given to such term
in Section 3.1; Term Loans A
shall mean collectively all of the Term Loans A.

     Term Loan A Base Rate Option  shall mean the option of the Borrower and the
Co-Borrowers  to have Term Loans A bear interest at the rate and under the terms
and conditions set forth in Section 4.1.2((i)).

     Term Loan A Commitment shall mean, as to any Lender at any time, the amount
initially set forth  opposite its name on Schedule  1.1(B) in the column labeled
"Amount of Commitment for Term Loans A" and thereafter on Schedule I to the most
recent  Assignment and Assumption  Agreement,  and Term Loan A Commitments shall
mean the aggregate Term Loan A Commitments of all of the Lenders.

     Term Loan A Euro-Rate  Option shall mean the option of the Borrower and the
Co-Borrowers  to have Term Loans A bear interest at the rate and under the terms
and conditions set forth in Section 4.1.2((ii)).

                           Term Loan A Maturity  Date shall mean  September  30,
2004.

                           Term Notes A shall mean  collectively and Term Note A
shall mean separately all of the
Term Notes of the Borrower and the Co-Borrowers in the form of Exhibit 1.1(T)(1)
evidencing the Term Loans A, together with all amendments, extensions, renewals,
replacements, refinancings or refunds thereof in whole or in part.

                           Term Loan B shall have the meaning given to such term
in Section 3.1; Term Loans B
shall mean collectively all of the Term Loans B.

     Term Loan B Base Rate Option shall mean the option of the Borrower and the
Co-Borrowers  to have Term Loans B bear interest at the rate and under the terms
and conditions set forth in Section 4.1.3(i).

     Term Loan B Commitment shall mean, as to any Lender at any time, the amount
initially set forth  opposite its name on Schedule  1.1(B) in the column labeled
"Amount of Commitment for Term Loans B" and thereafter on Schedule I to the most
recent  Assignment and Assumption  Agreement,  and Term Loan B Commitments shall
mean the aggregate Term Loan B Commitments of all of the Lenders.

     Term Loan B Euro-Rate Option shall mean the option of the Borrower and the
Co-Borrowers  to have Term Loans B bear interest at the rate and under the terms
and conditions set forth in Section 4.1.3(ii).

                           Term Loan B Maturity  Date shall mean  September  30,
2006.

                           Term Notes B shall mean  collectively and Term Note B
shall mean separately all of the
Term  Notes  B of the  Borrower  and the  Co-Borrowers  in the  form of  Exhibit
1.1(T)(2) evidencing the Term Loans B, together with all amendments, extensions,
renewals, replacements, refinancings or refunds thereof in whole or in part.

     Term Notes shall mean  collectively and Term Note shall mean separately all
of the Term Notes A and Term Notes B and each Term Note A and Term Note B.

     Transferor  Lender shall mean the selling Lender  pursuant to an Assignment
and Assumption Agreement.

     UCC  Collateral  shall  mean  the  property  of the Loan  Parties  in which
security interests are to be granted under the Security Agreement.

                           Uniform   Commercial  Code  shall  have  the  meaning
assigned to that term in Section 6.1.16.

     Voting  Stock  shall  mean any class or  classes  the  holders of which are
ordinarily, in the absence of contingencies, entitled to elect a majority of the
corporate directors (or persons performing similar functions).

                  1.2      Construction.

                  Unless  the  context  of  this  Agreement   otherwise  clearly
requires,  the following rules of construction shall apply to this Agreement and
each of the other Loan Documents:

                           1.2.1    Number; Inclusion.

     references to the plural include the singular, the plural, the part and the
whole;  "or" has the inclusive  meaning  represented by the phrase "and/or," and
"including"  has  the  meaning  represented  by the  phrase  "including  without
limitation";

                           1.2.2    Determination.

     references  to  "determination"  of or by the  Administrative  Agent or the
Lenders shall be deemed to include  good-faith  estimates by the  Administrative
Agent or the Lenders (in the case of quantitative determinations) and good-faith
beliefs by the  Administrative  Agent or the Lenders (in the case of qualitative
determinations)  and such  determination  shall be  conclusive  absent  manifest
error;

     1.2.3 Administrative Agent's Discretion and Consent.

     whenever  the  Administrative  Agent or the  Lenders  are granted the right
herein to act in its or their sole  discretion  or to grant or withhold  consent
such right shall be exercised in good faith;

                           1.2.4    Documents Taken as a Whole.

     the words "hereof,"  "herein,"  "hereunder,"  "hereto" and similar terms in
this  Agreement or any other Loan Document refer to this Agreement or such other
Loan Document as a whole and not to any  particular  provision of this Agreement
or such other Loan Document;

                           1.2.5    Headings.

     the section and other  headings  contained in this  Agreement or such other
Loan Document and the Table of Contents (if any),  preceding  this  Agreement or
such other Loan



Document  are for  reference  purposes  only and shall not control or affect the
construction of this Agreement or such other Loan Document or the interpretation
thereof in any respect;

                           1.2.6    Implied References to this Agreement.

     article, section,  subsection,  clause, schedule and exhibit references are
to this Agreement or other Loan Document,  as the case may be, unless  otherwise
specified;

                           1.2.7    Persons.

     reference to any Person includes such Person's  successors and assigns but,
if  applicable,  only if such  successors  and  assigns  are  permitted  by this
Agreement or such other Loan  Document,  as the case may be, and  reference to a
Person in a particular capacity excludes such Person in any other capacity;

                           1.2.8    Modifications to Documents.

     reference to any  agreement  (including  this  Agreement and any other Loan
Document  together with the schedules and exhibits hereto or thereto),  document
or instrument means such agreement, document or instrument as amended, modified,
replaced, substituted for, superseded or restated;

                           1.2.9    From, To and Through.

     relative to the determination of any period of time, "from" means "from and
including,"  "to" means "to but  excluding,"  and "through"  means  "through and
including"; and

                           1.2.10   Shall; Will.

     references to "shall" and "will" are intended to have the same meaning.

                  1.3      Accounting Principles.

                  Except  as   otherwise   provided  in  this   Agreement,   all
computations and  determinations  as to accounting or financial  matters and all
financial  statements to be delivered  pursuant to this Agreement  shall be made
and prepared in accordance  with GAAP  (including  principles  of  consolidation
where  appropriate),  and all  accounting  or  financial  terms  shall  have the
meanings ascribed to such terms by GAAP; provided,  however, that all accounting
terms used in Section 8.2 (and all defined  terms used in the  definition of any
accounting  term used in Section 8.2) shall have the meaning given to such terms
(and  defined  terms)  under GAAP as in effect on the date  hereof  applied on a
basis consistent with those used in preparing the Annual Statements  referred to
in Section 6.1.9((i)).





                  2.       REVOLVING CREDIT AND SWING LOAN FACILITIES

                  2.1      Revolving Credit Commitments.

                           2.1.1    Revolving Credit Loans.

                  Subject to the terms and  conditions  hereof and relying  upon
the  representations and warranties herein set forth, each Lender with Revolving
Credit  Commitments  severally  agrees  to make  Revolving  Credit  Loans to the
Borrower and the  Co-Borrowers  at any time or from time to time on or after the
date hereof to the  Expiration  Date,  provided that after giving effect to such
Revolving  Credit Loan (i) the aggregate  amount of Revolving  Credit Loans from
such Lender shall not exceed such Lender's  Revolving  Credit  Commitment  minus
such  Lender's   Revolving  Credit  Ratable  Share  of  the  Letters  of  Credit
Outstanding,  and (ii) the Borrower  shall not be in default of the covenant set
forth in Section  8.2.16 of this  Agreement,  as evidenced  pursuant to the Loan
Request delivered pursuant to Section 2.5 hereof. Within such limits of time and
amount and subject to the other  provisions of this Agreement,  the Borrower and
the Co-Borrowers may borrow, repay and reborrow pursuant to this Section 2.1.

                           2.1.2    Swing Loan Commitments.

                  Subject to the terms and  conditions  hereof and relying  upon
the representations  and warranties herein set forth,  National City may, at its
option, cancelable at any time for any reason whatsoever,  make swing loans (the
"Swing Loans") to the Borrower and the  Co-Borrowers at any time or from time to
time after the date hereof to, but not  including,  the  Expiration  Date, in an
aggregate  principal  amount up to but not in excess of  $5,000,000  (the "Swing
Loan  Commitment"),  provided  that the aggregate  principal  amount of National
City's  Swing  Loans  and the  Revolving  Credit  Loans  and  Letters  of Credit
Outstanding of all the Lenders at any one time outstanding  shall not exceed the
Revolving Credit  Commitments of all the Lenders or cause the Loan Parties to be
in default of the covenant set forth in Section 8.2.16 of this Agreement. Within
such  limits of time and amount  and  subject  to the other  provisions  of this
Agreement,  the Borrower  and the  Co-Borrowers  may borrow,  repay and reborrow
pursuant to this Section 2.1.2.

     2.2 Nature of Lenders' Obligations with Respect to Revolving Credit Loans.

                  Each  Lender  with  Revolving  Credit   Commitments  shall  be
obligated to participate in each request for Revolving  Credit Loans pursuant to
Section  2.5 in  accordance  with  its  Revolving  Credit  Ratable  Share of the
Revolving  Credit Loans.  The aggregate of each Lender's  Revolving Credit Loans
outstanding  hereunder to the Borrower  and the  Co-Borrowers  at any time shall
never exceed its Revolving Credit  Commitment minus its Revolving Credit Ratable
Share of the  Letter of Credit  Outstandings.  The  obligations  of each  Lender
hereunder  are  several.  The failure of any Lender to perform  its  obligations
hereunder shall not affect the Obligations of the Borrower and the  Co-Borrowers
to any other  party nor shall any other  party be liable for the failure of such
Lender  to  perform  its  obligations  hereunder.  The  Lenders  shall  have  no
obligation to make Revolving  Credit Loans  hereunder on or after the Expiration
Date.

                  2.3      Commitment Fees.

                  Accruing from the date hereof until the  Expiration  Date, the
Borrower and the Co-Borrowers agree to pay to the  Administrative  Agent for the
account  of  each  Lender  which  makes  a  Revolving  Credit   Commitment,   as
consideration  for  such  Lender's  Revolving  Credit  Commitment  hereunder,  a
nonrefundable  commitment  fee (the  "Commitment  Fee") equal to the  Applicable
Commitment  Fee Rate (computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days  elapsed) on the average daily  difference  between
the amount of (i) such Lender's Revolving Credit Commitment,  as the same may be
constituted from time to time (for purposes of this computation, National City's
Swing  Loans  shall be deemed not to be  borrowed  amounts  under its  Revolving
Credit  Commitment)  and (ii) the principal  amount of such  Lender's  Revolving
Credit   Ratable  Share  of  Revolving   Credit  Loans  and  Letters  of  Credit
Outstanding.  All  Commitment  Fees  shall be  payable  in  arrears on the first
Business Day of each October,  January, April and July after the date hereof and
on the Expiration Date or upon acceleration of the Notes.

                  2.4      [Intentionally Omitted].

                  2.5      Revolving Credit Loan Requests; Swing Loan Requests.

                           2.5.1    Revolving Credit Loan Requests.

                  Except as  otherwise  provided  herein,  the  Borrower and the
Co-Borrowers  may from time to time prior to the  Expiration  Date  request  the
Lenders to make  Revolving  Credit Loans,  or renew or convert the Interest Rate
Option  applicable to existing  Revolving Credit Loans or Term Loans pursuant to
Section 4.2, by delivering  to the  Administrative  Agent,  not later than 10:00
a.m.,  Pittsburgh  time,  (i)  three (3)  Business  Days  prior to the  proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
Euro-Rate  Option  applies or the  conversion to or the renewal of the Euro-Rate
Option for any Loans; and (ii) one (1) Business Day prior to either the proposed
Borrowing Date with respect to the making of Revolving Credit Loans to which the
Base Rate Option applies or the last day of the preceding  Interest  Period with
respect  to the  conversion  to the Base Rate  Option  for any  Loan,  of a duly
completed  request  therefor  substantially  in the form of Exhibit 2.5 (each, a
"Loan  Request"),  which  includes  a  representation  that the  Borrower  is in
compliance with Sections 8.2.16 after giving effect to the Loans subject to such
Loan Request.  Each Loan Request shall be irrevocable  and shall specify (i) the
proposed  Borrowing  Date;  (ii) the  aggregate  amount  of the  proposed  Loans
comprising  each  Borrowing  Tranche,  which shall be in integral  multiples  of
$1,000,000 and not less than $1,000,000 for each Borrowing  Tranche to which the
Euro-Rate  Option  applies  and not less than the  lesser of  $1,000,000  or the
maximum  amount  available for Borrowing  Tranches to which the Base Rate Option
applies;  (iii) whether the Euro-Rate  Option or Base Rate Option shall apply to
the proposed Loans comprising the applicable  Borrowing Tranche; and (iv) in the
case  of  a  Borrowing  Tranche  to  which  the  Euro-Rate  Option  applies,  an
appropriate Interest Period for the Loans comprising such Borrowing Tranche.




                           2.5.2    Swing Loan Requests.

     Except as otherwise  provided herein, the Borrower and the Co-Borrowers may
from time to time prior to the  Expiration  Date request  National  City to make
Swing Loans by delivery  to National  City not later than 10:00 a.m.  Pittsburgh
time  on the  proposed  Borrowing  Date  of a duly  completed  request  therefor
substantially  in the form of Exhibit  2.5.2  hereto or a request  by  telephone
immediately  confirmed in writing by letter,  facsimile or telex (each, a "Swing
Loan Request"), it being understood that National City may rely on the authority
of any  individual  making such a telephonic  request  without the  necessity of
receipt  of  such  written  confirmation.  Each  Swing  Loan  Request  shall  be
irrevocable  and shall  specify the proposed  Borrowing  Date and the  principal
amount of such Swing Loan, which shall be not less than $100,000.

1.1.     Making Revolving Credit Loans and Swing Loans.

                           2.6.1    Making Revolving Credit Loans.

                  The Administrative  Agent shall,  promptly after receipt by it
of a Loan  Request  pursuant  to  Section  2.5,  notify the  Lenders  which have
Commitments  which are the  subject of the Loan  Request of its  receipt of such
Loan Request specifying: (i) the proposed Borrowing Date and the time and method
of disbursement of the Loans requested thereby; (ii) the amount and type of each
such Loan and the applicable  Interest Period (if any); and (iii) in the case of
the a Loan Request for  Revolving  Credit  Loans,  the  apportionment  among the
Lenders of such Loans as  determined by the  Administrative  Agent in accordance
with Section 2.2. In the case of the Revolving  Credit Loans,  each Lender shall
remit the principal amount of each Revolving  Credit Loan to the  Administrative
Agent  such that the  Administrative  Agent is able to,  and the  Administrative
Agent shall,  to the extent the Lenders have made funds available to it for such
purpose and subject to Section  7.2,  fund such  Revolving  Credit  Loans to the
Borrower and the Co-Borrowers in U.S. Dollars and immediately available funds at
the Principal  Office prior to 2:00 p.m.,  Pittsburgh  time,  on the  applicable
Borrowing  Date,  provided  that if any Lender  fails to remit such funds to the
Administrative  Agent in a timely manner, the Administrative  Agent may elect in
its sole  discretion  to fund with its own funds the  Revolving  Credit Loans of
such Lender on such  Borrowing  Date,  and such  Lender  shall be subject to the
repayment obligation in Section 10.15.

                           2.6.2    Making Swing Loans.

                           So long as National  City elects to make Swing Loans,
National City shall, after
receipt by it of a Swing Loan Request pursuant to Section 2.5.2, fund such Swing
Loan to the  Borrower in U.S.  Dollars and  immediately  available  funds at the
Principal Office prior to 2:00 p.m. Pittsburgh time on the Borrowing Date.






                  2.7      Revolving Credit Notes; Swing Loan Note.

                           2.7.1    Revolving Credit Notes.

                  The Obligation of the Borrower and the  Co-Borrowers  to repay
the aggregate  unpaid principal amount of the Revolving Credit Loans made to the
Borrower  and the  Co-Borrowers  by  each  Lender  with  Revolving  Credit  Loan
Commitments,  together with interest thereon,  shall be evidenced by a Revolving
Credit  Note dated the  Closing  Date (or if such  Lender is not a party to this
Agreement  on the  Closing  Date,  the  date  that  such  Lender  joins  in this
Agreement),  payable to the order of such Lender in a face  amount  equal to the
Revolving Credit Commitment of such Lender.

     2.7.2 Swing Loan Note; Borrowings to Repay Swing Loans.

     2.7.2.1 The  obligation of the Borrower and the  Co-Borrowers  to repay the
unpaid  principal  amount  of the  Swing  Loans  made  to the  Borrower  and the
Co-Borrowers by National City together with interest  thereon shall be evidenced
by a demand  promissory  note of the  Borrower  and the  Co-Borrowers  dated the
Closing Date in  substantially  the form  attached  hereto as Exhibit  1.1(S)(2)
payable to the order of National  City in a face amount  equal to the Swing Loan
Commitment.

     2.7.2.2  National City may, at its option,  exercisable at any time for any
reason  whatsoever,  demand repayment of the Swing Loans, and each Lender making
Revolving  Credit  Commitments  shall make a Revolving  Credit Loan in an amount
equal to such Lender's Revolving Credit Ratable Share of the aggregate principal
amount of the  outstanding  Swing  Loans,  plus,  if National  City so requests,
accrued  interest  thereon,  provided  that no Lender  shall be obligated in any
event  to  make  Revolving  Credit  Loans  in  excess  of its  Revolving  Credit
Commitment  less its  Revolving  Credit  Ratable  Share  of  Letters  of  Credit
Outstanding.  Revolving  Credit Loans made  pursuant to the  preceding  sentence
shall  bear  interest  at the Base Rate  Option and shall be deemed to have been
properly requested in accordance with Section 2.5.1 without regard to any of the
requirements  of that  provision.  National  City  shall  provide  notice to the
Lenders,  the Borrower and the Co-Borrowers  (which may be telephonic or written
notice by letter, facsimile or telex) that such Revolving Credit Loans are to be
made under this Section 2.7.2.2 and of the apportionment  among the Lenders with
Revolving  Credit  Commitments,   and  such  Lenders  shall  be  unconditionally
obligated to fund such  Revolving  Credit Loans  (whether or not the  conditions
specified in Section  2.5.1 are then  satisfied)  by the time  National  City so
requests,  which  shall not be  earlier  than 3:00 p.m.  Pittsburgh  time on the
Business Day next after the date the Lenders  receive such notice from  National
City.

                  2.8      Use of Proceeds.

                  The proceeds of the  Revolving  Credit Loans shall be used for
the refinancing of existing  indebtedness of the Borrower,  the Co-Borrowers and
the other  Loan  Parties,  for the  acquisition  of stock or  assets of  Persons
engaged in the  business  of the  Borrower  and its  Subsidiaries  described  in
Schedule  8.2.10,   for  the  development  of  additional  retail  locations  in
connections  with such business,  and for working capital and general  corporate
purposes, all in accordance with Section 8.1.10.

                  2.9      Letter of Credit Subfacility.

                           2.9.1    Issuance of Letters of Credit.

     Borrower and  Co-Borrowers  may request the issuance of one or more letters
of credit  (each a  "Letter  of  Credit")  on  behalf  of the  Borrower,  either
Co-Borrower or another Loan Party by delivering to the Administrative  Agent (i)
a completed  application and agreement for letters of credit in such form as the
Administrative  Agent may specify from time to time by no later than 10:00 a.m.,
Pittsburgh time, at least three (3) Business Days, or such shorter period as may
be agreed to by the  Administrative  Agent,  in advance of the proposed  date of
issuance  and  (ii) a Loan  Request  which  includes  the  calculations  showing
compliance  with  Sections  8.2.16  after  giving  effect to the issuance of the
Letter of Credit or Letters of Credit.  Each Letter of Credit shall be a Standby
Letter of Credit.  Subject to the terms and conditions hereof and in reliance on
the  agreements  of the  other  Lenders  set  forth  in this  Section  2.9,  the
Administrative  Agent will issue a Letter of Credit provided that each Letter of
Credit shall (A) have a maximum  maturity of twelve (12) months from the date of
issuance,  and (B) in no event  expire  later than one Business Day prior to the
Expiration  Date and providing  that in no event shall (i) the Letters of Credit
Outstanding exceed, at any one time,  $10,000,000 or (ii) the Revolving Facility
Usage exceed, at any one time, the Revolving Credit Commitments.

                           2.9.2    Letter of Credit Fees.

     The Borrower and the Co-Borrowers shall pay (i) to the Administrative Agent
for the ratable account of the Lenders with Revolving  Credit  Commitments a fee
(the "Letter of Credit Fee") equal to the  Applicable  Margin for the  Revolving
Credit Euro-Rate Option per annum, and (ii) to the Administrative  Agent for its
own account a fronting fee equal to one-eighth  percent (1/8%) per annum,  which
fees shall be computed on the daily Letters of Credit  Outstanding  and shall be
payable  quarterly  in arrears  commencing  with the first  Business Day of each
October, January, April and July following issuance of each Letter of Credit and
on the Expiration Date. The Borrower and the Co-Borrowers  shall also pay to the
Administrative   Agent  for  the   Administrative   Agent's   sole  account  the
Administrative Agent's then in effect customary fees and administrative expenses
payable  with respect to the Letters of Credit as the  Administrative  Agent may
generally  charge or incur from time to time in  connection  with the  issuance,
maintenance,   modification   (if  any),   assignment   or  transfer  (if  any),
negotiation, and administration of Letters of Credit.

                           2.9.3....Disbursements, Reimbursement.

     2.9.3.1 Immediately upon the Issuance of each Letter of Credit, each
Lender  with  Revolving  Credit  Commitments  shall be  deemed  to,  and  hereby
irrevocably  and  unconditionally  agrees to,  purchase from the  Administrative
Agent a participation in such Letter of Credit and each drawing thereunder in an
amount equal to such  Lender's  Revolving  Credit  Ratable  Share of the maximum
amount  available to be drawn under such Letter of Credit and the amount of such
drawing, respectively.

     2.9.3.2 In the event of any request for a drawing  under a Letter of Credit
by the beneficiary or transferee thereof, the Administrative Agent will promptly
notify the Borrower and the Co-Borrowers. Provided that they shall have received
such notice,  the Borrower and the Co-Borrowers shall reimburse (such obligation
to  reimburse  the  Administrative  Agent  shall  sometimes  be referred to as a
"Reimbursement  Obligation")  the  Administrative  Agent  prior to  11:00  a.m.,
Pittsburgh time on each date that an amount is paid by the Administrative  Agent
under any  Letter of Credit  (each such date,  an  "Drawing  Date") in an amount
equal to the  amount  so paid by the  Administrative  Agent.  In the  event  the
Borrower and the Co-Borrowers fail to reimburse the Administrative Agent for the
full amount of any drawing under any Letter of Credit by 11:00 a.m.,  Pittsburgh
time, on the Drawing Date, the  Administrative  Agent will promptly  notify each
Lender with  Revolving  Credit  Commitments  thereof,  and the  Borrower and the
Co-Borrowers  shall be deemed to have requested  that Revolving  Credit Loans be
made by the Lenders  under the Base Rate Option to be  disbursed  on the Drawing
Date under  such  Letter of  Credit,  subject  to the  amount of the  unutilized
portion of the Revolving  Credit  Commitment  and subject to the  conditions set
forth in Section 7.2 other than any notice requirements. Any notice given by the
Administrative Agent pursuant to this Section 2.9.3.2 may be oral if immediately
confirmed in writing;  provided that the lack of such an immediate  confirmation
shall not affect the conclusiveness or binding effect of such notice.

     2.9.3.3 Each Lender shall upon any notice  pursuant to Section 2.9.3.2 make
available to the Administrative  Agent an amount in immediately  available funds
equal to its  Revolving  Credit  Ratable  Share of the  amount  of the  drawing,
whereupon the  participating  Lenders shall (subject to Section 2.9.3.4) each be
deemed to have made a  Revolving  Credit  Loan under the Base Rate Option to the
Borrower and the Co-Borrowers in that amount. If any Lender so notified fails to
make available to the Administrative Agent for the account of the Administrative
Agent the amount of such Lender's  Revolving Credit Ratable Share of such amount
by no later than 3:30 p.m.,  Pittsburgh  time on the Drawing Date, then interest
shall accrue on such Lender's obligation to make such payment,  from the Drawing
Date to the date on which such Lender  makes such  payment,  at a rate per annum
equal to the  Federal  Funds  Effective  Rate in effect from time to time during
such  period.  The  Administrative  Agent  will  promptly  give  notice  of  the
occurrence of the Drawing Date, but failure of the Administrative  Agent to give
any such notice on the Drawing Date or in  sufficient  time to enable any Lender
to effect  such  payment on such date shall not  relieve  such  Lender  from its
obligation under this Section 2.9.3.3.

     2.9.3.4 With respect to any unreimbursed drawing that is not converted into
Loans under the Base Rate Option to the Borrower and the  Co-Borrowers  in whole
or in part as contemplated by Section 2.9.3.2, because of the Borrower's and the
Co-Borrowers'  failure to satisfy the  conditions set forth in Section 7.2 other
than any notice  requirements  or for any other  reason,  the  Borrower  and the
Co-Borrowers  shall be deemed to have incurred from the  Administrative  Agent a
Letter of Credit Borrowing in the amount of such drawing.  Such Letter of Credit
Borrowing shall be due and payable on demand  (together with interest) and shall
bear interest at the rate per annum  applicable  to the  Revolving  Credit Loans
under the Base Rate Option.  Each Lender's payment to the  Administrative  Agent
pursuant  to Section  2.9.3.3  shall be deemed to be a payment in respect of its
participation  in such  Letter  of  Credit  Borrowing  and  shall  constitute  a
Participation  Advance  from such Lender in  satisfaction  of its  participation
obligation under this Section 2.9.3.

                           2.9.4    Repayment of Participation Advances.

     2.9.4.1 Upon (and only upon)  receipt by the  Administrative  Agent for its
account of immediately  available  funds from the Borrower and the  Co-Borrowers
(i) in reimbursement of any payment made by the  Administrative  Agent under the
Letter of Credit  with  respect  to which any  Lender  has made a  Participation
Advance to the  Administrative  Agent,  or (ii) in payment of interest on such a
payment  made by the  Administrative  Agent  under such a Letter of Credit,  the
Administrative  Agent  will  pay to each  Lender,  in the  same  funds  as those
received by the  Administrative  Agent,  the amount of such  Lender's  Revolving
Credit Ratable Share of such funds, except the Administrative Agent shall retain
the amount of the  Revolving  Credit  Ratable  Share of such funds of any Lender
that  did not  make a  Participation  Advance  in  respect  of such  payment  by
Administrative Agent.

     2.9.4.2 If the  Administrative  Agent is  required at any time to return to
any  Loan  Party,  or to a  trustee,  receiver,  liquidator,  custodian,  or any
official in any Insolvency  Proceeding,  any portion of the payments made by any
Loan  Party  to  the  Administrative   Agent  pursuant  to  Section  2.9.4.1  in
reimbursement  of a payment  made under the Letter of Credit or  interest or fee
thereon,  each Lender with Revolving Credit  Commitments shall, on demand of and
one  day's  notice  by  the  Administrative  Agent,   forthwith  return  to  the
Administrative  Agent the amount of its  Revolving  Credit  Ratable Share of any
amounts so returned by the  Administrative  Agent plus interest thereon from the
date such demand is made to the date such amounts are returned by such Lender to
the  Administrative  Agent,  at a rate  per  annum  equal to the  Federal  Funds
Effective Rate in effect from time to time.

                           2.9.5    Documentation.

     Each  Loan  Party  agrees  to be bound by the  terms of the  Administrative
Agent's  application and agreement for letters of credit and the  Administrative
Agent's  written  regulations  and  customary  practices  relating to letters of
credit,  though such  interpretation may be different from the such Loan Party's
own. In the event of a conflict  between such  application or agreement and this
Agreement, this Agreement shall govern. It is understood and agreed that, except
in the case of gross negligence or willful misconduct,  the Administrative Agent
shall not be liable  for any  error,  negligence  and/or  mistakes,  whether  of
omission or  commission,  in following  any Loan Party's  instructions  or those
contained  in  the  Letters  of  Credit  or  any  modifications,  amendments  or
supplements thereto.

                           2.9.6    Determinations to Honor Drawing Requests.

     In determining whether to honor any request for drawing under any Letter of
Credit by the beneficiary thereof, the Administrative Agent shall be responsible
only to determine that the documents and  certificates  required to be delivered
under such  Letter of Credit have been  delivered  and that they comply on their
face with the requirements of such Letter of Credit.

     2.9.7 Nature of Participation and Reimbursement Obligations.

     Each  Lender's  obligation in  accordance  with this  Agreement to make the
Loans or Participation  Advances,  as contemplated by Section 2.9.3, as a result
of a drawing under a Letter of Credit,  and the  Obligations of the Borrower and
the  Co-Borrowers  to  reimburse  the  Administrative  Agent upon a draw under a
Letter of Credit, shall be absolute, unconditional and irrevocable, and shall be
performed  strictly in  accordance  with the terms of this Section 2.9 under all
circumstances, including the following circumstances:

     (i) any  set-off,  counterclaim,  recoupment,  defense or other right which
such  Lender may have  against  the  Administrative  Agent,  the  Borrower,  the
Co-Borrowers or any other Person for any reason whatsoever;

     (ii) the  failure  of any Loan  Party or any  other  Person to  comply,  in
connection with a Letter of Credit  Borrowing,  with the conditions set forth in
Section 2.1, 2.5, 2.6 or 7.2 or as otherwise set forth in this Agreement for the
making of a Loan, it being  acknowledged  that such  conditions are not required
for the making of a Letter of Credit Borrowing and the obligation of the Lenders
to make Participation Advances under Section 2.9.3;

(iii)    any lack of validity or enforceability of any Letter of Credit;

(iv) the existence of any claim, set-off,  defense or other right which any Loan
Party or any Lender may have at any time against a beneficiary or any transferee
of any  Letter of Credit (or any  Persons  for whom any such  transferee  may be
acting),  the Administrative Agent or any Lender or any other Person or, whether
in connection with this Agreement,  the transactions  contemplated herein or any
unrelated  transaction  (including any underlying  transaction  between any Loan
Party or  Subsidiaries  of a Loan Party and the beneficiary for which any Letter
of Credit was procured);

     (v) any draft,  demand,  certificate or other document  presented under any
Letter of Credit proving to be forged,  fraudulent,  invalid or  insufficient in
any respect or any  statement  therein being untrue or inaccurate in any respect
even if the Administrative Agent has been notified thereof;

     (vi) payment by the Administrative Agent under any Letter of Credit
against  presentation of a demand,  draft or certificate or other document which
does not comply with the terms of such Letter of Credit;

(vii)  any  adverse  change in the  business,  operations,  properties,  assets,
condition   (financial   or  otherwise)  or  prospects  of  any  Loan  Party  or
Subsidiaries of a Loan Party;

     (viii) any breach of this Agreement or any other Loan Document by any party
thereto;

     (ix) the occurrence or continuance of an Insolvency Proceeding with respect
to any Loan Party;

     (x) the fact that an Event of Default  or a  Potential  Default  shall have
occurred and be continuing;

                                    (xi) the fact that the Expiration Date shall
have passed or this Agreement
or the Commitments hereunder shall have been terminated; and

(xii) any other circumstance or happening whatsoever,  whether or not similar to
any of the foregoing; provided that each Lender's obligation to make Loans under
Section 2.9.3.3 is subject to the conditions set forth in Section 7.2.

                           2.9.8    Indemnity.

     In addition to amounts  payable as provided in Section  10.5,  the Borrower
and the Co-Borrowers hereby agree to protect,  indemnify,  pay and save harmless
the  Administrative  Agent  from  and  against  any  and  all  claims,  demands,
liabilities,  damages, losses, costs, charges and expenses (including reasonable
fees,  expenses and  disbursements  of counsel and  allocated  costs of internal
counsel)  which  the  Administrative  Agent  may  incur  or be  subject  to as a
consequence,  direct or  indirect,  of (i) the issuance of any Letter of Credit,
other than as a result of (A) the gross negligence or willful  misconduct of the
Administrative  Agent as determined by a final  judgment of a court of competent
jurisdiction or (B) subject to the following clause (ii), the wrongful  dishonor
by the Administrative Agent of a proper demand for payment made under any Letter
of Credit,  or (ii) the failure of the  Administrative  Agent to honor a drawing
under any such  Letter of  Credit  as a result of any act or  omission,  whether
rightful or wrongful, of any present or future de jure or de facto government or
governmental  authority (all such acts or omissions herein called  "Governmental
Acts").

                           2.9.9    Liability for Acts and Omissions.

     As between  any Loan Party and the  Administrative  Agent,  such Loan Party
assumes  all risks of the acts and  omissions  of, or misuse of the  Letters  of
Credit  by,  the  respective   beneficiaries  of  such  Letters  of  Credit.  In
furtherance  and not in limitation of the foregoing,  the  Administrative  Agent
shall not be responsible  for: (i) the form,  validity,  sufficiency,  accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the  application  for an issuance of any such Letter of Credit,  even if it
should  in  fact  prove  to be in  any or all  respects  invalid,  insufficient,
inaccurate,  fraudulent or forged (even if the  Administrative  Agent shall have
been  notified  thereof);  (ii) the validity or  sufficiency  of any  instrument
transferring or assigning or purporting to transfer or assign any such Letter of
Credit or the rights or benefits  thereunder or proceeds thereof, in whole or in
part,  which may prove to be invalid or  ineffective  for any reason;  (iii) the
failure of the  beneficiary of any such Letter of Credit,  or any other party to
which  such  Letter of Credit  may be  transferred,  to  comply  fully  with any
conditions  required  in order to draw upon  such  Letter of Credit or any other
claim of any Loan Party against any beneficiary of such Letter of Credit, or any
such  transferee,  or any  dispute  between  or  among  any Loan  Party  and any
beneficiary  of any  Letter  of  Credit  or any such  transferee;  (iv)  errors,
omissions,  interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher;
(v) errors in  interpretation  of technical terms; (vi) any loss or delay in the
transmission  or otherwise  of any document  required in order to make a drawing
under  any  such  Letter  of  Credit  or of  the  proceeds  thereof;  (vii)  the
misapplication  by the  beneficiary of any such Letter of Credit of the proceeds
of any drawing under such Letter of Credit;  or (viii) any consequences  arising
from  causes  beyond the  control of the  Administrative  Agent,  including  any
Governmental  Acts, and none of the above shall affect or impair, or prevent the
vesting of, any of the Administrative Agent's rights or powers hereunder.

     In  furtherance  and  extension  and  not in  limitation  of  the  specific
provisions  set forth above,  any action taken or omitted by the  Administrative
Agent  under or in  connection  with the  Letters of Credit  issued by it or any
documents and  certificates  delivered  thereunder,  if taken or omitted in good
faith, shall not put the Administrative  Agent under any resulting  liability to
the Borrower, the Co-Borrowers or any Lender.

                                            3.       TERM LOANS

                  3.1      Term Loan Commitments.

                           3.1.1    Term Loan A Commitments.

                  Subject to the terms and conditions  hereof,  and relying upon
the  representations  and warranties  herein set forth,  each Lender with a Term
Loan A  Commitment  severally  agrees to make a term loan (the "Term Loan A") to
the Borrower and the  Co-Borrowers on the Closing Date in such principal  amount
as the Borrower and the Co-Borrowers shall request up to, but not exceeding such
Lender's Term Loan A Commitment.

                           3.1.2    Term Loan B Commitments.

                  Subject to the terms and conditions  hereof,  and relying upon
the  representations  and warranties  herein set forth,  each Lender with a Term
Loan B  Commitment  severally  agrees to make a term loan (the "Term Loan B") to
the Borrower and the  Co-Borrowers on the Closing Date in such principal  amount
as the Borrower and the Co-Borrowers shall request up to, but not exceeding such
Lender's Term Loan B Commitment.

     3.2 Nature of Lenders' Obligations with Respect to Term Loans.

                  The  obligations  of each  Lender to make Term  Loans A to the
Borrower and the Co-Borrowers shall be in the proportion that such Lender's Term
Loan A  Commitment  bears to the Term Loan A  Commitments  of all  Lenders;  the
obligations  of  each  Lender  to make  Term  Loans  B to the  Borrower  and the
Co-Borrowers  shall  be in  the  proportion  that  such  Lender's  Term  Loan  B
Commitment  bears to the Term Loan B Commitments  of all Lenders.  Each Lender's
Term Loans to the Borrower and the Co-Borrowers shall never exceed its Term Loan
Commitments. The failure of any Lender to make a Term Loan shall not relieve any
other  Lender of its  obligations  to make a Term  Loan nor shall it impose  any
additional  liability on any other Lender  hereunder.  The Lenders shall have no
obligation to make Term Loans  hereunder  after the Closing Date.  The Term Loan
Commitments  are not  revolving  credit  commitments,  and the  Borrower and the
Co-Borrowers  shall  not have the right to  borrow,  repay  and  reborrow  under
Section 3.1.

                           3.3      Term Loan Notes.

                  The Obligation of the Borrower and the  Co-Borrowers  to repay
the  unpaid  principal  amount of the Term Loans  made to the  Borrower  and the
Co-Borrowers by each Lender,  together with interest thereon, shall be evidenced
by a Term Note dated the Closing  Date (or if such Lender is not a party to this
Agreement  on the  Closing  Date,  the  date  that  such  Lender  joins  in this
Agreement),  payable to the order of each Lender in a face  amount  equal to the
Term Loan of such  Lender.  The  principal  amount of the Term  Notes A shall be
payable in quarterly payments due on the last day of each December, March, June,
and  September,  beginning  with the quarter  ending  December 31, 1999,  and as
follows:

<TABLE>
<CAPTION>


                   Quarter(s) Ending on Following Date or     Amount of Quarterly Payment of Principal
                           In The Following Period                     Due on Each Payment Date

<S>                       <C>   <C>        <C>  <C>                           <C>
                          12-31-99 through 9-30-00                            $3,750,000
                          12-31-00 through 9-30-01                            $5,000,000
                          12-31-01 through 9-30-02                            $6,250,000
                          12-31-02 through 9-30-03                            $7,500,000
                          12-31-03 through 9-30-04                            $8,750,000
</TABLE>

 The  principal  amount of the Term Notes B shall be payable in
quarterly  payments  each in the amount of $250,000  due on the last day of each
December, March, June, and September, beginning with the quarter ending December
31, 1999, and continuing through and including  September 30, 2004,  followed by
two annual  payments on September 30, 2005 and  September 30, 2006,  each in the
amount of $47,500,000.

                           3.4      Use of Proceeds.

                  The  proceeds  of the Term  Loans  shall be used to  refinance
existing  indebtedness  and for the acquisition of Rentavision and in accordance
with Section 8.1.10.

                                            4.       INTEREST RATES

                           4.1      Interest Rate Options.

                  The  Borrower  and the  Co-Borrowers  shall  pay  interest  in
respect of the outstanding  unpaid  principal amount of the Loans as selected by
it from the Base Rate Option or Euro-Rate  Option set forth below  applicable to
the  Loans,  it  being  understood  that,  subject  to the  provisions  of  this
Agreement,  the Borrower and the Co-Borrowers may select different Interest Rate
Options and  different  Interest  Periods to apply  simultaneously  to the Loans
comprising  different Borrowing Tranches and may convert to or renew one or more
Interest Rate Options with respect to all or any portion of the Loans comprising
any  Borrowing  Tranche,  provided  that  there  shall  not be at any  one  time
outstanding more than seven (7) Borrowing Tranches in the aggregate among all of
the Loans accruing  interest at a Euro-Rate Option,  and provided further,  that
only the Quoted Rate Option shall apply to the Swing  Loans.  If at any time the
designated  rate applicable to any Loan made by any Lender exceeds such Lender's
highest lawful rate, the rate of interest on such Lender's Loan shall be limited
to such Lender's highest lawful rate.

                           4.1.1    Revolving Credit Interest Rate Options.

     The Borrower and the  Co-Borrowers  shall have the right to select from the
following Interest Rate Options applicable to the Revolving Credit Loans:

     (i) Base Rate Option:  A fluctuating  rate per annum (computed on the basis
of a year of 365 or 366 days, as the case may be, and actual days elapsed) equal
to the Base  Rate  plus the  Applicable  Margin,  such  interest  rate to change
automatically  from  time to time  effective  as of the  effective  date of each
change in the Base Rate or Applicable Margin; or

     (ii) Euro-Rate Option: A rate per annum (computed on the basis of a year of
360 days and actual days  elapsed)  equal to the Euro-Rate  plus the  Applicable
Margin,  such interest rate to change  automatically from time to time effective
as of the effective date of each change in the Applicable Margin.

                           4.1.2    Term Loan A Interest Rate Options.

     The Borrower and the  Co-Borrowers  shall have the right to select from the
following Interest Rate Options applicable to the Term Loans A:

     (i) Term Loan A Base Rate Option: A fluctuating rate per annum (computed on
the  basis of a year of 365 or 366 days,  as the case may be,  and  actual  days
elapsed) equal to the Base Rate plus the Applicable  Margin,  such interest rate
to change  automatically from time to time effective as of the effective date of
each change in the Base Rate or Applicable Margin; or

     (ii) Term Loan A Euro-Rate  Option: A rate per annum (computed on the basis
of a year of 360 days and actual days elapsed)  equal to the Euro-Rate  plus the
Applicable Margin, such interest rate to change  automatically from time to time
effective as of the effective date of each change in the Applicable Margin.

                           4.1.3    Term Loan B Interest Rate Options.

     The Borrower and the  Co-Borrowers  shall have the right to select from the
following
Interest Rate Options applicable to the Term Loans B:

     (i) Term Loan B Base Rate Option: A fluctuating rate per annum (computed on
the  basis of a year of 365 or 366 days,  as the case may be,  and  actual  days
elapsed) equal to the Base Rate plus the Applicable  Margin,  such interest rate
to change  automatically from time to time effective as of the effective date of
each change in the Base Rate or Applicable Margin; or

     (ii) Term Loan B Euro-Rate  Option: A rate per annum (computed on the basis
of a year of 360 days and actual days elapsed)  equal to the Euro-Rate  plus the
Applicable Margin, such interest rate to change  automatically from time to time
effective as of the effective date of each change in the Applicable Margin.

                           4.1.4    Rate Quotations.

     The Borrower and the Co-Borrowers may call the  Administrative  Agent on or
before  the  date on which a Loan  Request  is to be  delivered  to  receive  an
indication  of the  rates  then in  effect,  but it is  acknowledged  that  such
projection shall not be binding on the  Administrative  Agent or the Lenders nor
affect the rate of  interest  which  thereafter  is  actually in effect when the
election is made.

                  4.2      Interest Periods.

                  At any  time  when the  Borrower  and the  Co-Borrowers  shall
select,   convert  to  or  renew  a  Euro-Rate  Option,  the  Borrower  and  the
Co-Borrowers  shall notify the  Administrative  Agent thereof at least three (3)
Business Days prior to the effective date of such Euro-Rate Option by delivering
a Loan  Request.  The notice  shall  specify an interest  period (the  "Interest
Period")  during which such  Interest  Rate Option shall  apply,  such  Interest
Period to be (i) with respect to the Term Loans B, one Month if Borrower and the
Co-Borrowers select the Euro-Rate Option during the Syndications Period and (ii)
with  respect  to the  Revolving  Credit  Loans,  Term  Loans A, and  after  the
Syndications  Period has ended, the Term Loans B, one, two, three or six Months.
Notwithstanding the preceding sentence,  the following provisions shall apply to
any selection of, renewal of, or conversion to a Euro-Rate Option:

                           4.2.1    Ending Date and Business Day.

     any  Interest  Period  which would  otherwise  end on a date which is not a
Business Day
shall be extended to the next  succeeding  Business Day unless such Business Day
falls in the next calendar  month,  in which case such Interest Period shall end
on the next preceding Business Day;

                           4.2.2    Amount of Borrowing Tranche.

     each Borrowing Tranche of Euro-Rate Loans shall be in integral multiples of
$1,000,000;

                           4.2.3    Termination Before Expiration Date.

     the Borrower and the Co-Borrowers shall not select,  convert to or renew an
Interest  Period for any portion of the  Revolving  Credit  Loans that would end
after the Expiration  Date, any portion of the Term Loans A that would end after
the Term Loan A Maturity Date, or any portion of the Term Loans B that would end
after the Term Loan B Maturity Date; and




                           4.2.4    Renewals.

     in the case of the renewal of a Euro-Rate  Option at the end of an Interest
Period,  the first day of the new  Interest  Period shall be the last day of the
preceding Interest Period,  without  duplication in payment of interest for such
day.

                  4.3      Interest After Default.

                  To the extent  permitted  by Law,  upon the  occurrence  of an
Event of Default and until such time such Event of Default shall have been cured
or waived:

                           4.3.1    Letter of Credit Fees, Interest Rate.

     the Letter of Credit Fees and the rate of interest for each Loan  otherwise
applicable  pursuant to Section  2.9.2 or Section  4.1,  respectively,  shall be
increased by two percent (2%) per annum; and

                           4.3.2    Other Obligations.

     each other Obligation hereunder if not paid when due shall bear interest at
a rate per annum equal to the sum of the rate of interest  applicable  under the
Base Rate Option  plus an  additional  two percent  (2%) per annum from the time
such Obligation becomes due and payable and until it is paid in full.

                           4.3.3    Acknowledgment.

     The Borrower and the  Co-Borrowers  acknowledge  that the increase in rates
referred to in this Section 4.3 reflects, among other things, the fact that such
Loans or other  amounts  have become a  substantially  greater  risk given their
default status and that the Lenders are entitled to additional  compensation for
such  risk;  and  all  such  interest  shall  be  payable  by  Borrower  and the
Co-Borrowers upon demand by Administrative Agent.

     4.4 Euro-Rate Unascertainable; Illegality; Increased Costs; Deposits Not
Available

                           4.4.1    Unascertainable.

     If on any date on which a Euro-Rate  would  otherwise  be  determined,  the
Administrative Agent shall have determined that:

     (i)  adequate  and  reasonable  means do not  exist for  ascertaining  such
Euro-Rate, or

     (ii) a contingency has occurred which materially and adversely  affects the
London interbank eurodollar market relating to the Euro-Rate, the Administrative
Agent shall have the rights specified in Section 4.4.3.

     4.4.2 Illegality; Increased Costs; Deposits Not Available.

                           If at any time any Lender shall have determined that:

     (i) the  making,  maintenance  or funding of any Loan to which a  Euro-Rate
Option  applies has been made  impracticable  or unlawful by  compliance by such
Lender in good faith with any Law or any  interpretation or application  thereof
by any Official  Body or with any request or directive of any such Official Body
(whether or not having the force of Law), or

     (ii) such Euro-Rate  Option will not adequately and fairly reflect the cost
to such Lender of the establishment or maintenance of any such Loan, or

     (iii) after making all reasonable efforts,  deposits of the relevant amount
in Dollars  for the  relevant  Interest  Period for a Loan to which a  Euro-Rate
Option applies are not available to such Lender in the London interbank market,


then the Administrative Agent shall have the rights specified in Section 4.4.3.

                           4.4.3    Administrative Agent's and Lender's Rights.

     In  the  case  of  any  event   specified  in  Section  4.4.1  above,   the
Administrative  Agent shall promptly so notify the Lenders, the Borrower and the
Co-Borrowers  thereof,  and in the case of an event  specified in Section  4.4.2
above, such Lender shall promptly so notify the Administrative Agent and endorse
a certificate  to such notice as to the specific  circumstances  of such notice,
and the  Administrative  Agent  shall  promptly  send  copies of such notice and
certificate to the other Lenders,  the Borrower and the Co-Borrowers.  Upon such
date as shall be specified  in such notice  (which shall not be earlier than the
date such notice is given),  the  obligation of (A) the Lenders,  in the case of
such notice given by the  Administrative  Agent, or (B) such Lender, in the case
of such notice given by such Lender,  to allow the Borrower and the Co-Borrowers
to select,  convert to or renew a Euro-Rate  Option shall be suspended until the
Administrative   Agent  shall  have  later   notified   the   Borrower  and  the
Co-Borrowers, or such Lender shall have later notified the Administrative Agent,
of  the  Administrative   Agent's  or  such  Lender's,   as  the  case  may  be,
determination that the circumstances giving rise to such previous  determination
no longer exist. If at any time the  Administrative  Agent makes a determination
under  Section  4.4.1 and the  Borrower  and the  Co-Borrowers  have  previously
notified the Administrative  Agent of its selection of, conversion to or renewal
of a  Euro-Rate  Option  and such  Interest  Rate  Option  has not yet gone into
effect,  such  notification  shall  be  deemed  to  provide  for  selection  of,
conversion  to or  renewal  of the Base Rate  Option  otherwise  available  with
respect to such Loans.  If any Lender  notifies  the  Administrative  Agent of a
determination  under Section  4.4.2,  the Borrower and the  Co-Borrowers  shall,
subject to the  Borrower's  and the  Co-Borrowers'  indemnification  Obligations
under Section  5.6.2,  as to any Loan of the Lender to which a Euro-Rate  Option
applies,  on the date  specified in such notice either  convert such Loan to the
Base Rate Option  otherwise  available  with respect to such Loan or prepay such
Loan in accordance with Section 5.4. Absent due notice from the Borrower and the
Co-Borrowers  of  conversion or  prepayment,  such Loan shall  automatically  be
converted to the Base Rate Option otherwise  available with respect to such Loan
upon such specified date.

                  4.5      Selection of Interest Rate Options.

                  If the  Borrower  and the  Co-Borrowers  fail to  select a new
Interest  Period to apply to any Borrowing  Tranche of Loans under the Euro-Rate
Option at the  expiration  of an existing  Interest  Period  applicable  to such
Borrowing Tranche in accordance with the provisions of Section 4.2, the Borrower
and the Co-Borrowers shall be deemed to have converted such Borrowing Tranche to
the Revolving  Credit Base Rate Option,  the Term Loan A Base Rate Option or the
Term Loan B Base Rate Option, as applicable, commencing upon the last day of the
existing Interest Period.

                                            5.       PAYMENTS

                  5.1      Payments.

                  All  payments  and  prepayments  to  be  made  in  respect  of
principal,  interest,  Commitment  Fees,  Letter of Credit Fees,  Administrative
Agent's Fee or other fees or amounts due from the Borrower and the  Co-Borrowers
hereunder  shall be payable  prior to 11:00 a.m.,  Pittsburgh  time, on the date
when due  without  presentment,  demand,  protest or notice of any kind,  all of
which are hereby  expressly  waived by the  Borrower and the  Co-Borrowers,  and
without  set-off,  counterclaim or other deduction of any nature,  and an action
therefor  shall  immediately   accrue.  Such  payments  shall  be  made  to  the
Administrative  Agent at the  Principal  Office for the account of National City
with respect to the Swing Loans and for the ratable accounts of the Lenders with
respect to the Revolving  Credit Loans and the Term Loans in U.S. Dollars and in
immediately  available  funds,  and  the  Administrative  Agent  shall  promptly
distribute such amounts to the Lenders in immediately  available funds, provided
that in the event payments are received by 11:00 a.m.,  Pittsburgh  time, by the
Administrative  Agent  with  respect  to the  Loans  and such  payments  are not
distributed to the Lenders on the same day received by the Administrative Agent,
the Administrative  Agent shall pay the Lenders the Federal Funds Effective Rate
with  respect  to  the  amount  of  such  payments  for  each  day  held  by the
Administrative  Agent and not  distributed  to the Lenders.  The  Administrative
Agent's and each Lender's statement of account,  ledger or other relevant record
shall,  in the absence of manifest  error, be conclusive as the statement of the
amount of principal of and interest on the Loans and other  amounts  owing under
this Agreement and shall be deemed an "account stated."

                  5.2      Pro Rata Treatment of Lenders.

                  Each borrowing shall be allocated to each Lender  according to
its Ratable Share as such Ratable Share  relates  specifically  to the Revolving
Credit Commitments,  the Term Loan A Commitments and the Term Loan B Commitments
of all Lenders having such Commitments,  and each selection of, conversion to or
renewal of any  Interest  Rate  Option and each  payment  or  prepayment  by the
Borrower and the Co-Borrowers  with respect to principal,  interest,  Commitment
Fees,  Letter of Credit Fees, or other fees (except for the fees of the Managing
Agents) or amounts due from the Borrower and the  Co-Borrowers  hereunder to the
Lenders with respect to the Loans, shall (except as provided in Section 4.4.3 in
the  case of an event  specified  in  Section  4.4  [Euro-Rate  Unascertainable;
Illegality;   Increased  Costs;   Deposits  Not  Available],   5.4.3  [Voluntary
Prepayments] or 5.4 [Additional  Compensation in Certain Circumstances]) be made
in proportion to the applicable  Loans  outstanding  from each Lender and, if no
such Loans are then  outstanding,  in proportion to the Revolving Credit Ratable
Share of each Lender.  Notwithstanding  any of the foregoing,  each borrowing or
payment  or  prepayment  by the  Borrower  and the  Co-Borrowers  of  principal,
interest,  fees or other  amounts from the Borrower  and the  Co-Borrowers  with
respect to the Swing  Loans shall be made by or to National  City  according  to
Section 2.

                  5.3      Interest Payment Dates.

                  Interest on Loans to which the Base Rate Option  applies shall
be due and  payable  in  arrears  on the  first  Business  Day of each  October,
January, April and July after the date hereof and on the Expiration Date or upon
acceleration  of the  Notes.  Interest  on Loans to which the  Euro-Rate  Option
applies  shall be due and  payable on the last day of each  Interest  Period for
those Loans and, if such Interest  Period is longer than three (3) Months,  also
on the 90th day of such Interest  Period.  Interest on the  principal  amount of
each Loan or other monetary Obligations shall be due and payable on demand after
such  principal  amount or other  monetary  Obligations  become due and  payable
(whether on the stated maturity date, upon acceleration or otherwise).

                  5.4      Voluntary Repayments.

                           5.4.1 Right to Repay.

     The Borrower and the Co-Borrowers shall have the right at their option from
time to time to pay the  Loans in  whole  or part  without  premium  or  penalty
(except as provided in Section 5.4.3 below or in Section 5.6):

     (i) at any time with  respect  to any Loan to which  the Base  Rate  Option
applies,

     (ii) on the last day of the  applicable  Interest  Period  with  respect to
Loans to which a Euro-Rate Option applies,

     (iii) on the date  specified in a notice by any Lender  pursuant to Section
4.4  [Euro-Rate  Unascertainable]  with respect to any Loan to which a Euro-Rate
Option applies.


     Whenever the Borrower and the Co-Borrowers  desire to repay any part of the
Loans,  they shall  provide a repayment  notice to the  Administrative  Agent at
least one (1)  Business  Day  prior to the date of  repayment  of the  Revolving
Credit Loans or the Term Loans or no later than 10:00 a.m.  Pittsburgh  time, on
the  date  of  prepayment  of the  Swing  Loans,  setting  forth  the  following
information:

     (x) the  date,  which  shall  be a  Business  Day,  on which  the  proposed
prepayment is to be made;

                           (y) a statement  indicating  the  application  of the
                  prepayment between the Swing Loans, Revolving Credit Loans and
                  Term  Loans,  provided  however,  that all  prepayments  which
                  relate   to  the  Term   Loans   shall  be   applied   by  the
                  Administrative  Agent to the outstanding  principal balance of
                  the Term Loans A and Term Loans B based upon the Ratable Share
                  of such Term Loan to all the Term Loans, and provided further,
                  each Lender with principal  outstanding  under its Term Loan B
                  shall have the right to refuse such  prepayment  in accordance
                  with the term of Section 5.5.1[Excess Cash Flow]; and

                            (z) the total  principal  amount of such  repayment,
                  which shall not be less than  $100,000  for any Swing Loans or
                  $1,000,000 for any Revolving Credit Loans or Term Loans.

     All repayment  notices shall be  irrevocable.  The principal  amount of the
Loans for which a  repayment  notice is given,  together  with  interest on such
principal  amount  except  with  respect to Loans to which the Base Rate  Option
applies, shall be due and payable on the date specified in such repayment notice
as the  date on which  the  proposed  repayment  is to be  made.  All Term  Loan
prepayments  permitted  pursuant to this  Section  5.4.1 shall be applied to the
unpaid  installments  of  principal  of the Term Loans in the  inverse  order of
scheduled  maturities.  Except as provided in Section 4.4.3, if the Borrower and
the  Co-Borrowers  repay a Loan but fails to specify  the  applicable  Borrowing
Tranche  which the Borrower and the  Co-Borrowers  are  repaying,  the repayment
shall be applied (i) first to Revolving  Credit Loans and then to Term Loans, as
provided in Section  5.5.1;  and (ii) after giving effect to the  allocations in
clause (i) above and in the preceding sentence, first to Loans to which the Base
Rate Option  applies,  then to Loans to which the Euro-Rate the Option  applies.
Any repayment hereunder shall be subject to the Borrower's and the Co-Borrowers'
Obligation to indemnify the Lenders under Section 5.6.2.

                           5.4.2    Commitment Reductions.

     The  Borrower  and the  Co-Borrowers  may at any time and from time to time
terminate in whole or reduce in part the Revolving Credit  Commitments by giving
the  Administrative  Agent and the  Lenders  not less than  seven (7) days prior
written notice to such effect.  Notice of termination or reduction,  having once
been given by the Borrower and the  Co-Borrowers,  shall be  irrevocable  on the
part of the Borrower and the  Co-Borrowers.  Each  reduction of the  Commitments
shall be in the  aggregate  amount of at least  $5,000,000  and in  multiples of
$500,000. After each such reduction of the Revolving Credit Commitments, the fee
payable  pursuant to Section 2.3 shall be calculated  upon the Revolving  Credit
Commitments  as so  reduced.  Upon  any such  reduction,  the  Revolving  Credit
Commitments  of the  Lenders  shall be reduced  proportionately  based upon each
Lender's Revolving Credit Ratable Share.



                           5.4.3    Replacement of a Lender.

     In the event any  Lender  (i) gives  notice  under  Section  4.4 or Section
5.6.1,  (ii)  does not  fund  Loans  because  the  making  of such  Loans  would
contravene any Law applicable to such Lender,  (iii) does not approve any action
as to which consent of the Required Lenders is requested by the Borrower and the
Co-Borrowers and obtained  hereunder,  or (iv) becomes subject to the control of
an  Official  Body  (other  than  normal and  customary  supervision),  then the
Borrower and the  Co-Borrowers  shall have the right at their  option,  with the
consent of the Administrative  Agent, which shall not be unreasonably  withheld,
to prepay the Loans of such Lender in whole,  together with all interest accrued
thereon,  and terminate such Lender's  Commitment  within ninety (90) days after
(w) receipt of such  Lender's  notice under  Section 4.4 or 5.6.1,  (x) the date
such  Lender  has failed to fund Loans  because  the making of such Loans  would
contravene Law applicable to such Lender,  (y) the date of obtaining the consent
which such Lender has not approved,  or (z) the date such Lender became  subject
to the control of an Official  Body, as  applicable;  provided that the Borrower
and  the  Co-Borrowers  shall  also  pay to  such  Lender  at the  time  of such
prepayment any amounts  required under Section 5.6 and any accrued  interest due
on such amount and any related fees; provided,  however, that the Commitment and
any Term Loan of such Lender  shall be provided by one or more of the  remaining
Lenders  or  a  replacement  lender  acceptable  to  the  Administrative  Agent;
provided,  further,  the remaining Lenders shall have no obligation hereunder to
increase their Commitments.  Notwithstanding  the foregoing,  the Administrative
Agent may only be  replaced  subject to the  requirements  of Section  10.14 and
provided that all Letters of Credit have expired or been terminated or replaced.

                           5.4.4    Change of Lending Office.

     Each Lender  agrees that upon the  occurrence  of any event  giving rise to
increased costs or other special payments under Section 4.4.2 [Illegality, etc.]
or 5.6.1  [Increased  Costs,  etc.]  with  respect  to such  Lender,  it will if
requested by the Borrower and the Co-Borrowers,  use reasonable efforts (subject
to overall policy  considerations  of such Lender) to designate  another lending
office for any Loans or Letters of Credit affected by such event,  provided that
such  designation  is made on such terms that such Lender and its lending office
suffer  no  economic,  legal or  regulatory  disadvantage,  with the  object  of
avoiding  the  consequence  of the event  giving rise to the  operation  of such
Section.  Nothing is this  Section  5.4.4 shall  affect or  postpone  any of the
Obligations  of the Borrower,  the  Co-Borrowers  or any other Loan Party or the
rights of the Administrative Agent or any Lender provided in this Agreement.

                  5.5      Mandatory Prepayments.

                           5.5.1    Excess Cash Flow.

                  Within  five  (5)  Business   Days  of  the  delivery  of  the
Borrower's  annual  financial  statements  pursuant  to  Section  8.3.3  [Annual
Financial  Statements],  but in any event no later  than  January 5 of each year
during the term hereof (each, a "Mandatory  Prepayment  Date"), and in the event
that the  Leverage  Ratio for the fiscal year in question is greater than 2.5 to
1.0, the  Borrower and the  Co-Borrowers  shall make a mandatory  prepayment  of
principal on the Term Loans equal to 50% of Excess Cash Flow for the immediately
preceding  fiscal  year,  subject to a credit  for  voluntary  prepayments  made
pursuant to Section 5.4 [Voluntary Prepayments] during the immediately preceding
fiscal year,  together with accrued  interest on such principal  amount (each, a
"Mandatory Prepayment of Excess Cash Flow"). Each Mandatory Prepayment of Excess
Cash  Flow  shall be  applied  by the  Administrative  Agent to the  outstanding
principal  balance of the Term  Loans A and Term Loans B based upon the  Ratable
Share of such Term Loan to all the Term Loans,  in each case by  application  to
the  unpaid  installments  of  principal  in  the  inverse  order  of  scheduled
maturities.  Upon its receipt of the annual financial statements of the Borrower
and receipt of payment by the Borrower  and the  Co-Borrowers  of the  Mandatory
Prepayment of Excess Cash Flow, the Administrative  Agent shall give the Lenders
with  outstanding  principal  on the Term  Loans B notice  of the  amount of the
Mandatory  Prepayment  of Excess  Cash  Flow.  In the event that any one or more
Lender with Term Loans B outstanding elects not to receive its pro rata share of
such  prepayment,  such Lender  shall  provide  written  notice of the amount it
elects not to receive in prepayment of its Term Loan B, and such amount shall be
reallocated  to payment of the Term Loans A based upon the Ratable  Share of the
Lenders with Term Loans A, to be applied by the Lenders with Term Loans A in the
inverse order of scheduled maturities. To the extent that a Mandatory Prepayment
of Excess Cash Flow exceeds the outstanding  principal amount of the Term Loans,
such  prepayment  shall be limited to the  amount  necessary  to prepay the Term
Loans in full.

                           5.5.2 Sale of Assets; Issuance of Stock .

     Within five (5) Business  Days of any sale of assets  authorized by Section
8.2.7((v)) which involves the sale of assets having a market value or book value
in an amount equal to or greater than $10,000,000 in the aggregate in any fiscal
year,  the Borrower and the  Co-Borrowers  shall make a mandatory  prepayment of
principal  equal to the  after-tax  proceeds of such sale (as  estimated in good
faith by the Borrower and the  Co-Borrowers),  together with accrued interest on
such principal amount.  Simultaneously with any issuance of capital stock by the
Borrower authorized by Section  8.2.13(iv),  the Borrower shall make a mandatory
prepayment of principal equal to the net proceeds of such issuance. In the event
that the Required  Lenders permit the incurrence of  Indebtedness  other than as
permitted under Section 8.2.1, the Borrower shall make a mandatory prepayment of
principal equal to the net proceeds of such Indebtedness.  In the event that the
Administrative  Agent does not disburse insurance proceeds in excess of $250,000
to the Loan Parties pursuant to Section 8.1.3, such proceeds shall be applied as
a  mandatory  prepayment  of  principal  equal to the  amount of such  insurance
proceeds.  All  prepayments  pursuant to this Section  5.5.2 shall be applied in
accordance with the provisions of Section 5.5.1, and upon payment in full of the
Term Loans, then as a permanent  reduction to the Revolving Credit  Commitments.
Notwithstanding  the  foregoing  and in the case of asset  sales  authorized  by
Section  8.2.7(v),  to the extent that the  after-tax  proceeds of such sale are
used  by the  applicable  Loan  Party  prior  to the due  date of the  mandatory
prepayment to acquire  substitute  assets in the ordinary  course of business of
such Loan  Party and such  substitute  assets are  subject  to a Prior  Security
Interest in favor of the  Administrative  Agent for the benefit of the  Lenders,
then the mandatory prepayment shall be correspondingly reduced or terminated, as
the case may be.

                           5.5.3    Application Among Interest Rate Options.

     All  prepayments  required  pursuant  to this  Section  5.5 shall  first be
applied  among the Interest  Rate Options to the  principal  amount of the Loans
subject to the Base Rate Option, then to Loans subject to a Euro-Rate Option. In
accordance with Section 5.6.2, the Borrower and the Co-Borrowers shall indemnify
the Lenders for any loss or expense,  including  loss of margin,  incurred  with
respect to any such  prepayments  applied  against  Loans subject to a Euro-Rate
Option on any day other than the last day of the applicable Interest Period.

                  5.6      Additional Compensation in Certain Circumstances.

     5.6.1....Increased  Costs or Reduced Return Resulting From Taxes, Reserves,
Capital Adequacy Requirements, Expenses, Etc.

     If any Law, guideline or interpretation or any change in any Law, guideline
or interpretation  or application  thereof by any Official Body charged with the
interpretation  or  administration  thereof or  compliance  with any  request or
directive  (whether or not having the force of Law) of any central bank or other
Official Body:

     (i) subjects any Lender to any tax or changes the basis of taxation with
respect to this Agreement,  the Notes, the Loans or payments by the Borrower and
the Co-Borrowers of principal,  interest,  Commitment Fees, or other amounts due
from the Borrower and the Co-Borrowers  hereunder or under the Notes (except for
taxes on the overall net income of such Lender),

     (ii) imposes,  modifies or deems applicable any reserve, special deposit or
similar requirement against credits or commitments to extend credit extended by,
or assets  (funded or  contingent)  of,  deposits with or for the account of, or
other acquisitions of funds by, any Lender, or

     (iii) imposes, modifies or deems applicable any capital adequacy or similar
requirement  (A) against assets (funded or contingent) of, or letters of credit,
other credits or  commitments to extend credit  extended by, any Lender,  or (B)
otherwise applicable to the obligations of any Lender under this Agreement,


and the result of any of the  foregoing is to increase  the cost to,  reduce the
income receivable by, or impose any expense  (including loss of margin) upon any
Lender with respect to this Agreement,  the Notes or the making,  maintenance or
funding of any part of the Loans (or,  in the case of any  capital  adequacy  or
similar  requirement,  to have the effect of reducing  the rate of return on any
Lender's capital,  taking into  consideration  such Lender's  customary policies
with  respect to capital  adequacy)  by an amount  which such Lender in its sole
discretion deems to be material,  such Lender shall from time to time notify the
Borrower, the Co-Borrowers and the Administrative Agent of the amount determined
in good faith (using any  averaging  and  attribution  methods  employed in good
faith)  by such  Lender to be  necessary  to  compensate  such  Lender  for such
increase in cost,  reduction  of income,  additional  expense or reduced rate of
return.  Such  notice  shall set forth in  reasonable  detail the basis for such
determination.  Such  amount  shall be due and payable by the  Borrower  and the
Co-Borrowers to such Lender ten (10) Business Days after such notice is given.

                           5.6.2    Indemnity.

     In addition to the compensation required by Section 5.6.1, the Borrower and
the Co-Borrowers shall indemnify each Lender against all liabilities,  losses or
expenses  (including loss of margin, any loss or expense incurred in liquidating
or employing  deposits  from third  parties and any loss or expense  incurred in
connection  with funds acquired by a Lender to fund or maintain Loans subject to
a Euro-Rate Option) which such Lender sustains or incurs as a consequence of any

     (i)  payment,  prepayment,  conversion  or  renewal  of any Loan to which a
Euro-Rate  Option applies on a day other than the last day of the  corresponding
Interest  Period  (whether  or not such  payment  or  prepayment  is  mandatory,
voluntary or automatic  and whether or not such  payment or  prepayment  is then
due),

     (ii) attempt by the Borrower or the Co-Borrowers to revoke  (expressly,  by
later  inconsistent  notices or  otherwise)  in whole or part any Loan  Requests
under Section 2.5 or Section 4.2 or notice relating to prepayments under Section
5.4, or

     (iii) default by the Borrower or the  Co-Borrowers  in the  performance  or
observance of any covenant or condition contained in this Agreement or any other
Loan Document, including any failure of the Borrower and the Co-Borrowers to pay
when due (by acceleration or otherwise) any principal,  interest, Commitment Fee
or any other amount due hereunder.

                  If any Lender sustains or incurs any such loss or expense,  it
shall from time to time notify the Borrower and the  Co-Borrowers  of the amount
determined  in good faith by such Lender (which  determination  may include such
assumptions,  allocations  of costs and  expenses and  averaging or  attribution
methods as such Lender shall deem  reasonable) to be necessary to indemnify such
Lender  for such loss or  expense.  Such  notice  shall set forth in  reasonable
detail the basis for such determination. Such amount shall be due and payable by
the Borrower and the  Co-Borrowers  to such Lender ten (10)  Business Days after
such notice is given.



                                    6.      REPRESENTATIONS AND WARRANTIES

                  6.1      Representations and Warranties.

                  The Loan Parties, jointly and severally, represent and warrant
to the Administrative Agent and each of the Lenders as follows:

                           6.1.1 Organization and Qualification.

     Each Loan Party and each  Subsidiary  of each Loan Party is a  corporation,
partnership or limited liability company duly organized, validly existing and in
good standing  under the laws of its  jurisdiction  of  organization.  Each Loan
Party and each  Subsidiary  of each Loan  Party has the  lawful  power to own or
lease its  properties  and to engage in the  business it  presently  conducts or
proposes to conduct.  Each Loan Party and each  Subsidiary of each Loan Party is
duly licensed or qualified and in good standing in each  jurisdiction  listed on
Schedule  6.1.1  and,  except  as  indicated  on  Schedule  6.1.1,  in all other
jurisdictions  where the  property  owned or  leased by it or the  nature of the
business  transacted  by  it or  both  makes  such  licensing  or  qualification
necessary.

                           6.1.2    Capitalization and Ownership.

     The authorized  capital stock of the Borrower consists of 50,000,000 shares
of common stock and 1,000,000  shares of preferred  stock,  of which  21,698,597
shares of common stock were issued and outstanding as of September 15, 1999, and
no shares of Series A preferred  stock  (collectively  referred to herein as the
"Shares") are issued and outstanding.

                           6.1.3    Subsidiaries.

     Schedule 6.1.3 states the name of each of the Borrower's Subsidiaries,  its
jurisdiction  of  incorporation,  its authorized  capital stock,  the issued and
outstanding  shares  (referred  to herein as the  "Subsidiary  Shares")  and the
owners thereof if it is a corporation,  its  outstanding  partnership  interests
(the "Partnership Interests") if it is a partnership and its outstanding limited
liability  company  interests,  interests  assigned to managers  thereof and the
voting rights  associated  therewith  (the "LLC  Interests")  if it is a limited
liability company. The Borrower and each Subsidiary of the Borrower has good and
marketable title to all of the Subsidiary Shares,  Partnership Interests and LLC
Interests  it  purports  to own,  free and clear in each  case of any Lien.  All
Subsidiary  Shares,  Partnership  Interests and LLC Interests  have been validly
issued, and all Subsidiary Shares are fully paid and nonassessable.  All capital
contributions and other consideration  required to be made or paid in connection
with the issuance of the Partnership  Interests and LLC Interests have been made
or paid,  as the case may be.  There are no options,  warrants  or other  rights
outstanding to purchase any such Subsidiary Shares, Partnership Interests or LLC
Interests except as indicated on Schedule 6.1.3.

                           6.1.4    Power and Authority.

     Each Loan Party has full power to enter  into,  execute,  deliver and carry
out this Agreement and the other Loan Documents to which it is a party, to incur
the  Indebtedness  contemplated  by  the  Loan  Documents  and  to  perform  its
Obligations  under  the Loan  Documents  to  which  it is a party,  and all such
actions have been duly authorized by all necessary proceedings on its part.

                           6.1.5    Validity and Binding Effect.

     This  Agreement  has been duly and validly  executed and  delivered by each
Loan  Party,  and each other Loan  Document  which any Loan Party is required to
execute and deliver on or after the date hereof will have been duly executed and
delivered  by such Loan  Party on the  required  date of  delivery  of such Loan
Document.  This  Agreement  and each other Loan  Document  constitutes,  or will
constitute,  legal, valid and binding obligations of each Loan Party which is or
will be a party thereto on and after its date of delivery  thereof,  enforceable
against such Loan Party in accordance with its terms,  except to the extent that
enforceability  of any of such  Loan  Document  may be  limited  by  bankruptcy,
insolvency,  reorganization,  moratorium  or other  similar laws  affecting  the
enforceability  of creditors' rights generally or limiting the right of specific
performance.

                           6.1.6    No Conflict.

     Neither the  execution  and  delivery of this  Agreement  or the other Loan
Documents by
any Loan  Party nor the  consummation  of the  transactions  herein  or  therein
contemplated  or compliance  with the terms and provisions  hereof or thereof by
any of them will  conflict  with,  constitute  a default  under or result in any
breach of (i) the terms and  conditions  of the  certificate  of  incorporation,
bylaws, certificate of limited partnership,  partnership agreement,  certificate
of  formation,  limited  liability  company  agreement  or other  organizational
documents  of any  Loan  Party  or (ii)  any Law or any  material  agreement  or
instrument  or order,  writ,  judgment,  injunction  or decree to which any Loan
Party  or  any of its  Subsidiaries  is a  party  or by  which  it or any of its
Subsidiaries  is bound or to which it is subject,  or result in the  creation or
enforcement of any Lien, charge or encumbrance whatsoever upon any property (now
or hereafter  acquired) of any Loan Party or any of its Subsidiaries (other than
Liens granted under the Loan Documents).

                           6.1.7    Litigation.

     Except  as set  forth in  Schedule  6.1.7,  there  are no  actions,  suits,
proceedings  or  investigations  pending or, to the knowledge of any Loan Party,
threatened  against such Loan Party or any  Subsidiary of such Loan Party at law
or equity before any Official Body. None of such actions, suits,  proceedings or
investigations,  which  if  determined  adversely  to the  Loan  Parties,  would
individually or in the aggregate result in any Material  Adverse Change.  Except
as set forth on Schedule 6.1.7 none of the Loan Parties or any  Subsidiaries  of
any Loan Party is in violation of any order,  writ,  injunction or any decree of
any Official Body. No such violations may result in any Material Adverse Change.

                           6.1.8    Title to Properties.

                           The real property  owned or leased by each Loan Party
and each Subsidiary of each Loan
Party is described on Schedule  6.1.8.  Each Loan Party and each  Subsidiary  of
each Loan Party has good and marketable title to or valid leasehold  interest in
all  properties,  assets and other  rights  which it purports to own or lease or
which are reflected as owned or leased on its books and records,  free and clear
of all Liens and  encumbrances  except Permitted Liens, and subject to the terms
and  conditions  of the  applicable  leases.  All leases of property are in full
force and effect  without the necessity for any consent which has not previously
been obtained upon consummation of the transactions contemplated hereby.

                           6.1.9    Financial Statements.

     (i) Historical Statements. The Borrower has delivered to the Administrative
Agent copies of its audited  consolidated  year-end financial statements for and
as of the end of the four fiscal  years ended  September  30, 1998 (the  "Annual
Statements").  In addition,  the Borrower  has  delivered to the  Administrative
Agent copies of its unaudited  consolidated interim financial statements for the
fiscal year to date and as of the end of the fiscal  quarter ended June 30, 1999
(the  "Interim   Statements"),   (the  Annual  and  Interim   Statements   being
collectively  referred  to  as  the  "Historical  Statements").  The  Historical
Statements were compiled from the books and records maintained by the Borrower's
management,  are correct and  complete  and fairly  represent  the  consolidated
financial  condition of the Borrower and its  Subsidiaries as of their dates and
the  results  of  operations  for the  fiscal  periods  then ended and have been
prepared in accordance with GAAP consistently  applied,  subject (in the case of
the Interim Statements) to normal year-end audit adjustments.

     (ii)   Financial   Projections.   The   Borrower   has   delivered  to  the
Administrative Agent financial  projections of the Borrower and its Subsidiaries
for the five fiscal years ended  September 30, 1999,  2000,  2001, 2002 and 2003
derived from various  assumptions of the Borrower's  management  (the "Financial
Projections").  The  Financial  Projections  represent  a  reasonable  range  of
possible  results  in  light  of  the  history  of  the  business,  present  and
foreseeable  conditions  and the intentions of the  Borrower's  management.  The
Financial Projections accurately reflect the liabilities of the Borrower and its
Subsidiaries upon consummation of the transactions contemplated hereby as of the
Closing Date.

     (iii)  Accuracy  of  Financial  Statements.  Neither the  Borrower  nor any
Subsidiary of the Borrower has any  liabilities,  contingent  or  otherwise,  or
forward  or  long-term  commitments  that are not  disclosed  in the  Historical
Statements or in the notes thereto, and except as disclosed therein there are no
unrealized or  anticipated  losses from any  commitments  of the Borrower or any
Subsidiary  of the Borrower  which may cause a Material  Adverse  Change.  Since
September 30, 1998, no Material Adverse Change has occurred.

                           6.1.10   Use of Proceeds; Margin Stock.

     The Loan Parties intend to use the proceeds of the Loans in accordance with
Sections 2.8, 3.4 and 8.1.10.  None of the Loan Parties or any  Subsidiaries  of
any Loan  Party  engages  or  intends  to engage  principally,  or as one of its
important  activities,  in the  business of  extending  credit for the  purpose,
immediately,  incidentally or ultimately, of purchasing or carrying margin stock
(within the meaning of  Regulation  U). No part of the  proceeds of any Loan has
been or will be used,  immediately,  incidentally or ultimately,  to purchase or
carry  any  margin  stock or to  extend  credit to  others  for the  purpose  of
purchasing  or carrying  any margin stock or to refund  Indebtedness  originally
incurred for such  purpose,  or for any purpose  which entails a violation of or
which is  inconsistent  with the  provisions of the  regulations of the Board of
Governors  of the  Federal  Reserve  System.  None of the  Loan  Parties  or any
Subsidiary  of any Loan  Party  holds or intends  to hold  margin  stock in such
amounts  that more than 25% of the  reasonable  value of the  assets of any Loan
Party or  Subsidiary  of any Loan  Party  are or will be  represented  by margin
stock.

                           6.1.11   Full Disclosure.

     Neither this  Agreement nor any other Loan Document,  nor any  certificate,
statement, agreement or other documents furnished to the Administrative Agent or
any Lender in connection herewith or therewith, contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements  contained herein and therein,  in light of the  circumstances  under
which they were made, not  misleading.  There is no fact known to any Loan Party
which materially  adversely affects the business,  property,  assets,  financial
condition, results of operations or prospects of any Loan Party or Subsidiary of
any  Loan  Party  which  has not  been set  forth  in this  Agreement  or in the
certificates,  statements, agreements or other documents furnished in writing to
the  Administrative  Agent  and the  Lenders  prior to or at the date  hereof in
connection with the transactions contemplated hereby.

                           6.1.12   Taxes.

     All federal, state, local and other tax returns required to have been filed
with
respect  to each Loan  Party and each  Subsidiary  of each Loan  Party have been
filed,  and payment or adequate  provision  has been made for the payment of all
taxes, fees, assessments and other governmental charges which have or may become
due pursuant to said returns or to  assessments  received,  except to the extent
that such taxes, fees, assessments and other charges are being contested in good
faith  by  appropriate  proceedings  diligently  conducted  and for  which  such
reserves or other appropriate  provisions,  if any, as shall be required by GAAP
shall have been made. There are no agreements or waivers extending the statutory
period of  limitations  applicable to any federal  income tax return of any Loan
Party or Subsidiary of any Loan Party for any period.

                           6.1.13   Consents and Approvals.

     Except for the filing of financing statements and the Mortgage in the state
and  county  filing  offices,  no  consent,   approval,   exemption,   order  or
authorization  of, or a  registration  or filing with,  any Official Body or any
other  Person is required by any Law or any  agreement  in  connection  with the
execution,  delivery  and  carrying  out of this  Agreement  and the other  Loan
Documents by any Loan Party,  except as listed on Schedule 6.1.13,  all of which
shall  have been  obtained  or made on or prior to the  Closing  Date  except as
otherwise indicated on Schedule 6.1.13.

     6.1.14 No Event of Default; Compliance with Instruments.

     No event has occurred  and is  continuing  and no condition  exists or will
exist after
giving effect to the borrowings or other  extensions of credit to be made on the
Closing Date under or pursuant to the Loan Documents which  constitutes an Event
of Default or Potential Default. None of the Loan Parties or any Subsidiaries of
any  Loan  Party  is in  violation  of  (i)  any  term  of  its  certificate  of
incorporation,   bylaws,   certificate  of  limited   partnership,   partnership
agreement,  certificate of formation,  limited  liability  company  agreement or
other  organizational  documents or (ii) any material agreement or instrument to
which it is a party or by which it or any of its  properties  may be  subject or
bound where such violation would constitute a Material Adverse Change.

     6.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.

     Each Loan Party and each  Subsidiary  of each Loan Party owns or  possesses
all the material patents,  trademarks,  service marks, trade names,  copyrights,
licenses,  registrations,  franchises,  permits and rights  necessary to own and
operate its properties  and to carry on its business as presently  conducted and
planned  to be  conducted  by such  Loan  Party  or  Subsidiary,  without  known
possible,  alleged or actual  conflict  with the rights of others.  All material
patents,   trademarks,   service  marks,  trade  names,  copyrights,   licenses,
registrations,  franchises and permits of each Loan Party and each Subsidiary of
each Loan Party are listed and described on Schedule 6.1.15.

                           6.1.16   Security Interests.

     The Liens and security  interests granted to the  Administrative  Agent for
the benefit of the Lenders pursuant to the Collateral  Assignments,  the Patent,
Trademark  and  Copyright  Security  Agreement,  the  Pledge  Agreement  and the
Security  Agreement in the Collateral (other than the Real Property)  constitute
and will  continue to  constitute  Prior  Security  Interests  under the Uniform
Commercial  Code as in  effect in each  applicable  jurisdiction  (the  "Uniform
Commercial  Code") or other applicable Law entitled to all the rights,  benefits
and  priorities  provided by the Uniform  Commercial  Code or such Law. Upon the
filing of  financing  statements  relating to said  security  interests  in each
office and in each jurisdiction  where required in order to perfect the security
interests  described above, taking possession of any stock certificates or other
certificates  evidencing the Pledge  Collateral  and  recordation of the Patent,
Trademark  and  Copyright  Security  Agreement in the United  States  Patent and
Trademark Office and United States  Copyright  Office,  as applicable,  all such
action  as  is  necessary   or  advisable  to  establish   such  rights  of  the
Administrative  Agent will have been taken, and there will be upon execution and
delivery of the  Collateral  Assignments,  the Patent,  Trademark  and Copyright
Security  Agreement,  the Pledge  Agreement  and the  Security  Agreement,  such
filings and such taking of  possession,  no necessity for any further  action in
order to  preserve,  protect  and  continue  such  rights,  except the filing of
continuation  statements  with respect to such financing  statements  within six
months  prior to each  five-year  anniversary  of the  filing of such  financing
statements.  All filing  fees and other  expenses in  connection  with each such
action have been or will be paid by the Borrower and the Co-Borrowers.

                           6.1.17   Mortgage Liens.

     The  Liens  granted  to the  Administrative  Agent for the  benefit  of the
Lenders pursuant
to the Mortgage  constitute a valid first  priority  Lien under  applicable  law
subject  only to  Permitted  Liens.  All such  action  as will be  necessary  or
advisable to establish such Lien of the Administrative Agent and its priority as
described  in the  preceding  sentence  will be  taken  at or  prior to the time
required for such  purpose,  and there will be as of the date of  execution  and
delivery  of the  Mortgage  no  necessity  for any  further  action  in order to
protect, preserve and continue such Lien and such priority.

                           6.1.18   Status of the Pledge Collateral.

     All the shares of capital  stock,  Partnership  Interests or LLC  Interests
included in the Pledge Collateral to be pledged pursuant to the Pledge Agreement
or the  Collateral  Assignment  are or will be upon issuance  validly issued and
nonassessable and owned beneficially and of record by the pledgor free and clear
of any Lien or  restriction  on transfer,  except as  otherwise  provided by the
Pledge  Agreement or the  Collateral  Assignment  and except as the right of the
Lenders to dispose of the Shares,  Partnership Interests or LLC Interests may be
limited  by  the  Securities  Act of  1933,  as  amended,  and  the  regulations
promulgated  by  the  Securities  and  Exchange  Commission  thereunder  and  by
applicable state securities laws. There are no shareholder, partnership, limited
liability  company or other  agreements  or  understandings  with respect to the
shares of capital stock,  Partnership Interests or LLC Interests included in the
Pledge  Collateral  except for the partnership  agreements and limited liability
company agreements described on Schedule 6.1.18. The Loan Parties have delivered
true and correct copies of such  partnership  agreements  and limited  liability
company agreements to the Administrative Agent.

                           6.1.19   Insurance.

     Schedule  6.1.19 lists all insurance  policies and other bonds to which any
Loan Party or  Subsidiary  of any Loan Party is a party,  all of which are valid
and in full  force and  effect.  No notice  has been  given or claim made and no
grounds  exist to cancel or avoid any of such policies or bonds or to reduce the
coverage  provided  thereby.  Such policies and bonds provide adequate  coverage
from reputable and  financially  sound insurers in amounts  sufficient to insure
the assets and risks of each Loan Party and each  Subsidiary  of each Loan Party
in accordance with prudent business practice in the industry of the Loan Parties
and their Subsidiaries.

                           6.1.20   Compliance with Laws.

     The Loan Parties and their  Subsidiaries  are in compliance in all material
respects  with all  applicable  Laws  (other than  Environmental  Laws which are
specifically addressed in Section 6.1.25) in all jurisdictions in which any Loan
Party or  Subsidiary  of any Loan Party is presently  or will be doing  business
except  where the  failure  to do so would not  constitute  a  Material  Adverse
Change.

                           6.1.21   Material Contracts; Burdensome Restrictions.

     Schedule  6.1.21  lists all  material  contracts  relating to the  business
operations of each Loan Party and each  Subsidiary of any Loan Party,  including
all employee benefit plans and Labor Contracts.  All such material contracts are
valid,  binding and  enforceable  upon such Loan Party or Subsidiary and each of
the other parties thereto in accordance with their  respective  terms, and there
is no  default  thereunder,  to the Loan  Parties'  knowledge,  with  respect to
parties  other than such Loan Party or  Subsidiary.  None of the Loan Parties or
their  Subsidiaries  is bound by any contractual  obligation,  or subject to any
restriction in any organization  document, or any requirement of Law which could
result in a Material Adverse Change.

                           6.1.22   Investment Companies; Regulated Entities.

     None of the  Loan  Parties  or any  Subsidiaries  of any  Loan  Party is an
"investment
company"  registered or required to be registered  under the Investment  Company
Act of 1940 or under the "control" of an "investment  company" as such terms are
defined  in the  Investment  Company  Act of 1940 and shall not  become  such an
"investment  company" or under such  "control."  None of the Loan Parties or any
Subsidiaries  of any Loan Party is subject to any other Federal state statute or
regulation limiting its ability to incur Indebtedness for borrowed money.

                           6.1.23   Plans and Benefit Arrangements.

                           Except as set forth on Schedule 6.1.23:

(i) The Borrower and each other member of the ERISA Group are in  compliance  in
all material  respects with any  applicable  provisions of ERISA with respect to
all  Benefit  Arrangements,  Plans and  Multiemployer  Plans.  There has been no
Prohibited  Transaction with respect to any Benefit  Arrangement or any Plan or,
to the best knowledge of the Borrower, with respect to any Multiemployer Plan or
Multiple  Employer  Plan,  which could result in any  material  liability of the
Borrower or any other  member of the ERISA  Group.  The  Borrower  and all other
members of the ERISA Group have made when due any and all  payments  required to
be made  under any  agreement  relating  to a  Multiemployer  Plan or a Multiple
Employer  Plan or any Law  pertaining  thereto.  With  respect  to each Plan and
Multiemployer  Plan,  the  Borrower and each other member of the ERISA Group (i)
have  fulfilled in all material  respects  their  obligations  under the minimum
funding  standards of ERISA,  (ii) have not incurred any  liability to the PBGC,
and (iii) have not had asserted  against them any penalty for failure to fulfill
the minimum funding requirements of ERISA.

(ii) To the  best of the  Borrower's  and  each  Co-Borrower's  knowledge,  each
Multiemployer Plan and Multiple Employer Plan is able to pay benefits thereunder
when due.

     (iii)  Neither  the  Borrower  nor any other  member of the ERISA Group has
instituted or intends to institute  proceedings to terminate any Plan other than
a Plan of an acquired  entity that was not  intended to be  continued  after the
acquisition date or a reasonable time thereafter.

     (iv) No event  requiring  notice to the PBGC under Section  302(f)(4)(A) of
ERISA has occurred or is reasonably  expected to occur with respect to any Plan,
and no amendment with respect to which security is required under Section 307 of
ERISA has been made or is reasonably expected to be made to any Plan.

     (v) The  aggregate  actuarial  present  value  of all  benefit  liabilities
(whether or not vested) under each Plan, determined on a plan termination basis,
as  disclosed  in, and as of the date of, the most recent  actuarial  report for
such Plan, does not exceed the aggregate fair market value of the assets of such
Plan.

     (vi)  Neither  the  Borrower  nor any other  member of the ERISA  Group has
incurred or reasonably expects to incur any material withdrawal  liability under
ERISA to any Multiemployer  Plan or Multiple Employer Plan. Neither the Borrower
nor any other member of the ERISA Group has been  notified by any  Multiemployer
Plan or Multiple Employer Plan that such Multiemployer Plan or Multiple Employer
Plan has been  terminated  within the  meaning of Title IV of ERISA and,  to the
best knowledge of the Borrower,  no Multiemployer Plan or Multiple Employer Plan
is reasonably  expected to be reorganized  or terminated,  within the meaning of
Title IV of ERISA.

     (vii) To the extent that any Benefit  Arrangement is insured,  the Borrower
and all other  members  of the  ERISA  Group  have  paid  when due all  premiums
required to be paid for all periods through the Closing Date. To the extent that
any Benefit  Arrangement is funded other than with  insurance,  the Borrower and
all other  members  of the  ERISA  Group  have  made when due all  contributions
required to be paid for all periods through the Closing Date.

     (viii) All Plans,  Benefit  Arrangements and Multiemployer  Plans have been
administered  in accordance  with their terms and applicable Law in all material
respects.

                           6.1.24   Employment Matters.

     Each of the Loan Parties and each of their  Subsidiaries  is in  compliance
with the Labor Contracts and all applicable  federal,  state and local labor and
employment  Laws including  those related to equal  employment  opportunity  and
affirmative  action,  labor  relations,  minimum  wage,  overtime,  child labor,
medical  insurance  continuation,  worker  adjustment  and  relocation  notices,
immigration controls and worker and unemployment compensation, where the failure
to comply would constitute a Material  Adverse Change.  There are no outstanding
grievances,  arbitration  awards or appeals  therefrom  arising out of the Labor
Contracts or current or threatened strikes, picketing, handbilling or other work
stoppages or slowdowns at  facilities of any of the Loan Parties or any of their
Subsidiaries  which in any case would constitute a Material Adverse Change.  The
Borrower has delivered to the  Administrative  Agent true and correct  copies of
each of the Labor Contracts.

                           6.1.25   Environmental Matters.

                           Except as disclosed on Schedule 6.1.25:

     (i) None of the Loan Parties or any Subsidiaries of any Loan Party has
received any  Environmental  Complaint  from any Official Body or private Person
alleging that such Loan Party or Subsidiary or any prior or subsequent  owner of
any of the Property is a potentially  responsible  party under the Comprehensive
Environmental Response,  Cleanup and Liability Act, 42 U.S.C. ss. 9601, et seq.,
and  none  of  the  Loan  Parties  has  any  reason  to  believe  that  such  an
Environmental Complaint might be received.  There are no pending or, to any Loan
Party's  knowledge,  threatened  Environmental  Complaints  relating to any Loan
Party or  Subsidiary  of any Loan Party or, to any Loan Party's  knowledge,  any
prior or subsequent  owner of any of the Property  pertaining to, or arising out
of, any Environmental Conditions.

     (ii) There are no  circumstances  at, on or under any of the Property owned
by any Loan Party that constitute a breach of or non-compliance  with any of the
Environmental  Laws where the failure to comply would  constitute or result in a
Material  Adverse  Change,  and  there  are no  past  or  present  Environmental
Conditions  at, on or under any of the Property owned by a Loan Party or, to any
Loan  Party's  knowledge,  at,  on or  under  adjacent  property,  that  prevent
compliance with the Environmental  Laws at any of the owned Property.  There are
no  circumstances  at, on or under any of the Property  leased by any Loan Party
that constitute a breach of or non-compliance with any of the Environmental Laws
where the failure to comply would  constitute a Material  Adverse Change.  There
are no past or  present  Environmental  Conditions  at,  on or under  any of the
Property  leased by a Loan Party or, to any Loan  Party's  knowledge,  at, on or
under adjacent property,  that prevent compliance with the Environmental Laws at
any of the leased  Property,  where the  failure to comply  would  constitute  a
Material Adverse Change.

     (iii)  Neither  any  of the  Property  owned  by any  Loan  Party  nor  any
structures, improvements,  equipment, fixtures, activities or facilities thereon
or thereunder  contain or use  Regulated  Substances  except in compliance  with
Environmental  Laws,  except where the failure to comply would not constitute or
result  in a  Material  Adverse  Change.  There  are no  processes,  facilities,
operations,  equipment  or other  activities  at,  on or under  any of the owned
Property, or, to any Loan Party's knowledge,  at, on or under adjacent property,
that  currently  result  in the  release  or  threatened  release  of  Regulated
Substances  onto any of the  owned  Property,  except  to the  extent  that such
releases or threatened releases are not a breach of or otherwise not a violation
of the Environmental  Laws. Neither any of the Property leased by any Loan Party
nor any structures, improvements,  equipment, fixtures, activities or facilities
thereon or thereunder  contain or use Regulated  Substances except in compliance
with  Environmental Laws where the failure to comply would constitute a Material
Adverse Change.  There are no processes,  facilities,  operations,  equipment or
other  activities  at, on or under any of the leased  Property,  or, to any Loan
Party's knowledge,  at, on or under adjacent property,  that currently result in
the release or threatened release of Regulated Substances onto any of the leased
Property, except to the extent that such releases or threatened releases are not
a breach of or  otherwise  not a violation of the  Environmental  Laws where the
failure to comply would constitute a Material Adverse Change.

     (iv) There are no aboveground  storage tanks,  underground storage tanks or
underground  piping  associated  with such  tanks,  used for the  management  of
Regulated Substances at, on or under any of the Property owned by any Loan Party
that (a) do not have,  to the extent  required  by  Environmental  Laws,  a full
operational  secondary containment system in place, and (b) are not otherwise in
compliance  with all  Environmental  Laws.  There are no  abandoned  underground
storage tanks or underground piping associated with such tanks,  previously used
for the  management  of  Regulated  Substances  at, on or under any of the owned
Property  that  have  not  either  been  closed  in  place  in  accordance  with
Environmental  Laws or removed in compliance  with all applicable  Environmental
Laws and no contamination associated with the use of such tanks exists on any of
the owned Property that is not in compliance with Environmental  Laws. There are
no aboveground  storage tanks,  underground  storage tanks or underground piping
associated with such tanks, used for the management of Regulated  Substances at,
on or under any of the  Property  leased by any Loan Party that (a) do not have,
to the extent  required by  Environmental  Laws,  a full  operational  secondary
containment  system in place,  and (b) are not otherwise in compliance  with all
Environmental  Laws, where in the case of (a) or (b), the failure to comply with
such Environmental Laws would constitute a Material Adverse Change. There are no
abandoned  underground  storage tanks or underground piping associated with such
tanks,  previously  used for the  management of Regulated  Substances  at, on or
under any of the leased  Property  that have not either  been closed in place in
accordance with  Environmental Laws or removed in compliance with all applicable
Environmental  Laws and no  contamination  associated with the use of such tanks
exists  on  any  of  the  leased   Property  that  is  not  in  compliance  with
Environmental  Laws,  where the failure to comply  would  constitute  a Material
Adverse Change.

     (v) Each Loan Party and each  Subsidiary of any Loan Party has all material
permits,  licenses,  authorizations,  plans and  approvals  necessary  under the
Environmental  Laws  for the  conduct  of the  business  of such  Loan  Party or
Subsidiary as presently  conducted,  except where the failure to do so would not
constitute  or result in a  Material  Adverse  Change.  Each Loan Party and each
Subsidiary  of any Loan Party has submitted  all material  notices,  reports and
other filings required by the Environmental  Laws to be submitted to an Official
Body which pertain to past and current operations on any of the Property.

     (vi)  All  past  and  present  on-site  generation,   storage,  processing,
treatment,  recycling,  reclamation,  disposal  or other  use or  management  of
Regulated  Substances  at,  on, or under any of the  Property  owned by any Loan
Party  and  all  off-site  transportation,   storage,   processing,   treatment,
recycling,  reclamation,  disposal  or  other  use or  management  of  Regulated
Substances  have been done in accordance  with the  Environmental  Laws,  except
where the failure to do so would not constitute or result in a Material  Adverse
Change. All past and present on-site generation, storage, processing, treatment,
recycling,  reclamation,  disposal  or  other  use or  management  of  Regulated
Substances at, on, or under any of the Property leased by any Loan Party and all
off-site transportation, storage, processing, treatment, recycling, reclamation,
disposal or other use or  management of Regulated  Substances  have been done in
accordance with the  Environmental  Laws, except where to failure to comply with
such Environmental Laws would not constitute a Material Adverse Change.

                           6.1.26   Senior Debt Status.

     The  Obligations of each Loan Party under this  Agreement,  the Notes,  the
Guaranty  Agreement and each of the other Loan  Documents to which it is a party
(i) do rank and will rank at least pari passu in  priority  of payment  with all
other Indebtedness of such Loan Party except  Indebtedness of such Loan Party to
the extent secured by Permitted Liens, and (ii) constitute "Senior Debt" as such
term is defined in the  Subordinated  Loan  Documents.  There is no Lien upon or
with respect to any of the  properties or income of any Loan Party or Subsidiary
of any Loan Party which secures  indebtedness or other obligations of any Person
except for Permitted Liens.

                           6.1.27   Year 2000.

     The Loan  Parties and their  Subsidiaries  have  reviewed  the areas within
their business
and operations  which could be adversely  affected by, and have developed or are
developing  a program  to  address  on a timely  basis,  the risk  that  certain
computer applications used by the Loan Parties and their Subsidiaries (or any of
their  respective  material  suppliers,  customers  or vendors) may be unable to
recognize and perform properly date-sensitive functions involving dates prior to
and after  December  31, 1999 (the "Year 2000  Problem").  The Year 2000 Problem
will not result in any Material Adverse Change.


                  6.2      Updates to Schedules.

     Should  any  of  the  information  or  disclosures  provided  on any of the
Schedules  attached hereto become outdated or incorrect in any material respect,
the Borrower and the Co-Borrower shall promptly provide the Administrative Agent
in writing with such  revisions or updates to such  Schedule as may be necessary
or appropriate to update or correct same;  provided,  however,  that no Schedule
shall be  deemed  to have  been  amended,  modified  or  superseded  by any such
correction  or  update,  nor shall  any  breach of  warranty  or  representation
resulting from the inaccuracy or  incompleteness  of any such Schedule be deemed
to have been cured thereby, unless and until the Required Lenders, in their sole
and  absolute  discretion,  shall have  accepted in writing  such  revisions  or
updates to such Schedule.

                                    7.      CONDITIONS OF LENDING

                  The  obligation  of  each  Lender  to  make  Loans  and of the
Administrative  Agent to issue  Letters  of Credit  hereunder  is subject to the
performance  by each of the Loan  Parties  of its  Obligations  to be  performed
hereunder  at or  prior to the  making  of any such  Loans or  issuance  of such
Letters of Credit and to the satisfaction of the following further conditions:

                  7.1      First Loans.


                  On the Closing Date:

                           7.1.1    Officer's Certificate.

     The representations and warranties of each of the Loan Parties contained in
Section 6 and in each of the other Loan Documents  shall be true and accurate on
and as of the Closing  Date with the same effect as though such  representations
and warranties had been made on and as of such date (except  representations and
warranties which relate solely to an earlier date or time, which representations
and  warranties  shall be true and  correct on and as of the  specific  dates or
times  referred to therein),  and each of the Loan Parties shall have  performed
and complied with all covenants and conditions  hereof and thereof,  no Event of
Default or Potential  Default  shall have  occurred and be  continuing  or shall
exist; and there shall be delivered to the Administrative  Agent for the benefit
of each Lender a certificate of each of the Loan Parties, dated the Closing Date
and signed by the Chief Executive Officer,  President or Chief Financial Officer
of each of the Loan Parties,  to each such effect.  The  certificate of the Loan
Parties  shall  contain   calculations  in  sufficient   detail  to  demonstrate
compliance  as of the Closing  Date with all  financial  covenants  contained in
Section 8.2.

                           7.1.2    Secretary's Certificate.

     There shall be  delivered  to the  Administrative  Agent for the benefit of
each Lender a certificate  dated the Closing Date and signed by the Secretary or
an Assistant Secretary of each of the Loan Parties, certifying as appropriate as
to:

     (i) all action taken by each Loan Party in connection  with this  Agreement
and the other Loan Documents;

     (ii) the names of the officer or officers authorized to sign this
Agreement and the other Loan  Documents and the true  signatures of such officer
or officers and specifying the Authorized Officers permitted to act on behalf of
each Loan Party for purposes of this  Agreement and the true  signatures of such
officers,  on which the  Administrative  Agent and each Lender may  conclusively
rely; and

     (iii) copies of its organizational documents, including its certificate or
articles  of  incorporation,   bylaws,   certificate  of  limited   partnership,
partnership  agreement,  certificate of formation,  articles of organization and
operating agreement or regulations as in effect on the Closing Date certified by
the appropriate  state official where such documents are filed in a state office
together  with  certificates  from the  appropriate  state  officials  as to the
continued  existence  and good  standing  of each Loan Party in each state where
organized or qualified to do business.

                           7.1.3    Delivery of Loan Documents.

     The  Collateral  Assignments,  Indemnity  Agreement,  initial Loan Request,
Mortgages,  Notes,  Patent,  Trademark and Copyright Security Agreement,  Pledge
Agreement, and Security Agreement shall have been duly executed and delivered to
the  Administrative  Agent for the  benefit of the  Lenders,  together  with all
appropriate  financing  statements and appropriate stock powers and certificates
evidencing the Pledge Collateral.

                           7.1.4    Opinion of Counsel.

     There shall be  delivered  to the  Administrative  Agent for the benefit of
each Lender a written opinion of Hodgson Russ Andrews Wood & Goodyear,  LLP, and
Ronald D.  DeMoss,  counsel  and  general  counsel,  respectively,  for the Loan
Parties (who may rely on the opinions of such other counsel as may be acceptable
to the Administrative  Agent),  dated the Closing Date and in form and substance
satisfactory to the Administrative Agent and its counsel:

     (i) as to the matters set forth in Exhibit 7.1.4; and

     (ii) as to such other  matters  incident to the  transactions  contemplated
herein as the Administrative Agent may reasonably request.

                           7.1.5    Legal Details.

     All legal  details and  proceedings  in  connection  with the  transactions
contemplated by this Agreement and the other Loan Documents shall be in form and
substance   satisfactory  to  the  Administrative  Agent  and  counsel  for  the
Administrative  Agent, and the Administrative Agent shall have received all such
other  counterpart  originals or certified or other copies of such documents and
proceedings  in  connection  with  such  transactions,  in  form  and  substance
satisfactory to the Administrative Agent and said counsel, as the Administrative
Agent or said counsel may reasonably request.

                           7.1.6    Payment of Fees.

     The  Borrower  shall  have paid or caused to be paid to the  Administrative
Agent,  for  itself  and  for the  account  of the  Lenders  to the  extent  not
previously paid, all other commitment and other fees accrued through the Closing
Date and the costs and  expenses  for  which  the  Administrative  Agent and the
Lenders are entitled to be reimbursed.

                           7.1.7    Consents.

     All material consents required to effectuate the transactions  contemplated
hereby as set forth on Schedule  6.1.13 shall have been  obtained.  The Borrower
and the other  purchasers of notes under the  Subordinated  Loan Documents shall
have executed and delivered an amendment in connection  with this  Agreement and
the Loans  wherein the Borrower and the other note  purchasers  acknowledge  and
agree that the terms of subordination  in the Subordinated  Loan Documents apply
to this Agreement, the Loan Documents and the Loans.

                           7.1.8    Officer's Certificate Regarding MACs.

     Since June 30, 1999, no Material Adverse Change shall have occurred;  prior
to the Closing Date,  there shall have been no material change in the management
of any Loan Party or  Subsidiary  of any Loan  Party;  and there shall have been
delivered  to the  Administrative  Agent  for  the  benefit  of  each  Lender  a
certificate  dated the Closing Date and signed by the Chief  Executive  Officer,
President or Chief Financial Officer of each Loan Party to each such effect.

                           7.1.9    No Violation of Laws.

     The making of the Loans and the issuance of the Letters of Credit shall not
contravene any Law applicable to any Loan Party or any of the Lenders.

                           7.1.10   No Actions or Proceedings.

     No action, proceeding, investigation,  regulation or legislation shall have
been instituted, threatened or proposed before any court, governmental agency or
legislative  body to  enjoin,  restrain  or  prohibit,  or to obtain  damages in
respect of, this Agreement,  the other Loan Documents or the consummation of the
transactions  contemplated  hereby or  thereby or which,  in the  Administrative
Agent's  sole   discretion,   would  make  it   inadvisable  to  consummate  the
transactions contemplated by this Agreement or any of the other Loan Documents.

     7.1.11 Insurance Policies; Certificates of Insurance; Endorsements.

     The  Loan  Parties  shall  have  delivered   evidence   acceptable  to  the
Administrative Agent that adequate insurance in compliance with Section 8.1.3 is
in full force and effect and that all premiums  then due thereon have been paid,
together with a certified copy of each Loan Party's casualty insurance policy or
policies  evidencing  coverage  satisfactory to the  Administrative  Agent, with
additional  insured,  mortgagee  and lender loss  payable  special  endorsements
attached thereto in form and substance  satisfactory to the Administrative Agent
and its counsel naming the Administrative Agent as additional insured, mortgagee
and lender loss payee.

                           7.1.12   Title Insurance.

     The Loan Parties shall deliver a title  insurance  policy or an endorsement
or binder in favor of the  Administrative  Agent for the benefit of the Lenders,
in  customary  ALTA  current  mortgagee's  form,  and in  amounts  not less than
$3,500,000,  with  premiums paid thereon,  issued by a title  insurance  company
acceptable  to the  Administrative  Agent and  insuring the Mortgage on the Real
Property in the City of Erie,  Pennsylvania  as a valid first priority Lien upon
the applicable  Loan Parties' fee simple title to such Real Property  Collateral
and all improvements and all appurtenances thereto (including such easements and
appurtenances as may be required by the Administrative Agent), free and clear of
any and all defects and encumbrances whatsoever, subject only to such exceptions
as may be approved in writing by the  Administrative  Agent,  with  endorsements
thereto as to such matters as the Administrative Agent may designate.

                           7.1.13   Filing Receipts.

     The  Administrative  Agent  shall  have  received  (1) copies of all filing
receipts and  acknowledgments  issued by any governmental  authority to evidence
any  recordation  or filing  necessary to perfect the Lien of the Lenders on the
Collateral or other satisfactory evidence of such recordation and filing and (2)
evidence  in a form  acceptable  to the  Administrative  Agent  that  such  Lien
constitutes a Prior  Security  Interest in favor of the Lenders and, in the case
of the Mortgage, a valid and perfected first priority Lien.

     7.1.14 Amendment and Restatement of Existing Credit Agreement.

     The revolving credit loans,  term loans and other obligations of certain of
the Loan Parties under the Existing  Credit  Agreement,  as amended,  shall have
been amended and restated and evidenced by this Agreement,  the Revolving Credit
Notes, the Term Loan A Notes and the other Loan Documents,  without any novation
having  occurred  as a result  thereof.  Effective  upon the Closing  Date,  all
letters of credit  outstanding under the Existing Loan Agreement shall be deemed
to be Letters  of Credit  issued  pursuant  to the terms of this  Agreement  and
subject to the provisions of Section 2.9 of this  Agreement.  The liabilities of
Rentavision  to  Manufacturers  and  Traders  Trust  Company  under  the  credit
facilities of such financial  institution  to Rentavision  shall be satisfied on
the Closing Date and such credit facilities shall terminate.

                           7.1.15   Continuation of Subordination.

     The  Subordinated  Debt  evidenced by the NWB  Subordinated  Loan Documents
shall  continue  to be  subordinated  to the  Obligations  under  the  terms and
conditions of subordination set forth in the NWB Indenture.



                           7.1.16   Consummation of Acquisition.

     The Loan Parties shall have  consummated  the  Acquisition  under terms and
conditions satisfactory to the Administrative Agent in accordance with the terms
of the Acquisition Agreement and the other Acquisition Documents.  In connection
with the Acquisition, the Borrower and its Subsidiaries shall not pay or provide
Acquisition  Consideration  of more than  $100,000,000  in the aggregate.  After
giving effect to the Acquisition and the Acquisition  Consideration given by the
Borrower and its Subsidiaries,  the Borrower and the Co-Borrowers shall have the
ability to obtain  additional  Revolving  Credit  Loans under this  Agreement in
amounts acceptable to the Managing Agents.


                  7.2      Each Additional Loan.

                  At the time of making  any Loans or  issuing  any  Letters  of
Credit other than Loans made or Letters of Credit issued on the Closing Date and
after giving effect to the proposed  extensions of credit:  the  representations
and warranties of the Loan Parties  contained in Section 6 and in the other Loan
Documents  shall be true on and as of the date of such additional Loan or Letter
of Credit with the same effect as though such representations and warranties had
been made on and as of such date (except  representations  and warranties  which
expressly  relate solely to an earlier date or time, which  representations  and
warranties  shall be true and correct on and as of the  specific  dates or times
referred to therein) and the Loan Parties shall have performed and complied with
all covenants and conditions  hereof;  no Event of Default or Potential  Default
shall have occurred and be continuing or shall exist; the making of the Loans or
issuance of such Letter of Credit shall not contravene any Law applicable to any
Loan  Party or  Subsidiary  of any Loan  Party  or any of the  Lenders;  and the
Borrower and the Co-Borrowers shall have delivered to the Administrative Agent a
duly executed and completed Loan Request or  application  for a Letter of Credit
as the case may be.

                                            8.       COVENANTS

                  8.1      Affirmative Covenants.

                  The Loan Parties,  jointly and  severally,  covenant and agree
that until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit  Borrowings,  and interest  thereon,  expiration  or  termination  of all
Letters of Credit,  satisfaction  of all of the Loan Parties' other  Obligations
under the Loan Documents and  termination of the  Commitments,  the Loan Parties
shall comply at all times with the following affirmative covenants:

                           8.1.1    Preservation of Existence, Etc.

     Each  Loan  Party  shall,  and shall  cause  each of its  Subsidiaries  to,
maintain its legal  existence as a corporation,  limited  partnership or limited
liability  company and its license or  qualification  and good  standing in each
jurisdiction  in which its  ownership  or lease of property or the nature of its
business  makes such  license or  qualification  necessary,  except as otherwise
expressly permitted in Section 8.2.6.

     8.1.2  Payment  of  Liabilities,  Including  Taxes,  Etc. . Each Loan Party
shall,  and shall cause each of its  Subsidiaries to, duly pay and discharge all
liabilities to which it is subject or which are asserted against it, promptly as
and when the same shall become due and payable, including all taxes, assessments
and  governmental  charges upon it or any of its properties,  assets,  income or
profits,  prior to the date on which  penalties  attach  thereto,  except to the
extent that such liabilities, including taxes, assessments or charges, are being
contested in good faith and by  appropriate  and lawful  proceedings  diligently
conducted and for which such reserve or other appropriate provisions, if any, as
shall be  required  by GAAP shall have been  made,  but only to the extent  that
failure to discharge  any such  liabilities  would not result in any  additional
liability  which  would  adversely  affect to a material  extent  the  financial
condition  of any Loan  Party or  Subsidiary  of any Loan  Party or which  would
affect the  Collateral,  provided  that the Loan Parties and their  Subsidiaries
will pay all such liabilities  forthwith upon the commencement of proceedings to
foreclose any Lien which may have attached as security therefor.

                           8.1.3    Maintenance of Insurance.

     Each Loan Party shall,  and shall cause each of its Subsidiaries to, insure
its  properties  and  assets  against  loss or  damage  by fire and  such  other
insurable hazards as such assets are commonly insured (including fire,  extended
coverage, property damage, workers' compensation,  public liability and business
interruption insurance) and against other risks (including errors and omissions)
in such  amounts  as  similar  properties  and  assets  are  insured  by prudent
companies  in similar  circumstances  carrying on similar  businesses,  and with
reputable and financially sound insurers, including self-insurance to the extent
customary,  all as reasonably  determined by the  Administrative  Agent.  At the
request of the  Administrative  Agent,  the Loan  Parties  shall  deliver to the
Administrative  Agent  and  each of the  Lenders  (x) on the  Closing  Date  and
annually  thereafter  an original  certificate  of insurance  signed by the Loan
Parties'  independent  insurance  broker  describing  and  certifying  as to the
existence of the insurance on the  Collateral  required to be maintained by this
Agreement and the other Loan Documents,  together with a copy of the endorsement
described in the next sentence attached to such certificate and (y) from time to
time a summary  schedule  indicating all insurance then in force with respect to
each of the Loan  Parties.  Such  policies of insurance  shall  contain  special
endorsements,  in form and substance  acceptable to the Administrative  Agent in
its reasonable judgment,  which shall (i) specify the Administrative Agent as an
additional insured, mortgagee and lender loss payee as its interests may appear,
with the understanding  that any obligation  imposed upon the insured (including
the liability to pay premiums)  shall be the sole  obligation of the  applicable
Loan Parties and not that of the insured,  (ii) provide that the interest of the
Lenders shall be insured regardless of any breach or violation by the applicable
Loan Parties of any  warranties,  declarations  or conditions  contained in such
policies  or any action or  inaction of the  applicable  Loan  Parties or others
insured under such policies, (iii) provide a waiver of any right of the insurers
to set off or  counterclaim  or any other  deduction,  whether by  attachment or
otherwise,  (iv)  provide  that any and all  rights  of  subrogation  which  the
insurers may have or acquire shall be, at all times and in all respects,  junior
and subordinate to the prior payment in full of the  Indebtedness  hereunder and
that no insurer  shall  exercise or assert any right of  subrogation  until such
time as the  Indebtedness  hereunder  has been paid in full and the  Commitments
have terminated,  (v) provide,  except in the case of public liability insurance
and workmen's compensation insurance,  that all insurance proceeds for losses of
less than  $250,000  shall be adjusted with and payable to the  applicable  Loan
Parties and that all insurance  proceeds for losses of $250,000 or more shall be
adjusted with and payable to the  Administrative  Agent,  (vi) include effective
waivers  by the  insurer  of all  claims  for  insurance  premiums  against  the
Administrative  Agent,  (vii) provide that no  cancellation of such policies for
any reason  (including  non-payment  of premium) nor any change therein shall be
effective  until at least thirty (30) days after  receipt by the  Administrative
Agent of  written  notice of such  cancellation  or  change,  (viii) be  primary
without right of contribution of any other insurance  carried by or on behalf of
any  additional  insureds  with  respect to their  respective  interests  in the
Collateral,  and (ix) provide that  inasmuch as the policy  covers more than one
insured,  all terms,  conditions,  insuring agreements and endorsements  (except
limits of liability)  shall operate as if there were a separate  policy covering
each insured.  The applicable Loan Parties shall notify the Administrative Agent
promptly of any  occurrence  causing a material  loss or decline in value of the
Collateral  and the estimated (or actual,  if available)  amount of such loss or
decline. Any monies received by the Administrative Agent constituting  insurance
proceeds or condemnation  proceeds (pursuant to the Mortgage) may, at the option
of the Administrative  Agent, (i) be applied by the Administrative  Agent to the
payment of the Loans in such manner as the  Administrative  Agent may reasonably
determine,  or (ii) be disbursed to the applicable Loan Parties on such terms as
are deemed appropriate by the Administrative  Agent for the repair,  restoration
and/or replacement of property in respect of which such proceeds were received.

                           8.1.4    Maintenance of Properties and Leases.

     Each  Loan  Party  shall,  and shall  cause  each of its  Subsidiaries  to,
maintain in good
repair,  working  order  and  condition  (ordinary  wear and tear  excepted)  in
accordance with the general  practice of other  businesses of similar  character
and size, all of those properties useful or necessary to its business,  and from
time to time,  such Loan  Party  will  make or cause to be made all  appropriate
repairs, renewals or replacements thereof.

                           8.1.5    Maintenance of Patents, Trademarks, Etc.

     Each  Loan  Party  shall,  and shall  cause  each of its  Subsidiaries  to,
maintain in full
force  and  effect  all  patents,   trademarks,   service  marks,  trade  names,
copyrights, licenses, franchises, permits and other authorizations necessary for
the ownership and operation of its  properties and business if the failure so to
maintain the same would constitute a Material Adverse Change.

                           8.1.6    Visitation Rights.

     Each Loan Party shall,  and shall cause each of its Subsidiaries to, permit
any  of  the  officers  or  authorized   employees  or  representatives  of  the
Administrative  Agent or any of the  Lenders  to visit  and  inspect  any of its
properties  and to examine  and make  excerpts  from its books and  records  and
discuss its business  affairs,  finances and accounts with its officers,  all in
such detail and at such times and as often as any of the Lenders may  reasonably
request,  provided that each Lender shall provide the Borrower, the Co-Borrowers
and the  Administrative  Agent  with  reasonable  notice  prior to any  visit or
inspection.  In the event any  Lender  desires  to  conduct an audit of any Loan
Party, such Lender shall conduct such audit  contemporaneously with any audit to
be performed by the Administrative Agent.

                           8.1.7    Keeping of Records and Books of Account.

     The Borrower  shall,  and shall cause each  Subsidiary  of the Borrower to,
maintain and keep proper  books of record and account  which enable the Borrower
and its  Subsidiaries to issue financial  statements in accordance with GAAP and
as  otherwise   required  by  applicable   Laws  of  any  Official  Body  having
jurisdiction  over the Borrower or any Subsidiary of the Borrower,  and in which
full, true and correct entries shall be made in all material respects of all its
dealings and business and financial affairs.

                           8.1.8    Plans and Benefit Arrangements.

     The  Borrower  shall,  and shall cause each other member of the ERISA Group
to,  comply with ERISA,  the  Internal  Revenue Code and other  applicable  Laws
applicable to Plans and Benefit Arrangements except where such failure, alone or
in conjunction  with any other failure,  would not result in a Material  Adverse
Change.  Without  limiting the generality of the  foregoing,  the Borrower shall
cause all of its Plans and all Plans maintained by any member of the ERISA Group
to be funded in accordance  with the minimum  funding  requirements of ERISA and
shall  make,  and cause  each  member of the  ERISA  Group to make,  in a timely
manner, all contributions due to Plans,  Benefit  Arrangements and Multiemployer
Plans.

                           8.1.9    Compliance with Laws.

     Each Loan Party shall,  and shall cause each of its Subsidiaries to, comply
with all applicable  Laws,  including all  Environmental  Laws, in all respects,
provided  that it shall not be deemed to be a violation of this Section 8.1.9 if
any  failure  to  comply  with any Law would  not  result  in fines,  penalties,
remediation costs,  other similar  liabilities or injunctive relief which in the
aggregate would constitute a Material Adverse Change.

                           8.1.10   Use of Proceeds.

8.1.10.1 General.

     The Loan  Parties  will use the  Letters of Credit and the  proceeds of the
Loans only for (i) general corporate  purposes and for working capital,  (ii) to
finance Permitted Acquisitions,  or (iii) to develop additional retail locations
in  connection  with the  business  of the Loan  Parties  described  in Schedule
8.2.10. The Loan Parties shall not use the Letters of Credit and the proceeds of
the Loans for any purposes which contravenes any applicable Law or any provision
hereof.

                                    8.1.10.2Margin Stock.

     The Loan Parties shall not use the proceeds of the Loans to purchase margin
stock as more fully provided in Section 6.1.10.

                                    8.1.10.3Section 20 Subsidiaries.

     The Loan Parties will not,  directly or indirectly,  use any portion of the
proceeds of the Loans (i) knowingly to purchase any Ineligible Securities from a
Section 20  Subsidiary  during any  period in which such  Section 20  Subsidiary
makes a market in such Ineligible Securities,  (ii) knowingly to purchase during
the underwriting or placement period Ineligible Securities being underwritten or
privately  placed by a  Section  20  Subsidiary,  or (iii) to make  payments  of
principal or interest on Ineligible Securities  underwritten or privately placed
by as Section 20  Subsidiary  and issued by or for the benefit of any Loan Party
or any Affiliate of any Loan Party.

                           8.1.11   Further Assurances.

     Each Loan  Party  shall,  from  time to time,  at its  expense,  faithfully
preserve and
protect the  Administrative  Agent's Lien on and Prior Security  Interest in the
Collateral  as a  continuing  first  priority  perfected  Lien,  subject only to
Permitted Liens,  and shall do such other acts and things as the  Administrative
Agent in its sole  discretion  may deem necessary or advisable from time to time
in order to  preserve,  perfect  and protect  the Liens  granted  under the Loan
Documents  and to exercise and enforce its rights and remedies  thereunder  with
respect to the Collateral.

                           8.1.12   Subordination of Intercompany Loans.

     Each  Loan  Party  shall  cause  any  intercompany  Indebtedness,  loans or
advances  owed by any Loan  Party to any  other  Loan  Party to be  subordinated
pursuant to the terms of the Intercompany Subordination Agreement.

                           8.1.13   Interest Rate Protection.

                           Within thirty (30) days after the Closing  Date,  the
Loan Parties shall enter into one
or more interest rate protection  agreements with one or more of the Lenders and
with the prior consent of the  Administrative  Agent, which consent shall not be
unreasonably  withheld.  Such interest rate protection agreements shall be in an
amount such that when aggregated with the interest rate protection agreements of
the Borrower in effect on the Closing Date, provide for interest rate protection
in a notional  principal  amount of at least  $125,000,000  (the  interest  rate
protection  agreements  in effect on the  Closing  Date and those  entered  into
pursuant to this Section  8.1.13 are  collectively  referred to as the "Interest
Rate  Protection  Agreements").  Such Interest Rate  Protection  Agreement shall
contain such terms and  conditions as shall be acceptable to the  Administrative
Agent.  Documentation  for the Interest Rate Protection  Agreement shall be in a
standard  International Swap Dealer Association  Agreement and shall provide for
the method of  calculating  the  reimbursable  amount of the  provider's  credit
exposure in a reasonable and customary  manner.  Such financial  institution (if
other  than a Lender)  may be  granted a  security  interest  in the  Collateral
pursuant  to the Loan  Documents  and receive a Lien pari passu with the Lien of
the Administrative Agent upon terms acceptable to the Administrative Agent.


                  8.2      Negative Covenants.

                  The Loan Parties,  jointly and  severally,  covenant and agree
that until payment in full of the Loans, Reimbursement Obligations and Letter of
Credit Borrowings and interest thereon, expiration or termination of all Letters
of Credit,  satisfaction of all of the Loan Parties' other Obligations hereunder
and  termination  of the  Commitments,  the Loan  Parties  shall comply with the
following negative covenants:

                           8.2.1    Indebtedness.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to,  at any time  create,  incur,  assume  or  suffer to exist any
Indebtedness, except:

     (i) Indebtedness under the Loan Documents;

     (ii) Existing  Indebtedness  as set forth on Schedule 8.2.1  (including any
extensions  or  renewals  thereof,  provided  there is no increase in the amount
thereof  or other  significant  change in the  terms  thereof  unless  otherwise
specified on Schedule 8.2.1;

     (iii) Capitalized and operating leases as and to the extent permitted under
Section 8.2.15;

     (iv)  Indebtedness   secured  by  Purchase  Money  Security  Interests  not
exceeding $100,000;

     (v)   Indebtedness  of  a  Loan  Party  to  another  Loan  Party  which  is
subordinated in accordance with the provisions of Section 8.1.12; and

     (vi)  Indebtedness  incurred  in  connection  with  Permitted  Acquisitions
provided  that after giving  effect  thereto,  no Potential  Default or Event of
Default exists.

                           8.2.2    Liens.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries to, at any time create,  incur,  assume or suffer to exist any Lien
on any of its property or assets, tangible or intangible, now owned or hereafter
acquired, or agree or become liable to do so, except Permitted Liens.

                           8.2.3    Guaranties.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to, at any time,  directly or  indirectly,  become or be liable in
respect of any Guaranty,  or assume,  guarantee,  become surety for,  endorse or
otherwise agree,  become or remain directly or contingently  liable upon or with
respect to any  obligation  or  liability  of any other  Person,  except for (i)
Guaranties  of  Indebtedness  of the  Loan  Parties  permitted  hereunder,  (ii)
Guaranties  of  Subordinated  Debt in existence on the Closing  Date,  and (iii)
Guaranties of Indebtedness permitted under Section 8.2.1(vi).

                           8.2.4    Loans and Investments.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to, at any time make or suffer to remain  outstanding  any loan or
advance to, or purchase,  acquire or own any stock,  bonds,  notes or securities
of,  or any  partnership  interest  (whether  general  or  limited)  or  limited
liability  company  interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except:

     (i) trade  credit  extended on usual and  customary  terms in the  ordinary
course of business;

     (ii) advances to employees to meet expenses  incurred by such  employees in
the ordinary course of business;

                                    (iii)   Permitted Acquisitions;

                                    (iv)    Permitted Investments; and

     (v) loans, advances and investments in other Loan Parties, provided
however,  that additional loans,  advances and investments in Action Rent-to-Own
Holdings of South Carolina, Inc., a South Carolina corporation, shall be limited
to $500,000 in the aggregate.

                           8.2.5    Dividends and Related Distributions.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to,  make or pay,  or agree to become or remain  liable to make or
pay,  any  dividend  or  other  distribution  of any  nature  (whether  in cash,
property,  securities or otherwise) on account of or in respect of its shares of
capital stock,  partnership  interests or limited liability company interests on
account of the purchase, redemption,  retirement or acquisition of its shares of
capital stock (or warrants,  options or rights therefor),  partnership interests
or limited liability company interests, except that (i) the Loan Parties may pay
dividends or other  distributions  payable to another  Loan Party,  and (ii) the
Borrower may pay  principal,  interest or dividends  on the  Subordinated  Debt,
subject to (y) the  restrictions  on  prepayments  in Section 8.2.22 and (z) the
restrictions on payments  contained in the  subordination  and other  provisions
contained in the Subordinated Loan Documents.

     8.2.6 Liquidations, Mergers, Consolidations, Acquisitions.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries to, dissolve,  liquidate or wind-up its affairs,  or become a party
to any merger or consolidation,  or acquire by purchase,  lease or otherwise all
or  substantially  all of the  assets  or  capital  stock of any  other  Person,
provided that

     (1)......any  Loan Party other than the  Borrower and the  Co-Borrower  may
consolidate  or merge into  another Loan Party which is  wholly-owned  by one or
more of the other  Loan  Parties,  and  Rentavision  may merge with and into the
Borrower so long as the Borrower is the surviving  corporation,  provided,  that
Borrower and the Co-Borrowers shall deliver to the  Administrative  Agent copies
of the applicable merger or consolidation documentation within five (5) Business
Days  after  the  effective  date  of  such  merger  or  consolidation  and  the
appropriate Loan Parties shall promptly thereafter (but in no event in less than
five (5)  Business  Days after the  Administrative  Agent's  request  therefore)
execute and deliver to the Administrative  Agent new UCC-1 financing  statements
or  amendments  to filed  UCC-1  financing  statements,  as  appropriate  in the
discretion  of the  Administrative  Agent,  and take  such  other  action  as is
necessary to maintain  first priority Liens in the assets of the parties to such
merger or consolidation; and

     (2)......any Loan Party may acquire,  whether by purchase or by merger, (A)
all of the ownership  interests of another  Person or (B)  substantially  all of
assets of another Person or of a business or division of another Person (each an
"Permitted  Acquisition"),  provided that each of the following  requirements is
met:

     (i) such Person shall be a corporation,  limited liability company or other
entity with respect to  applicable  state law  providing  that the owners of all
stock or other  ownership  interests  in such entity shall not be liable for any
obligations of such entity or for the claims of any creditors thereof,

     (ii) if the Loan  Parties are  acquiring  the  ownership  interests in such
Person, such Person shall execute a Guarantor Joinder and join this Agreement as
a Guarantor pursuant to Section 11.18 and such Person and its owners shall grant
Liens in the assets and stock or other  ownership  interests  in such Person and
otherwise  comply  with  Section  11.18 on or before the date of such  Permitted
Acquisition,

     (iii) the board of directors  or other  equivalent  governing  body of such
Person shall have approved such Permitted Acquisition and the Loan Parties shall
have  delivered to the Lenders  written  evidence of such approval prior to such
Permitted Acquisition,

     (iv) the business  acquired,  or the business conducted by the Person whose
ownership  interests are being acquired,  as applicable,  shall be substantially
the same as one or more line or lines of business  conducted by the Loan Parties
and shall comply with Section 8.2.10,

     (v) no Potential  Default or Event of Default shall exist immediately prior
to and after giving effect to such Permitted Acquisition,

     (vi) the Borrower and the Co-Borrowers  shall have given the Administrative
Agent  written  notice of the  acquisition  at least  five (5) days prior to its
consummation,  which notice shall include a quarterly compliance  certificate of
the  Borrower in the form of Exhibit  8.3.4 which  evidences  that after  giving
effect  to the  Permitted  Acquisition  and any  Loans to be made in  connection
therewith,  the Borrower is not in default with respect the  covenants set forth
in Sections 8.2.16,

     (vii)  any  Consideration  given  by  the  Loan  Parties  in  the  form  of
Indebtedness  to be paid  at a date  after  the  closing  date of the  Permitted
Acquisition  shall be subordinated  to the Loans and other  Obligations on terms
and conditions satisfactory to the Administrative Agent,

     (viii) the Loan Parties  shall have  delivered to the Lenders such opinions
of counsel in form and substance  satisfactory  to the  Administrative  Agent or
such other evidence as shall be satisfactory to the Administrative  Agent in its
sole  discretion that the Loan Parties are in compliance with all applicable Law
in any  additional  states  in which  the Loan  Parties  do  business  after the
consummation of the Permitted Acquisition,

     (ix) the business  acquired,  or the business conducted by the Person whose
ownership  interests are being  acquired,  as applicable,  shall be permitted by
Section 8.2.10, and

     (x) if after giving effect to a Permitted Acquisition the Leverage Ratio is
greater than or equal to 2.0 to 1.0, the Consideration given by the Loan Parties
for such Permitted  Acquisition shall not exceed $20,000,000 in value, and after
giving effect to such Permitted Acquisition,  the aggregate  Consideration given
by the Loan Parties for all Permitted  Acquisitions  made during the then fiscal
quarter of the Permitted  Acquisition and during the prior three fiscal quarters
shall not exceed $50,000,000.

                           8.2.7    Dispositions of Assets or Subsidiaries.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries to, sell, convey,  assign,  lease, abandon or otherwise transfer or
dispose of,  voluntarily  or  involuntarily,  any of its  properties  or assets,
tangible  or  intangible   (including  sale,   assignment,   discount  or  other
disposition of accounts,  contract rights,  chattel paper,  equipment or general
intangibles with or without  recourse or of capital stock,  shares of beneficial
interest,  partnership  interests or limited  liability  company  interests of a
Subsidiary of such Loan Party), except:

     (i) transactions  involving the sale of inventory in the ordinary course of
business;

     (ii) any sale,  transfer,  rental or lease of assets in the ordinary course
of  business  which are no longer  necessary  or required in the conduct of such
Loan Party's or such Subsidiary's business,  including,  without limitation, the
Real Property located at 3230 West Lake Road, Erie, Pennsylvania;

     (iii) any sale,  transfer or lease of assets by any wholly owned Subsidiary
of such Loan Party to another Loan Party;

     (iv) any  sale,  transfer  or lease of  assets  in the  ordinary  course of
business  which does not cause the aggregate  market value or the aggregate book
value of all such  sales,  transfers  and  leases in any  fiscal  year to exceed
$5,000,000 and which are replaced by substitute assets acquired or leased within
the parameters of Section 8.2.15, provided such substitute assets are subject to
the Lenders' Prior Security Interest; or

     (v) any sale,  transfer or lease of assets,  other than those  specifically
excepted  pursuant to clauses (i) through  (iv) above,  which is approved by the
Required Lenders so long as the after-tax  proceeds (as reasonably  estimated by
the Borrower and the Co-Borrowers) are applied as a mandatory  prepayment of the
Term Loans in accordance with the provisions of Section 5.5.2 above.

                           8.2.8    Affiliate Transactions.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries to, enter into or carry out any transaction  (including  purchasing
property or services  from or selling  property or services to any  Affiliate of
any  Loan  Party or other  Person)  unless  such  transaction  is not  otherwise
prohibited by this Agreement, is entered into in the ordinary course of business
upon  fair and  reasonable  arm's-length  terms and  conditions  which are fully
disclosed to the  Administrative  Agent and is in accordance with all applicable
Law.

     8.2.9 Subsidiaries, Partnerships and Joint Ventures.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to, own or create  directly or indirectly any  Subsidiaries  other
than (i) any  Subsidiary  which has joined this  Agreement  as  Guarantor on the
Closing Date; and (ii) any Subsidiary  formed after the Closing Date which joins
this  Agreement  as a Guarantor  pursuant to Section  11.18,  provided  that the
Required  Lenders  shall have  consented to such  formation and joinder and that
such Subsidiary and the Loan Parties, as applicable, shall grant and cause to be
perfected  first priority Liens to the  Administrative  Agent for the benefit of
the Lenders in the assets held by, and stock of or other ownership interests in,
such  Subsidiary.  Each of the Loan  Parties  shall  not  become or agree to (1)
become a general or  limited  partner  in any  general  or limited  partnership,
except that the Loan  Parties  may be general or limited  partners in other Loan
Parties,  (2) become a member or manager of, or hold a limited liability company
interest in, a limited  liability  company,  except that the Loan Parties may be
members or managers of, or hold limited  liability  company  interests in, other
Loan Parties, or (3) become a joint venturer or hold a joint venture interest in
any joint venture.

                           8.2.10   Continuation of or Change in Business.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries to,
engage  in any  business  other  than  the  Line of  Business  substantially  as
conducted  and  operated  by such Loan Party or  Subsidiary  during the  present
fiscal  year,  and such Loan Party or  Subsidiary  shall not permit any material
change in such business.

                           8.2.11   Plans and Benefit Arrangements.

                           Each of the Loan  Parties  shall  not,  and shall not
permit any of its Subsidiaries to:

     (i) fail to satisfy the minimum funding requirements of ERISA and the
Internal Revenue Code with respect to any Plan;

     (ii) request a minimum  funding  waiver from the Internal  Revenue  Service
with respect to any Plan;

     (iii) engage in a Prohibited Transaction with any Plan, Benefit Arrangement
or   Multiemployer   Plan  which,   alone  or  in  conjunction  with  any  other
circumstances or set of circumstances  resulting in liability under ERISA, would
constitute a Material Adverse Change;

     (iv)  permit  the  aggregate   actuarial   present  value  of  all  benefit
liabilities  (whether  or not  vested)  under  each Plan,  determined  on a plan
termination  basis, as disclosed in the most recent  actuarial  report completed
with respect to such Plan, to exceed,  as of any actuarial  valuation  date, the
fair market value of the assets of such Plan;

     (v) fail to make when due any contribution to any  Multiemployer  Plan that
the  Borrower or any member of the ERISA Group may be required to make under any
agreement relating to such Multiemployer Plan, or any Law pertaining thereto;

     (vi) withdraw  (completely  or partially)  from any  Multiemployer  Plan or
withdraw (or be deemed  under  Section  4062(e) of ERISA to  withdraw)  from any
Multiple  Employer  Plan,  where  any such  withdrawal  is likely to result in a
material liability of the Borrower or any member of the ERISA Group;

     (vii)  terminate,  or institute  proceedings to terminate,  any Plan, where
such termination is likely to result in a material  liability to the Borrower or
any member of the ERISA Group;

     (viii) make any  amendment  to any Plan with  respect to which  security is
required under Section 307 of ERISA; or

     (ix)  fail to give  any  and all  notices  and  make  all  disclosures  and
governmental  filings  required under ERISA or the Internal  Revenue Code, where
such failure is likely to result in a Material Adverse Change.

                           8.2.12   Fiscal Year.

     The  Borrower  and the  Co-Borrowers  shall  not,  and shall not permit any
Subsidiary  of the  Borrower  to,  change its fiscal year from the  twelve-month
period beginning October 1 and ending September 30.

                           8.2.13   Issuance of Stock.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to,  issue  any  additional  shares  of its  capital  stock or any
options,  warrants or other rights in respect thereof,  except that the Borrower
may issue additional  shares of capital stock (i) for Permitted  Acquisitions in
accordance  with the  provisions  of Section  8.2.6,  (ii) for  distribution  to
employees  as provided  for under the stock  option  plans and 401(k)  plans set
forth on Schedule  6.1.21 as in effect on the Closing Date,  (iii) in connection
with the  conversion  of  Indebtedness  incurred  under the NWB  Indenture  into
capital stock of the Borrower pursuant to the terms of the NWB Subordinated Loan
Documents,  (iv) in connection  with the Mass Mutual  Warrants or (v) if the net
proceeds  of the  issuance  are used by the  Borrower  to  reduce  (a) the Loans
outstanding under this Agreement, and (b) the Commitments of the Lenders.

                           8.2.14   Changes in Organizational Documents.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries   to,  amend  in  any  respect  its   certificate  or  articles  of
incorporation  (including  any  provisions  or  resolutions  relating to capital
stock),  by-laws,  certificate of limited  partnership,  partnership  agreement,
certificate  of  formation,  articles  of  organization,   operating  agreement,
regulations or other organizational  documents without providing at least thirty
(30) calendar  days' prior written  notice to the  Administrative  Agent and the
Lenders  and,  in the event  such  change  would be  adverse  to the  Lenders as
determined by the  Administrative  Agent in its sole  discretion,  obtaining the
prior written consent of the Required Lenders.

                           8.2.15   Capital Expenditures and Leases.

     Excluding  the  purchase of Rental  Merchandise,  each of the Loan  Parties
shall not,  and shall not permit any of its  Subsidiaries  to, make any payments
exceeding  $25,000,000  in the  aggregate  in any fiscal  year on account of the
purchase or lease of any assets which if purchased would constitute fixed assets
or which if  leased  would  constitute  a  capitalized  lease,  or any  payments
exceeding  $1,000,000  in the  aggregate  in any  fiscal  year on account of the
rental or lease of real or personal  property of any other Person which does not
constitute  a  capitalized  lease  (other than leases of retail  store sites and
motor  vehicles),  and all such  capital  expenditures  and leases shall be made
under usual and customary terms and in the ordinary course of business.

                           8.2.16   Maximum Leverage Ratio (Total Funded Debt).

     The Loan Parties  shall not permit the  Leverage  Ratio of the Borrower and
its  Subsidiaries  to  exceed  the ratio  set  forth  below for the four  fiscal
quarters then ended.
<TABLE>
<CAPTION>


                                     Period                                 Ratio

<S>                                      <C>   <C>                      <C>     <C>
                    Closing Date through 12/31/99                       3.50 to 1.00

                    1/1/00 through 6/30/00                              3.25 to 1.00

                    7/1/00 through 6/30/01                              3.00 to 1.00

                    7/1/01 through 6/30/02                              2.75 to 1.00

                    7/1/02 and thereafter                               2.50 to 1.00
</TABLE>


                           8.2.17   Subordinated Loan Document Amendments.

     The Loan  Parties  shall not amend the terms of the NWB  Subordinated  Loan
Documents without the prior written consent of the Administrative Agent.

                           8.2.18   Minimum Interest Coverage Ratio.

     The Loan Parties  shall not permit the Interest  Coverage  Ratio to be less
than the ratio set forth  below for the four  fiscal  quarters  then  ended,  as
calculated at the end of each fiscal quarter of the Borrower.

<TABLE>
<CAPTION>

                                    Period                                 Ratio

<S>                                      <C>   <C>                     <C>     <C>
                    Closing Date through 12/31/99                      3.75 to 1.00

                    1/1/00 through 6/30/00                             4.00 to 1.00

                    7/1/00 through 12/31/00                            4.25 to 1.00

                    1/1/01 through 6/30/01                             4.50 to 1.00

                    7/1/01 through 3/31/02                             4.75 to 1.00

                    4/1/02 and thereafter                              5.00 to 1.00
</TABLE>


                           8.2.19   Minimum Net Worth.

     The Borrower shall not at any time permit Consolidated Net Worth to be less
than the
Base Net Worth.

                           8.2.20   Fixed Charge Coverage Ratio.

     The Borrower  shall not at any time permit the Fixed Charge  Coverage Ratio
to be  less  than  1.2 to 1.0  for the  four  fiscal  quarters  then  ended,  as
calculated at the end of each fiscal quarter of the Borrower.

                           8.2.21   Rental Merchandise Usage.

     The Loan Parties shall not permit the value of the Rental Merchandise under
lease pursuant to Rental Contracts to be less than (i) 70% of the total value of
Rental  Merchandise,  as  measured  at the end of  each  fiscal  quarter  of the
Borrower  commencing  December 31, 1999 through and including June 30, 2000, and
(ii) 75% of the total  value of Rental  Merchandise,  as  measured at the end of
each  fiscal  quarter  of  the  Borrower  commencing   September  30,  2000  and
thereafter.  For  purposes  of this  Section  8.2.21,  the  value of the  Rental
Merchandise  shall be as it is  recorded  on the books and  records  of the Loan
Parties, determined in accordance with GAAP.

                           8.2.22   Prepayments on Subordinated Debt.

     The Loan Parties  shall not make any  voluntary  prepayment,  redemption or
repurchase on account of any of the Subordinated  Debt,  provided however,  that
the  Borrower  may redeem the  Subordinated  Debt  incurred  pursuant to the NWB
Indenture in accordance  with the terms of the NWB Indenture so long as no Event
of Default or Potential  Default has occurred or would exist after giving effect
to the payments made to redeem such Subordinated Debt.

                  8.3      Reporting Requirements.

     The Loan  Parties,  jointly and  severally,  covenant  and agree that until
payment in full of the  Loans,  Reimbursement  Obligations  and Letter of Credit
Borrowings  and interest  thereon,  expiration or  termination of all Letters of
Credit, satisfaction of all of the Loan Parties' other Obligations hereunder and
under the other Loan  Documents and  termination  of the  Commitments,  the Loan
Parties will furnish or cause to be  furnished to the  Administrative  Agent and
each of the Lenders:

                           8.3.1    Monthly Financial Statements.

     As soon as available  and in any event  within  thirty (30)  calendar  days
after the end of each  calendar  month,  the  Borrower's  financial  statements,
consisting of a consolidated  and  consolidating  balance sheet as of the end of
such month and related  consolidated  and  consolidating  statements  of income,
stockholders' equity and cash flows for the month then ended and the fiscal year
through that date,  all in reasonable  detail and  certified  (subject to normal
year-end  adjustments)  by the  Chief  Executive  Officer,  President  or  Chief
Financial  Officer of the Borrower as having been  prepared in  accordance  with
GAAP, consistently applied, and setting forth in comparative form the respective
financial  statements  for the  corresponding  date and  period in the  previous
fiscal year.

                           8.3.2    Quarterly Financial Statements.

     As soon as available and in any event within  forty-five (45) calendar days
after the end of each of the first three  fiscal  quarters in each fiscal  year,
the  quarterly  report  of Form  10-Q  for  the  Borrower  and its  consolidated
financial  statements,  consisting of a consolidated and  consolidating  balance
sheet  as of the  end of  such  fiscal  quarter  and  related  consolidated  and
consolidating statements of income,  stockholders' equity and cash flows for the
fiscal  quarter  then  ended and the  fiscal  year  through  that  date,  all in
reasonable detail and certified  (subject to normal year-end audit  adjustments)
by the Chief  Executive  Officer,  President or Chief  Financial  Officer of the
Borrower as having been prepared in accordance with GAAP,  consistently applied,
and setting forth in comparative  form the respective  financial  statements for
the corresponding date and period in the previous fiscal year.



                           8.3.3    Annual Financial Statements.

     As soon as available and in any event within ninety (90) days after the end
of each  fiscal  year of the  Borrower,  the annual  report on Form 10-K for the
Borrower and its consolidated financial statements, consisting of a consolidated
and  consolidating  balance sheet as of the end of such fiscal year, and related
consolidated and consolidating  statements of income,  stockholders'  equity and
cash flows for the fiscal year then ended, all in reasonable  detail and setting
forth in comparative form the financial  statements as of the end of and for the
preceding  fiscal year, and certified by  PriceWaterhouseCoopers  L.L.P. or such
other  independent   certified  public  accountants  of  comparable   nationally
recognized standing  satisfactory to the Administrative  Agent in its reasonable
judgment.  The  consolidating  statement  of income  shall  include  a  schedule
detailing  the  income  by  each  retail  location  of  the  Loan  Parties.  The
certificate or report of accountants shall be free of qualifications (other than
any consistency  qualification  that may result from a change in the method used
to prepare the  financial  statements as to which such  accountants  concur) and
shall not  indicate  the  occurrence  or  existence  of any event,  condition or
contingency which would materially impair the prospect of payment or performance
of any  covenant,  agreement  or duty of any Loan  Party  under  any of the Loan
Documents.  The Loan Parties shall deliver with such  financial  statements  and
certification  by  their  accountants  a  letter  of  such  accountants  to  the
Administrative Agent and the Lenders substantially (i) to the effect that, based
upon their  ordinary and customary  examination  of the affairs of the Borrower,
performed in connection  with the  preparation  of such  consolidated  financial
statements,  and in accordance with generally accepted auditing standards,  they
are not aware of the  existence of any condition or event which  constitutes  an
Event of Default or Potential Default or, if they are aware of such condition or
event,  stating the nature thereof and  confirming  the Borrower's  calculations
with respect to the  certificate to be delivered  pursuant to Section 8.3.4 with
respect to such financial statements and (ii) to the effect that the Lenders are
intended to rely upon such  accountant's  certification  of the annual financial
statements and that such accountants  authorize the Loan Parties to deliver such
reports and certificate to the Lenders on such accountants' behalf.

                           8.3.4    Certificate of the Borrower.

     Concurrently with the financial statements of the Borrower furnished to the
Administrative  Agent and to the Lenders pursuant to Sections 8.3.2 and 8.3.3, a
certificate of the Borrower signed by the Chief Executive Officer,  President or
Chief  Financial  Officer of the Borrower,  in the form of Exhibit 8.3.4, to the
effect  that,   except  as  described   pursuant  to  Section  8.3.5,   (i)  the
representations and warranties of the Borrower contained in Section 6 and in the
other Loan Documents are true on and as of the date of such certificate with the
same effect as though such  representations  and warranties had been made on and
as of such date (except  representations  and warranties  which expressly relate
solely to an  earlier  date or time) and the Loan  Parties  have  performed  and
complied with all covenants and conditions  hereof,  (ii) no Event of Default or
Potential  Default exists and is continuing on the date of such  certificate and
(iii) containing  calculations in sufficient detail to demonstrate compliance as
of the date of such financial  statements with all financial covenants contained
in Section 8.2.


                           8.3.5    Notice of Default.

     Promptly  after any officer of any Loan Party has learned of the occurrence
of an Event of Default or Potential  Default,  a certificate signed by the Chief
Executive  Officer,  President  or Chief  Financial  Officer  of such Loan Party
setting forth the details of such Event of Default or Potential  Default and the
action which the such Loan Party proposes to take with respect thereto.

                           8.3.6    Notice of Litigation.

     Promptly  after the  commencement  thereof,  notice of all actions,  suits,
proceedings or
investigations  before or by any Official  Body or any other Person  against any
Loan Party or  Subsidiary  of any Loan  Party  which  relate to the  Collateral,
involve a claim or series of claims in excess of $100,000 or which if  adversely
determined would constitute a Material Adverse Change.

                           8.3.7    Certain Events.

                           Written notice to the Administrative Agent:

     (i) at least fourteen (14) calendar days prior thereto, with respect to any
proposed sale or transfer of assets pursuant to Section 8.2.7((iv)) or ((v)),

     (ii) within the time limits set forth in Section  8.2.14,  any amendment to
the organizational documents of any Loan Party;

                                    (iii) at least  fourteen  (14) calendar days
prior thereto, with respect to
any  change  in any Loan  Party's  locations  from the  locations  set  forth in
Schedule A to the  Security  Agreement,  other than changes  resulting  from the
consummation of a Permitted Acquisition; and

                                    (iv) at least five (5)  calendar  days prior
thereto, with respect to any
change in any Loan Party's  locations from the locations set forth in Schedule A
to the  Security  Agreement  resulting  from  the  consummation  of a  Permitted
Acquisition.

     8.3.8 Budgets, Forecasts, Other Reports and Information.

                           Promptly upon becoming available to the Borrower:

     (i) the annual budget and any forecasts or projections of the Borrower,  to
be supplied not later than sixty (60) days prior to  commencement  of the fiscal
year to which any of the foregoing may be applicable,

     (ii) any reports including  management letters submitted to the Borrower by
independent accountants in connection with any annual, interim or special audit,

     (iii) any reports, notices or proxy statements generally distributed by the
Borrower to its  stockholders  on a date no later than the date supplied to such
stockholders,  (iv) regular or periodic reports,  including Forms 10-K, 10-Q and
8-K,  registration  statements and prospectuses,  filed by the Borrower with the
Securities and Exchange Commission,

     (v) a copy of any order in any  proceeding  to which the Borrower or any of
its Subsidiaries is a party issued by any Official Body, and

     (vi) such other reports and information as any of the Lenders may from time
to time reasonably request.  The Borrower shall also notify the Lenders promptly
of the  enactment or adoption of any Law which may result in a Material  Adverse
Change.

     8.3.9 Notices Regarding Plans and Benefit Arrangements.

8.3.9.1  Certain Events.

     Promptly upon becoming aware of the occurrence  thereof,  notice (including
the nature of the event and,  when known,  any action taken or threatened by the
Internal Revenue Service or the PBGC with respect thereto) of:

     (i) any  Reportable  Event with respect to the Borrower or any other member
of the ERISA  Group  (regardless  of  whether  the  obligation  to  report  said
Reportable Event to the PBGC has been waived),

     (ii) any  Prohibited  Transaction  which could  subject the Borrower or any
other member of the ERISA Group to a civil penalty assessed  pursuant to Section
502(i) of ERISA or a tax imposed by Section 4975 of the Internal Revenue Code in
connection  with  any  Plan,  any  Benefit  Arrangement  or  any  trust  created
thereunder,

     (iii) any assertion of material  withdrawal  liability  with respect to any
Multiemployer Plan,

     (iv) any partial or complete  withdrawal from a  Multiemployer  Plan by the
Borrower  or any other  member of the ERISA  Group  under  Title IV of ERISA (or
assertion  thereof),  where  such  withdrawal  is likely  to result in  material
withdrawal liability,

     (v) any cessation of operations (by the Borrower or any other member of the
ERISA Group) at a facility in the circumstances  described in Section 4062(e) of
ERISA,

     (vi) withdrawal by the Borrower or any other member of the ERISA Group from
a Multiple Employer Plan,

     (vii) a failure by the  Borrower or any other  member of the ERISA Group to
make a payment to a Plan  required to avoid  imposition  of a Lien under Section
302(f) of ERISA,

     (viii) the adoption of an amendment to a Plan  requiring  the  provision of
security to such Plan pursuant to Section 307 of ERISA, or

     (ix) any change in the actuarial assumptions or funding methods used for
any  Plan,  where  the  effect  of such  change  is to  materially  increase  or
materially  reduce the unfunded benefit liability or obligation to make periodic
contributions.

     8.3.9.2 Notices of Involuntary Termination and Annual Reports.

     Promptly after receipt  thereof,  copies of (a) all notices received by the
Borrower  or any  other  member  of the  ERISA  Group of the  PBGC's  intent  to
terminate any Plan  administered  or maintained by the Borrower or any member of
the ERISA Group, or to have a trustee appointed to administer any such Plan; and
(b) at the request of the Administrative  Agent or any Lender each annual report
(IRS Form 5500 series) and all accompanying schedules, the most recent actuarial
reports, the most recent financial  information  concerning the financial status
of each Plan  administered  or maintained by the Borrower or any other member of
the ERISA Group, and schedules showing the amounts contributed to each such Plan
by or on behalf of the  Borrower or any other member of the ERISA Group in which
any of their  personnel  participate  or from which such  personnel may derive a
benefit, and each Schedule B (Actuarial  Information) to the annual report filed
by the Borrower or any other member of the ERISA Group with the Internal Revenue
Service with respect to each such Plan.

                           8.3.9.3  Notice of Voluntary Termination.

     Promptly upon the filing thereof, copies of any Form 5310, or any successor
or  equivalent  form to Form 5310,  filed with the PBGC in  connection  with the
termination of any Plan.

                                    9.      DEFAULT

                  9.1      Events of Default.

                  An Event of Default shall mean the  occurrence or existence of
any one or more of the  following  events or  conditions  (whatever  the  reason
therefor and whether voluntary, involuntary or effected by operation of Law):

                           9.1.1    Payments Under Loan Documents.

     The Borrower or either  Co-Borrower  shall fail to pay any principal of any
Loan  (including  mandatory   prepayments  or  the  payment  due  at  maturity),
Reimbursement Obligation or Letter of Credit Borrowing or any other amount owing
hereunder or under the other Loan Documents after such principal or other amount
becomes due in accordance  with the terms hereof or thereof,  or the Borrower or
either  Co-Borrower  shall fail to pay any  interest on any Loan,  Reimbursement
Obligation  or Letter of Credit  Borrowing  within five calendar days after such
interest becomes due in accordance with the terms hereof;

                           9.1.2    Breach of Warranty.

     Any  representation or warranty made at any time by any of the Loan Parties
herein or by any of the Loan  Parties  in any  other  Loan  Document,  or in any
certificate,  other instrument or statement furnished pursuant to the provisions
hereof or thereof,  shall prove to have been false or misleading in any material
respect as of the time it was made or furnished;

     9.1.3 Breach of Negative Covenants or Visitation Rights.

     Any of the Loan Parties shall default in the  observance or  performance of
any covenant contained in Section 8.1.6 or Section 8.2;

                           9.1.4    Breach of Other Covenants.

     Any of the Loan Parties shall default in the  observance or  performance of
any other covenant,  condition or provision hereof or of any other Loan Document
and such default  shall  continue  unremedied  for a period of ten (10) Business
Days after any officer of any Loan Party becomes aware of the occurrence thereof
(such  grace  period to be  applicable  only in the event  such  default  can be
remedied  by  corrective  action  of  the  Loan  Parties  as  determined  by the
Administrative Agent in its sole discretion);

     9.1.5 Defaults in Other Agreements or Indebtedness.

                           A default or event of default shall occur at any time
under the terms of any other
agreement  involving  borrowed  money or the  extension  of  credit or any other
Indebtedness  including  the  Subordinated  Debt  under  which any Loan Party or
Subsidiary  of any Loan Party may be  obligated  as a borrower or  guarantor  in
excess of  $300,000  in the  aggregate,  and such  breach,  default  or event of
default  consists of the  failure to pay  (beyond any period of grace  permitted
with respect thereto,  whether waived or not) any indebtedness when due (whether
at stated  maturity,  by acceleration or otherwise) or if such breach or default
permits or causes the  acceleration  of any  indebtedness  (whether  or not such
right shall have been waived) or the termination of any commitment to lend;

                           9.1.6    Final Judgments or Orders.

     Any  final  judgments  or  orders  for the  payment  of money in  excess of
$100,000  in the  aggregate  shall be entered  against any Loan Party by a court
having jurisdiction in the premises, which judgment is not discharged,  vacated,
bonded or stayed  pending  appeal  within a period of thirty  (30) days from the
date of entry;

                           9.1.7    Loan Document Unenforceable.

     Any  of the  Loan  Documents  or any  provision  relating  to or  affecting
subordination  contained in any  Subordinated  Loan Documents  shall cease to be
legal, valid and binding agreements  enforceable against the party executing the
same or such  party's  successors  and  assigns  (as  permitted  under  the Loan
Documents) in accordance  with the respective  terms thereof or shall in any way
be  terminated  (except in  accordance  with its terms) or become or be declared
ineffective  or  inoperative  or shall in any way be  challenged or contested or
cease to give or provide  the  respective  Liens,  security  interests,  rights,
titles,  interests,  remedies,  powers  or  privileges  intended  to be  created
thereby;

     9.1.8 Uninsured Losses; Proceedings Against Assets.

     There  shall  occur any  material  uninsured  damage  to or loss,  theft or
destruction  of any of the Collateral in excess of $250,000 or the Collateral or
any  other  of the  Loan  Parties'  or any of  their  Subsidiaries'  assets  are
attached,  seized,  levied upon or subjected to a writ or distress  warrant;  or
such come within the possession of any receiver,  trustee, custodian or assignee
for the benefit of creditors  and the same is not cured within  thirty (30) days
thereafter;

                           9.1.9    Notice of Lien or Assessment.

                           A notice of Lien or  assessment in excess of $100,000
which is not a Permitted Lien is
filed of record with  respect to all or any part of any of the Loan  Parties' or
any of their  Subsidiaries'  assets by the  United  States,  or any  department,
agency or instrumentality  thereof, or by any state, county,  municipal or other
governmental agency, including the PBGC, or any taxes or debts owing at any time
or times  hereafter to any one of these becomes payable and the same is not paid
within thirty (30) days after the same becomes payable;

                           9.1.10   Insolvency.

     Any Loan Party or any  Subsidiary  of a Loan Party  ceases to be solvent or
admits in writing its inability to pay its debts as they mature;

     9.1.11 Events Relating to Plans and Benefit Arrangements.

     Any  of  the  following  occurs:   (i)  any  Reportable  Event,  which  the
Administrative Agent
determines in good faith constitutes  grounds for the termination of any Plan by
the PBGC or the  appointment  of a trustee to  administer or liquidate any Plan,
shall  have  occurred  and be  continuing;  (ii)  proceedings  shall  have  been
instituted or other action taken to terminate any Plan, or a termination  notice
shall  have  been  filed  with  respect  to any Plan;  (iii) a trustee  shall be
appointed to administer  or liquidate any Plan;  (iv) the PBGC shall give notice
of its intent to  institute  proceedings  to  terminate  any Plan or Plans or to
appoint a trustee to administer  or liquidate any Plan;  and, in the case of the
occurrence  of  (i),  (ii),  (iii)  or  (iv)  above,  the  Administrative  Agent
determines  in  good  faith  that  the  amount  of  the   Borrower's  or  either
Co-Borrower's  liability is likely to exceed 10% of Consolidated  Net Worth less
intangibles;  (v) the  Borrower  or any member of the ERISA  Group shall fail to
make any  contributions  when due to a Plan or a  Multiemployer  Plan;  (vi) the
Borrower or any other  member of the ERISA Group shall make any  amendment  to a
Plan with  respect to which  security  is required  under  Section 307 of ERISA;
(vii) the  Borrower  or any  other  member of the  ERISA  Group  shall  withdraw
completely or partially from a  Multiemployer  Plan;  (viii) the Borrower or any
other member of the ERISA Group shall withdraw (or shall be deemed under Section
4062(e)  of  ERISA to  withdraw)  from a  Multiple  Employer  Plan;  or (ix) any
applicable  Law is adopted,  changed or  interpreted  by any Official  Body with
respect to or  otherwise  affecting  one or more Plans,  Multiemployer  Plans or
Benefit  Arrangements  and, with respect to any of the events  specified in (v),
(vi), (vii),  (viii) or (ix), the Administrative  Agent determines in good faith
that any such occurrence would be reasonably  likely to materially and adversely
affect the total enterprise represented by the Borrower and the other members of
the ERISA Group;

                           9.1.12   Cessation of Business.

     Any Loan Party or Subsidiary of a Loan Party ceases to conduct its business
as contemplated,  except as expressly permitted under Section 8.2.6 or 8.2.7, or
any Loan Party or Subsidiary  of a Loan Party is enjoined,  restrained or in any
way  prevented by court order from  conducting  all or any material  part of its
business  and  such  injunction,  restraint  or  other  preventive  order is not
dismissed within thirty (30) days after the entry thereof;

                           9.1.13   Change of Control.

     (i) An  Acquiring  Person  shall have  acquired,  or obtained  the right to
acquire,  legal or beneficial ownership of 50% or more of the outstanding shares
of the  Voting  Stock  of the  Borrower;  (ii) all the  outstanding  partnership
interests and capital  stock,  as the case may be, of either  Co-Borrower  shall
cease to be owned  beneficially  and of record by the Borrower,  the  Borrower's
direct  and  indirect  wholly-owned  Subsidiaries  or  some  combination  of the
foregoing,  or (iii) within a period of twelve (12) consecutive calendar months,
individuals  who were  directors of the Borrower on the first day of such period
shall cease to constitute a majority of the board of directors of the Borrower;

                           9.1.14   Involuntary Proceedings.

                           A proceeding  shall have been  instituted  in a court
having jurisdiction in the premises
seeking a decree or order for relief in respect of any Loan Party or  Subsidiary
of a  Loan  Party  in an  involuntary  case  under  any  applicable  bankruptcy,
insolvency,  reorganization  or other similar law now or hereafter in effect, or
for the appointment of a receiver,  liquidator,  assignee,  custodian,  trustee,
sequestrator,  conservator (or similar official) of any Loan Party or Subsidiary
of a Loan Party for any substantial part of its property,  or for the winding-up
or liquidation of its affairs,  and such proceeding shall remain  undismissed or
unstayed  and in effect  for a period of thirty  (30)  consecutive  days or such
court shall enter a decree or order  granting  any of the relief  sought in such
proceeding; or

                           9.1.15   Voluntary Proceedings.

     Any Loan Party or  Subsidiary  of a Loan Party  shall  commence a voluntary
case  under  any  applicable  bankruptcy,  insolvency,  reorganization  or other
similar law now or hereafter in effect,  shall  consent to the entry of an order
for relief in an  involuntary  case under any such law, or shall  consent to the
appointment or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator,  conservator (or other similar official) of itself or for
any substantial part of its property or shall make a general  assignment for the
benefit of  creditors,  or shall fail  generally to pay its debts as they become
due, or shall take any action in furtherance of any of the foregoing.

                  9.2      Consequences of Event of Default.

     9.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization
Proceedings.

     If an Event of Default  specified under Sections 9.1.1 through 9.1.13 shall
occur and be continuing, the Lenders and the Administrative Agent shall be under
no further  obligation to make Loans or issue Letters of Credit, as the case may
be, and the  Administrative  Agent  may,  and upon the  request of the  Required
Lenders,  shall (i) by  written  notice to the  Borrower  and the  Co-Borrowers,
declare  the  unpaid  principal  amount of the Notes  then  outstanding  and all
interest  accrued  thereon,  any unpaid fees and all other  Indebtedness  of the
Borrower and the  Co-Borrowers  to the Lenders  hereunder  and  thereunder to be
forthwith  due  and  payable,  and  the  same  shall  thereupon  become  and  be
immediately due and payable to the Administrative  Agent for the benefit of each
Lender without presentment, demand, protest or any other notice of any kind, all
of which are hereby  expressly  waived,  and (ii)  require the  Borrower and the
Co-Borrowers to, and the Borrower and the Co-Borrowers shall thereupon,  deposit
in a  non-interest  bearing  account  with  the  Administrative  Agent,  as cash
collateral for its Obligations under the Loan Documents,  an amount equal to the
maximum amount currently or at any time thereafter  available to be drawn on all
outstanding  Letters of Credit,  and the  Borrower and the  Co-Borrowers  hereby
pledge  to  the  Administrative  Agent  and  the  Lenders,  and  grants  to  the
Administrative  Agent and the Lenders a security  interest  in, all such cash as
security for such Obligations. Upon the curing of all existing Events of Default
to the  satisfaction of the Required  Lenders,  the  Administrative  Agent shall
return such cash collateral to the Borrower and the Co-Borrowers; and

     9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings.

     If an Event of  Default  specified  under  Section  9.1.14 or 9.1.15  shall
occur, the
Lenders shall be under no further  obligations  to make Loans  hereunder and the
unpaid  principal  amount of the Notes then outstanding and all interest accrued
thereon,  any unpaid fees and all other  Indebtedness  of the  Borrower  and the
Co-Borrowers  to the Lenders  hereunder and thereunder  shall be immediately due
and payable, without presentment,  demand, protest or notice of any kind, all of
which are hereby expressly waived; and

                           9.2.3    Set-off.

     If an Event of Default  shall occur and be  continuing,  any Lender to whom
any  Obligation  is owed by any Loan  Party  hereunder  or under any other  Loan
Document or any  participant  of such  Lender  which has agreed in writing to be
bound by the provisions of Section 10.13 and any branch, Subsidiary or Affiliate
of such Lender or  participant  anywhere  in the world shall have the right,  in
addition to all other rights and remedies  available  to it,  without  notice to
such Loan Party,  to set-off against and apply to the then unpaid balance of all
the Loans and all other Obligations of the Borrower and the Co-Borrowers and the
other Loan Parties hereunder or under any other Loan Document any debt owing to,
and any other  funds held in any manner for the account  of, the  Borrower,  the
Co-Borrowers  or such other Loan Party by such Lender or  participant or by such
branch,  Subsidiary  or Affiliate,  including all funds in all deposit  accounts
(whether time or demand,  general or special,  provisionally credited or finally
credited,  or  otherwise)  now or  hereafter  maintained  by the  Borrower,  the
Co-Borrowers  or such other Loan Party for its own  account  (but not  including
funds held in custodian or trust  accounts)  with such Lender or  participant or
such branch,  Subsidiary or Affiliate. Such right shall exist whether or not any
Lender or the  Administrative  Agent  shall  have  made any  demand  under  this
Agreement or any other Loan Document, whether or not such debt owing to or funds
held for the account of the Borrower,  the Co-Borrowers or such other Loan Party
is or are matured or unmatured  and  regardless  of the existence or adequacy of
any Collateral, Guaranty or any other security, right or remedy available to any
Lender or the Administrative Agent; and

                           9.2.4    Suits, Actions, Proceedings.

     If an Event of Default  shall occur and be  continuing,  and whether or not
the
Administrative  Agent shall have  accelerated  the maturity of Loans pursuant to
any of the foregoing provisions of this Section 9.2, the Administrative Agent or
any Lender, if owed any amount with respect to the Notes, may proceed to protect
and enforce its rights by suit in equity, action at law and/or other appropriate
proceeding,  whether for the specific  performance  of any covenant or agreement
contained in this  Agreement or the Notes,  including as permitted by applicable
Law the obtaining of the ex parte appointment of a receiver, and, if such amount
shall have become  due,  by  declaration  or  otherwise,  proceed to enforce the
payment  thereof or any other  legal or  equitable  right of the  Administrative
Agent or such Lender; and

                           9.2.5    Application of Proceeds.

     From and  after the date on which  the  Administrative  Agent has taken any
action  pursuant  to this  Section  9.2 and  until all  Obligations  of the Loan
Parties  have  been  paid  in  full,  any  and  all  proceeds  received  by  the
Administrative  Agent from any sale or other  disposition of the Collateral,  or
any part  thereof,  or the  exercise of any other  remedy by the  Administrative
Agent, shall be applied as follows:

     (i) first,  to  reimburse  the  Administrative  Agent and the  Lenders  for
out-of-pocket costs, expenses and disbursements, including reasonable attorneys'
and paralegals' fees and legal expenses, incurred by the Administrative Agent or
the Lenders in connection  with realizing on the Collateral or collection of any
Obligations  of  any of the  Loan  Parties  under  any  of the  Loan  Documents,
including  advances made by the Lenders or any one of them or the Administrative
Agent for the reasonable  maintenance,  preservation,  protection or enforcement
of,  or  realization  upon,  the  Collateral,   including  advances  for  taxes,
insurance,  repairs  and the like and  reasonable  expenses  incurred to sell or
otherwise  realize on, or prepare for sale or other  realization  on, any of the
Collateral;

     (ii) second,  to the repayment of all  Indebtedness  then due and unpaid of
the Loan  Parties to the Lenders  incurred  under this  Agreement  or any of the
other  Loan  Documents,  whether  of  principal,  interest,  fees,  expenses  or
otherwise,  in such  manner as the  Administrative  Agent may  determine  in its
discretion; and

     (iii) the balance, if any, as required by Law.

                           9.2.6    Other Rights and Remedies.

     In addition to all of the rights and remedies  contained in this  Agreement
or  in  any  of  the  other  Loan  Documents   (including  the  Mortgage),   the
Administrative  Agent  shall have all of the rights  and  remedies  of a secured
party under the Uniform  Commercial  Code or other  applicable Law, all of which
rights  and  remedies  shall be  cumulative  and  non-exclusive,  to the  extent
permitted  by Law.  The  Administrative  Agent may,  and upon the request of the
Required  Lenders  shall,  exercise  all  post-default  rights  granted  to  the
Administrative Agent and the Lenders under the Loan Documents or applicable Law.

                  9.3      Notice of Sale.

                  Any notice required to be given by the Administrative Agent of
a sale,  lease,  or other  disposition  of the  Collateral or any other intended
action  by the  Administrative  Agent,  if  given  ten (10)  days  prior to such
proposed  action,  shall  constitute  commercially  reasonable  and fair  notice
thereof to the Borrower and the Co-Borrowers.

                                            10.      THE AGENT

                  10.1     Appointment.

                  Each  Lender  hereby  irrevocably  designates,   appoints  and
authorizes  National City to act as  Administrative  Agent for such Lender under
this  Agreement  and to execute  and  deliver or accept on behalf of each of the
Lenders the other Loan Documents. Each Lender hereby irrevocably authorizes, and
each holder of any Note by the acceptance of a Note shall be deemed  irrevocably
to authorize,  the Administrative  Agent to take such action on its behalf under
the  provisions  of this  Agreement  and the other Loan  Documents and any other
instruments and agreements  referred to herein,  and to exercise such powers and
to perform such duties hereunder as are specifically delegated to or required of
the Administrative  Agent by the terms hereof,  together with such powers as are
reasonably incidental thereto. National City agrees to act as the Administrative
Agent on behalf of the Lenders to the extent provided in this Agreement.

                  10.2     Delegation of Duties.

                  The  Administrative  Agent  may  perform  any  of  its  duties
hereunder by or through agents or employees  (provided such  delegation does not
constitute a relinquishment of its duties as Administrative  Agent) and, subject
to Sections 10.5 and 10.6, shall be entitled to engage and pay for the advice or
services of any attorneys,  accountants or other experts  concerning all matters
pertaining to its duties hereunder and to rely upon any advice so obtained.

                  10.3     Nature of Duties; Independent Credit Investigation.

                  The   Administrative   Agent   shall   have   no   duties   or
responsibilities  except  those  expressly  set forth in this  Agreement  and no
implied  covenants,   functions,   responsibilities,   duties,  obligations,  or
liabilities  shall be read into this Agreement or otherwise exist. The duties of
the  Administrative  Agent shall be mechanical and administrative in nature; the
Administrative  Agent shall not have by reason of this  Agreement a fiduciary or
trust  relationship  in respect of any Lender;  and  nothing in this  Agreement,
expressed or implied,  is intended to or shall be so construed as to impose upon
the Administrative  Agent any obligations in respect of this Agreement except as
expressly set forth herein.  Without  limiting the  generality of the foregoing,
the  use  of  the  term  "agent"  in  this   Agreement  with  reference  to  the
Administrative  Agent is not intended to connote any  fiduciary or other implied
(or express)  obligations  arising under agency  doctrine of any applicable Law.
Instead,  such term is used merely as a matter of market custom, and is intended
to create or reflect only an  administrative  relationship  between  independent
contracting   parties.   Each  Lender   expressly   acknowledges  (i)  that  the
Administrative  Agent has not made any  representations  or warranties to it and
that no act by the Administrative Agent hereafter taken, including any review of
the  affairs  of any of the Loan  Parties,  shall be  deemed to  constitute  any
representation or warranty by the Administrative  Agent to any Lender; (ii) that
it has made and will continue to make,  without reliance upon the Administrative
Agent, its own independent  investigation of the financial condition and affairs
and its own  appraisal  of the  creditworthiness  of each of the Loan Parties in
connection  with this  Agreement  and the  making and  continuance  of the Loans
hereunder;   and  (iii)  except  as   expressly   provided   herein,   that  the
Administrative  Agent shall have no duty or responsibility,  either initially or
on a  continuing  basis,  to  provide  any  Lender  with  any  credit  or  other
information with respect thereto,  whether coming into its possession before the
making of any Loan or at any time or times thereafter.

     10.4.....Actions in Discretion of Administrative  Agent;  Instructions from
the Lenders.

                  The Administrative  Agent agrees,  upon the written request of
the  Required  Lenders,  to take or refrain  from  taking any action of the type
specified  as  being  within  the  Administrative   Agent's  rights,  powers  or
discretion herein,  provided that the Administrative Agent shall not be required
to take any action which exposes the Administrative  Agent to personal liability
or which is contrary to this  Agreement or any other Loan Document or applicable
Law. In the absence of a request by the  Required  Lenders,  the  Administrative
Agent shall have authority,  in its sole discretion,  to take or not to take any
such  action,  unless this  Agreement  specifically  requires the consent of the
Required  Lenders  or all of the  Lenders.  Any  action  taken or failure to act
pursuant to such  instructions  or  discretion  shall be binding on the Lenders,
subject to Section  10.6.  Subject to the  provisions of Section 10.6, no Lender
shall have any right of action whatsoever against the Administrative  Agent as a
result of the Administrative Agent acting or refraining from acting hereunder in
accordance with the instructions of the Required  Lenders,  or in the absence of
such instructions, in the absolute discretion of the Administrative Agent.

     10.5 Reimbursement and Indemnification of Administrative Agent.

                  The Borrower and the Co-Borrowers unconditionally agree to pay
or reimburse the Administrative Agent and hold the Administrative Agent harmless
against (a) liability  for the payment of all  reasonable  out-of-pocket  costs,
expenses and  disbursements,  including fees and expenses of counsel  (including
the allocated costs of staff counsel), appraisers and environmental consultants,
incurred by the  Administrative  Agent (i) in connection  with the  development,
negotiation,  preparation,  printing,  execution,  administration,  syndication,
interpretation  and  performance of this Agreement and the other Loan Documents,
(ii) relating to any requested  amendments,  waivers or consents pursuant to the
provisions hereof, (iii) in connection with the enforcement of this Agreement or
any other Loan  Document or collection of amounts due hereunder or thereunder or
the proof and  allowability  of any claim  arising  under this  Agreement or any
other Loan  Document,  whether in  bankruptcy  or  receivership  proceedings  or
otherwise,  and (iv) in any workout or  restructuring  or in connection with the
protection,  preservation, exercise or enforcement of any of the terms hereof or
of any rights  hereunder or under any other Loan Document or in connection  with
any foreclosure,  collection or bankruptcy proceedings, and (b) all liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements of any kind or nature  whatsoever which may be imposed
on, incurred by or asserted against the Administrative Agent, in its capacity as
such, in any way relating to or arising out of this  Agreement or any other Loan
Documents or any action taken or omitted by the  Administrative  Agent hereunder
or  thereunder,  provided  that the Borrower and the  Co-Borrowers  shall not be
liable  for any  portion  of such  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements if the
same  results  from the  Administrative  Agent's  gross  negligence  or  willful
misconduct, or if the Borrower and the Co-Borrowers were not given notice of the
subject claim and the  opportunity  to participate  in the defense  thereof,  at
their expense (except that the Borrower and the Co-Borrowers shall remain liable
to the  extent  such  failure  to give  notice  does not result in a loss to the
Borrower and the  Co-Borrowers),  or if the same  results  from a compromise  or
settlement  agreement  entered  into without the consent of the Borrower and the
Co-Borrowers,  which  shall  not be  unreasonably  withheld.  In  addition,  the
Borrower  and the  Co-Borrowers  agree  to  reimburse  and  pay  all  reasonable
out-of-pocket  expenses of the  Administrative  Agent's  regular  employees  and
agents  engaged  periodically  to  perform  audits of the Loan  Parties'  books,
records and business properties.

                  10.6     Exculpatory Provisions; Limitation of Liability.

                  Neither  the  Administrative  Agent nor any of its  directors,
officers,  employees, agents, attorneys or Affiliates shall (a) be liable to any
Lender for any action taken or omitted to be taken by it or them  hereunder,  or
in connection herewith including pursuant to any Loan Document, unless caused by
its or their own gross negligence or willful  misconduct,  (b) be responsible in
any  manner  to  any of  the  Lenders  for  the  effectiveness,  enforceability,
genuineness,  validity or the due execution of this  Agreement or any other Loan
Documents or for any recital,  representation,  warranty, document, certificate,
report or statement herein or made or furnished under or in connection with this
Agreement or any other Loan Documents,  or (c) be under any obligation to any of
the Lenders to ascertain or to inquire as to the  performance  or  observance of
any of the terms,  covenants or conditions  hereof or thereof on the part of the
Loan Parties,  or the financial  condition of the Loan Parties, or the existence
or possible existence of any Event of Default or Potential Default. No claim may
be made by any of the Loan Parties,  any Lender, the Administrative Agent or any
of their respective Subsidiaries against the Administrative Agent, any Lender or
any of their respective directors,  officers,  employees,  agents,  attorneys or
Affiliates,  or any of them, for any special,  indirect or consequential damages
or, to the fullest extent  permitted by Law, for any punitive damages in respect
of any claim or cause of action  (whether  based on  contract,  tort,  statutory
liability,  or any other ground) based on, arising out of or related to any Loan
Document or the transactions  contemplated  hereby or any act, omission or event
occurring in connection  therewith,  including the  negotiation,  documentation,
administration  or collection of the Loans,  and each of the Loan Parties,  (for
itself and on behalf of each of its Subsidiaries),  the Administrative Agent and
each Lender hereby waive, releases and agree never to sue upon any claim for any
such damages,  whether such claim now exists or hereafter  arises and whether or
not it is now known or suspected to exist in its favor. Each Lender agrees that,
except  for  notices,  reports  and other  documents  expressly  required  to be
furnished to the Lenders by the  Administrative  Agent hereunder or given to the
Administrative  Agent for the  account of or with  copies for the  Lenders,  the
Administrative  Agent and each of its directors,  officers,  employees,  agents,
attorneys or Affiliates shall not have any duty or responsibility to provide any
Lender with an credit or other information concerning the business,  operations,
property,  condition (financial or otherwise),  prospects or creditworthiness of
the Loan Parties which may come into the possession of the Administrative  Agent
or any of its directors, officers, employees, agents, attorneys or Affiliates.

     10.7 Reimbursement and Indemnification of Administrative Agent by Lenders.

                  Each   Lender   agrees  to   reimburse   and   indemnify   the
Administrative  Agent (to the  extent not  reimbursed  by the  Borrower  and the
Co-Borrowers  and  without  limiting  the  Obligation  of the  Borrower  and the
Co-Borrowers  to do so) in  proportion to its Ratable Share from and against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
and reasonable costs, expenses or disbursements, including reasonable attorneys'
fees and  disbursements  (including the allocated costs of staff  counsel),  and
costs  of  appraisers  and  environmental  consultants,  of any  kind or  nature
whatsoever  which  may be  imposed  on,  incurred  by or  asserted  against  the
Administrative Agent, in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by the  Administrative  Agent  hereunder or thereunder,  provided that no Lender
shall be  liable  for any  portion  of such  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
(a) if the same results from the  Administrative  Agent's  gross  negligence  or
willful  misconduct,  or (b) if such Lender was not given  notice of the subject
claim and the opportunity to participate in the defense thereof,  at its expense
(except that such Lender shall remain  liable to the extent such failure to give
notice does not result in a loss to the Lender), or (c) if the same results from
a compromise and settlement  agreement  entered into without the consent of such
Lender,  which shall not be  unreasonably  withheld.  In  addition,  each Lender
agrees promptly upon demand to reimburse the Administrative Agent (to the extent
not  reimbursed by the Borrower and the  Co-Borrowers  and without  limiting the
Obligation of the Borrower and the  Co-Borrowers  to do so) in proportion to its
Ratable  Share  for  all  amounts  due  and  payable  by the  Borrower  and  the
Co-Borrowers to the  Administrative  Agent in connection with the Administrative
Agent's  periodic  audit  of the  Loan  Parties'  books,  records  and  business
properties.

                  10.8     Reliance by Administrative Agent.

                  The  Administrative  Agent  shall be entitled to rely upon any
writing,  telegram,  telex or teletype  message,  resolution,  notice,  consent,
certificate,   letter,  cablegram,   statement,   order  or  other  document  or
conversation by telephone or otherwise  believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or Persons,  and upon
the advice and opinions of counsel and other  professional  advisers selected by
the Administrative  Agent. The Administrative  Agent shall be fully justified in
failing  or  refusing  to take any  action  hereunder  unless it shall  first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense  which may be incurred by it by reason of taking or  continuing  to take
any such action.

                  10.9     Notice of Default.

                  The Administrative Agent shall not be deemed to have knowledge
or notice of the occurrence of any Potential  Default or Event of Default unless
the Administrative Agent has received written notice from a Lender, the Borrower
or the  Co-Borrowers  referring to this  Agreement,  describing  such  Potential
Default  or Event of  Default  and  stating  that such  notice  is a "notice  of
default."

                  10.10    Notices.

                  The Administrative  Agent shall promptly send to each Lender a
copy of all notices received from the Borrower and the Co-Borrowers  pursuant to
the  provisions  of this  Agreement or the other Loan  Documents  promptly  upon
receipt thereof.  The  Administrative  Agent shall promptly notify the Borrower,
the  Co-Borrowers  and the other Lenders of each change in the Base Rate and the
effective date thereof. Upon the request of any Lender, the Administrative Agent
shall  provide  such Lender with any report  provided  by the  Borrower  and the
Co-Borrowers  to the  Administrative  Agent  pursuant to the  provisions of this
Agreement or the Loan Documents which are not required to be provided to all the
Lenders.

                  10.11    Lenders in Their Individual Capacities.

                  With respect to its Revolving Credit Commitment, the Revolving
Credit  Loans,  the Term  Loan A  Commitment,  the Term  Loan A, the Term Loan B
Commitment  and the Term Loan B made by it and any other rights and powers given
to it as a Lender  hereunder  or under  any of the  other  Loan  Documents,  the
Administrative  Agent  shall have the same  rights and powers  hereunder  as any
other Lender and may exercise the same as though it were not the  Administrative
Agent, and the term "Lenders"  shall,  unless the context  otherwise  indicates,
include the Administrative Agent in its individual  capacity.  National City and
its  Affiliates  and each of the Lenders and their  respective  Affiliates  may,
without liability to account, except as prohibited herein, make loans to, accept
deposits  from,  discount  drafts for, act as trustee under  indentures  of, and
generally engage in any kind of banking or trust business with, the Loan Parties
and their Affiliates, in the case of the Administrative Agent, as though it were
not acting as Administrative  Agent hereunder and in the case of each Lender, as
though such Lender were not a Lender  hereunder.  The Lenders  acknowledge that,
pursuant to such activities,  the Administrative Agent or its Affiliates may (i)
receive information  regarding the Loan Parties (including  information that may
be subject to  confidentiality  obligations  in favor of the Loan  Parties)  and
acknowledge  that the  Administrative  Agent  shall be  under no  obligation  to
provide such  information to them, and (ii) accept fees and other  consideration
from the Loan  Parties  for  services  in  connection  with this  Agreement  and
otherwise without having to account for the same to the Lenders.

                  10.12    Holders of Notes.

                  The  Administrative  Agent may deem and treat any payee of any
Note as the owner  thereof  for all  purposes  hereof  unless and until  written
notice of the  assignment  or  transfer  thereof  shall have been filed with the
Administrative Agent. Any request, authority or consent of any Person who at the
time of making such request or giving such authority or consent is the holder of
any Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.

                  10.13    Equalization of Lenders.

                  The Lenders and the holders of any participations in any Notes
agree among  themselves that, with respect to all amounts received by any Lender
or any such holder for application on any Obligation hereunder or under any Note
or under any such  participation,  whether  received by  voluntary  payment,  by
realization  upon security,  by the exercise of the right of set-off or banker's
lien, by counterclaim or by any other non-pro rata source,  equitable adjustment
will be made in the manner stated in the following  sentence so that, in effect,
all such  excess  amounts  will be shared  ratably  among the  Lenders  and such
holders in proportion to their interests in payments under the Notes,  except as
otherwise  provided  in Section  4.4.3,  5.4.3 or 5.6.  The  Lenders or any such
holder  receiving any such amount shall purchase for cash from each of the other
Lenders an interest in such  Lender's  Loans in such amount as shall result in a
ratable  participation  by the  Lenders  and each such  holder in the  aggregate
unpaid  amount  under the  Notes,  provided  that if all or any  portion of such
excess amount is thereafter  recovered from the Lender or the holder making such
purchase,  such purchase  shall be rescinded and the purchase  price restored to
the extent of such recovery,  together with interest or other  amounts,  if any,
required by law  (including  court order) to be paid by the Lender or the holder
making such purchase.

                  10.14    Successor Administrative Agent.

                  The  Administrative  Agent (i) may  resign  as  Administrative
Agent or (ii) shall  resign if such  resignation  is  requested  by the Required
Lenders (if the Administrative  Agent is a Lender,  the  Administrative  Agent's
Loans and its Commitment shall be considered in determining whether the Required
Lenders have requested such resignation) or required by Section 5.4.3, in either
case of (i) or (ii) by giving  not less than  thirty  (30) days'  prior  written
notice to the Borrower and the Co-Borrowers.  If the Administrative  Agent shall
resign under this Agreement,  then either (a) the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders, subject to the consent
of the  Borrower  and the  Co-Borrowers,  such  consent  not to be  unreasonably
withheld,  or (b) if a successor  agent shall not be so  appointed  and approved
within the thirty (30) day period following the Administrative Agent's notice to
the Lenders of its  resignation,  then the  Administrative  Agent shall appoint,
with the consent of the  Borrower and the  Co-Borrowers,  such consent not to be
unreasonably withheld, a successor agent who shall serve as Administrative Agent
until  such  time as the  Required  Lenders  appoint  and the  Borrower  and the
Co-Borrowers  consent  to  the  appointment  of  a  successor  agent.  Upon  its
appointment  pursuant to either clause (a) or (b) above,  such  successor  agent
shall succeed to the rights,  powers and duties of the Administrative Agent, and
the term "Administrative  Agent" shall mean such successor agent, effective upon
its appointment, and the former Administrative Agent's rights, powers and duties
as Administrative  Agent shall be terminated without any other or further act or
deed on the part of such  former  Administrative  Agent or any of the parties to
this Agreement. After the resignation of any Administrative Agent hereunder, the
provisions  of this  Section  0  shall  inure  to the  benefit  of  such  former
Administrative Agent and such former Administrative Agent shall not by reason of
such  resignation  be deemed to be released from liability for any actions taken
or not taken by it while it was an Administrative Agent under this Agreement.

                  10.15    Availability of Funds.

                  The Administrative  Agent may assume that each Lender has made
or will make the proceeds of a Loan available to the Administrative Agent unless
the  Administrative  Agent shall have been  notified by such Lender on or before
the  later of (1) the  close of  Business  on the  Business  Day  preceding  the
Borrowing  Date with  respect  to such Loan or (2) 24 hours  before  the time on
which the  Administrative  Agent actually funds the proceeds of such Loan to the
Borrower  and the  Co-Borrowers  (whether  using its own funds  pursuant to this
Section 10.15 or using proceeds deposited with the  Administrative  Agent by the
Lenders  and  whether  such  funding  occurs  before  or after the time on which
Lenders  are   required   to  deposit  the   proceeds  of  such  Loan  with  the
Administrative  Agent).  The  Administrative  Agent may, in  reliance  upon such
assumption  (but shall not be required to),  make  available to the Borrower and
the Co-Borrowers a corresponding  amount. If such corresponding amount is not in
fact  made  available  to  the   Administrative   Agent  by  such  Lender,   the
Administrative  Agent shall be  entitled  to recover  such amount on demand from
such Lender (or, if such  Lender  fails to pay such amount  forthwith  upon such
demand from the Borrower and the  Co-Borrowers)  together with interest thereon,
in respect of each day during the period  commencing on the date such amount was
made available to the Borrower and the  Co-Borrowers  and ending on the date the
Administrative  Agent  recovers  such  amount,  at a rate per annum equal to the
applicable interest rate in respect of the Loan.

                  10.16    Calculations.

                  In the absence of gross negligence or willful misconduct,  the
Administrative  Agent shall not be liable for any error in computing  the amount
payable to any Lender whether in respect of the Loans, fees or any other amounts
due to the Lenders under this Agreement.  In the event an error in computing any
amount payable to any Lender is made, the  Administrative  Agent,  the Borrower,
the  Co-Borrowers  and each affected  Lender shall,  forthwith upon discovery of
such error,  make such  adjustments  as shall be required to correct such error,
and any compensation  therefor will be calculated at the Federal Funds Effective
Rate.

                  10.17    Beneficiaries.

                  Except as expressly  provided  herein,  the provisions of this
Section  10 are  solely  for the  benefit  of the  Administrative  Agent and the
Lenders,  and the Loan  Parties  shall not have any rights to rely on or enforce
any of the provisions  hereof. In performing its functions and duties under this
Agreement, the Administrative Agent shall act solely as agent of the Lenders and
does not assume and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any of the Loan Parties.

                                            11.      MISCELLANEOUS

                  11.1     Modifications, Amendments or Waivers.

                  With  the  written  consent  of  the  Required  Lenders,   the
Administrative  Agent, acting on behalf of all the Lenders, and the Borrower and
the  Co-Borrowers,  on behalf of the Loan  Parties,  may from time to time enter
into written agreements  amending or changing any provision of this Agreement or
any other  Loan  Document  or the  rights  of the  Lenders  or the Loan  Parties
hereunder or thereunder, or may grant written waivers or consents to a departure
from the due  performance of the  Obligations  of the Loan Parties  hereunder or
thereunder. Any such agreement, waiver or consent made with such written consent
shall be effective to bind all the Lenders and the Loan Parties; provided, that,
without the written  consent of all the Lenders,  no such  agreement,  waiver or
consent may be made which will:

     11.1.1 Increase of Commitment; Extension or Expiration Date.

     Increase the amount of the  Revolving  Credit  Commitment,  the Term Loan A
Commitment or the Term Loan B Commitment  of any Lender  hereunder or extend the
Expiration Date, the Term Loan A Maturity Date or the Term Loan B Maturity Date;

     11.1.2...Extension  of Payment;  Reduction of  Principal  Interest or Fees;
Modification of Terms of Payment.

     Whether or not any Loans are  outstanding,  extend the time for  payment of
principal  or  interest  of any Loan  (excluding  the due date of any  mandatory
prepayment of a Loan or any mandatory  Commitment  reduction in connection  with
such a mandatory  repayment  hereunder  except for  mandatory  reductions of the
Commitments on the Expiration Date), the Commitment Fee or any other fee payable
to any Lender,  or reduce the principal  amount of or the rate of interest borne
by any Loan or reduce the Commitment Fee or any other fee payable to any Lender,
or otherwise  affect the terms of payment of the principal of or interest of any
Loan, the Commitment Fee or any other fee payable to any Lender;




                           11.1.3   Release of Collateral or Guarantor.

     Except  for  sales of  assets  permitted  by  Section  8.2.7,  release  any
Collateral,  any Guarantor from its Obligations under the Guaranty  Agreement or
any other security for any of the Loan Parties' Obligations; or

                           11.1.4   Miscellaneous

     Amend  Section  5.2 [Pro Rata  Treatment  of  Lenders],  10.6  [Exculpatory
Provisions, etc.] or 10.13 [Equalization of Lenders] or this Section 11.1, alter
any  provision  regarding  the pro rata  treatment  of the  Lenders,  change the
definition  of Required  Lenders,  or change any  requirement  providing for the
Lenders or the Required Lenders to authorize the taking of any action hereunder;

provided,  further, that no agreement,  waiver or consent which would modify the
interests,  rights or obligations of the Administrative Agent in its capacity as
Administrative  Agent or as the issuer of Letters of Credit  shall be  effective
without the written consent of the Administrative  Agent; provided further, that
notwithstanding  any provision of this Section 11.1 to the contrary,  during the
Syndications  Period any provision of this Agreement that affects the structure,
terms or pricing of the Term Loans B or the Term Loan B Commitments  (including,
without  limitation,  the interest  rates or interest  rate  margins  applicable
thereto and the amortization of the Term Loans B subsequent to the occurrence of
the Expiration Date and the Term Loan A Maturity Date) may be amended,  modified
or waived  with the written  consent of (i) the  holders of one hundred  percent
(100%) of the Term Loans B outstanding  (or, if no Term Loans B are outstanding,
one  hundred  percent  (100%)  of  the  Term  Loan  B  Commitments),   (ii)  the
Administrative  Agent,  and  (iii)  the  Borrower  and  the  Co-Borrowers,   for
themselves  and on behalf of the Loan  Parties,  except that in no event may the
amount of the Term Loan B Commitments or the Term Loans B be reduced pursuant to
any such amendment, modification or waiver.

     11.2 No Implied Waivers; Cumulative Remedies; Writing Required.

                  No  course  of  dealing   and  no  delay  or  failure  of  the
Administrative  Agent or any Lender in exercising  any right,  power,  remedy or
privilege under this Agreement or any other Loan Document shall affect any other
or future exercise thereof or operate as a waiver thereof,  nor shall any single
or partial  exercise  thereof or any abandonment or  discontinuance  of steps to
enforce such a right,  power,  remedy or privilege preclude any further exercise
thereof  or of any other  right,  power,  remedy or  privilege.  The  rights and
remedies of the  Administrative  Agent and the Lenders under this  Agreement and
any other Loan  Documents  are  cumulative  and not  exclusive  of any rights or
remedies  which  they would  otherwise  have.  Any  waiver,  permit,  consent or
approval  of any kind or  character  on the part of any  Lender of any breach or
default under this Agreement or any such waiver of any provision or condition of
this  Agreement  must be in writing  and shall be  effective  only to the extent
specifically set forth in such writing.

                  11.3     Reimbursement and Indemnification of Lenders; Taxes.

                  The Borrower and the Co-Borrowers agree  unconditionally  upon
demand to pay or reimburse to each Lender (other than the Administrative  Agent,
as to which the Borrower's and the  Co-Borrowers'  Obligations  are set forth in
Section  10.5) and to save such Lender  harmless  against (i)  liability for the
payment  of all  reasonable  out-of-pocket  costs,  expenses  and  disbursements
(including  fees and  expenses of counsel  (including  allocated  costs of staff
counsel) for each Lender),  incurred by such Lender (a) in  connection  with the
enforcement  of this  Agreement or any other Loan  Document,  or  collection  of
amounts due hereunder or thereunder or the proof and  allowability  of any claim
arising under this Agreement or any other Loan  Document,  whether in bankruptcy
or   receivership   proceedings  or  otherwise,   and  (b)  in  any  workout  or
restructuring  or in connection with the protection,  preservation,  exercise or
enforcement  of any of the terms hereof or of any rights  hereunder or under any
other  Loan  Document  or in  connection  with any  foreclosure,  collection  or
bankruptcy proceedings, or (ii) all liabilities,  obligations,  losses, damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind or nature  whatsoever  which may be imposed  on,  incurred  by or  asserted
against such Lender,  in its capacity as such, in any way relating to or arising
out of this Agreement or any other Loan Documents or any action taken or omitted
by such Lender  hereunder  or  thereunder,  provided  that the  Borrower and the
Co-Borrowers   shall  not  be  liable  for  any  portion  of  such  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or  disbursements  (A) if the same  results  from such  Lender's  gross
negligence or willful  misconduct,  or (B) if the Borrower and the  Co-Borrowers
were not given notice of the subject claim and the opportunity to participate in
the  defense  thereof,  at  its  expense  (except  that  the  Borrower  and  the
Co-Borrowers  shall remain liable to the extent such failure to give notice does
not result in a loss to the Borrower and the  Co-Borrowers),  or (C) if the same
results  from a  compromise  or  settlement  agreement  entered into without the
consent of the Borrower and the  Co-Borrowers,  which shall not be  unreasonably
withheld.  The Lenders  will  attempt to minimize the fees and expenses of legal
counsel for the Lenders which are subject to  reimbursement  by the Borrower and
the Co-Borrowers hereunder by considering the usage of one law firm to represent
the Lenders and the Administrative Agent if appropriate under the circumstances.
The  Borrower  and the  Co-Borrowers  agree  unconditionally  to pay all  stamp,
document,  transfer,  recording or filing taxes or fees and similar  impositions
now or  hereafter  determined  by the  Administrative  Agent or any Lender to be
payable in connection  with this Agreement or any other Loan  Document,  and the
Borrower and the Co-Borrowers  agree  unconditionally to save the Administrative
Agent and the  Lenders  harmless  from and against any and all present or future
claims,  liabilities or losses with respect to or resulting from any omission to
pay or delay in paying any such taxes, fees or impositions.

                  11.4     Holidays.

                  Whenever payment of a Loan to be made or taken hereunder shall
be due on a day which is not a  Business  Day such  payment  shall be due on the
next  Business  Day and such  extension  of time shall be included in  computing
interest  and fee,  except  that the  Loans  shall  be due on the  Business  Day
preceding  the  Expiration  Date if the  Expiration  Date is not a Business Day.
Whenever any payment or action to be made or taken hereunder (other than payment
of the Loans)  shall be stated to be due on a day which is not a  Business  Day,
such payment or action shall be made or taken on the next following Business Day
(except as provided in Section 4.2 with  respect to Interest  Periods  under the
Euro-Rate Option), and such extension of time shall not be included in computing
interest or fees, if any, in connection with such payment or action.

                  11.5     Funding by Branch, Subsidiary or Affiliate.

                           11.5.1   Notional Funding.

     Each Lender shall have the right from time to time,  without  notice to the
Borrower or the Co-Borrowers, to deem any branch, Subsidiary or Affiliate (which
for the purposes of this Section 11.5 shall mean any  corporation or association
which is directly or  indirectly  controlled  by or is under  direct or indirect
common control with any corporation or association  which directly or indirectly
controls such Lender) of such Lender to have made, maintained or funded any Loan
to which the Euro-Rate  Option  applies at any time,  provided that  immediately
following (on the assumption  that a payment were then due from the Borrower and
the  Co-Borrowers  to such other  office),  and as a result of such change,  the
Borrower  and  the  Co-Borrowers  would  not  be  under  any  greater  financial
obligation  pursuant  to Section 5.6 than they would have been in the absence of
such change.  Notional  funding  offices may be selected by each Lender  without
regard to such Lender's  actual  methods of making,  maintaining  or funding the
Loans or any sources of funding actually used by or available to such Lender.

                           11.5.2   Actual Funding.

     Each Lender  shall have the right from time to time to make or maintain any
Loan by arranging  for a branch,  Subsidiary or Affiliate of such Lender to make
or maintain  such Loan subject to the last sentence of this Section  11.5.2.  If
any Lender causes a branch, Subsidiary or Affiliate to make or maintain any part
of the Loans hereunder, all terms and conditions of this Agreement shall, except
where the context clearly requires otherwise,  be applicable to such part of the
Loans to the same  extent  as if such  Loans  were  made or  maintained  by such
Lender,  but in no event shall any Lender's use of such a branch,  Subsidiary or
Affiliate to make or maintain any part of the Loans  hereunder cause such Lender
or such branch, Subsidiary or Affiliate to incur any cost or expenses payable by
the  Borrower  and the  Co-Borrowers  hereunder  or require the Borrower and the
Co-Borrowers to pay any other compensation to any Lender (including any expenses
incurred  or payable  pursuant  to Section  5.6) which  would  otherwise  not be
incurred.

                  11.6     Notices.

                  All  notices,   requests,   demands,   directions   and  other
communications  (as  used in this  Section  11.6,  collectively  referred  to as
"Notices")  given to or made upon any party hereto under the  provisions of this
Agreement  shall be by  telephone  or in writing  (including  telex or facsimile
communication)  unless  otherwise  expressly  permitted  hereunder  and shall be
delivered  or sent by  telex  or  facsimile  to the  respective  parties  at the
addresses and numbers set forth under their  respective names on Schedule 1.1(B)
hereof or in accordance with any subsequent unrevoked written direction from any
party to the others.  All Notices shall,  except as otherwise  expressly  herein
provided, be effective (a) in the case of telex or facsimile, when received, (b)
in the case of hand-delivered  Notice, when  hand-delivered,  (c) in the case of
telephone,  when telephoned,  provided,  however, that in order to be effective,
telephonic  Notices  must be  confirmed in writing no later than the next day by
letter,  facsimile  or telex,  (d) if given by mail,  four (4) days  after  such
communication is deposited in the mail with first-class postage prepaid,  return
receipt  requested,  and (e) if  given  by any  other  means  (including  by air
courier),  when delivered;  provided,  that Notices to the Administrative  Agent
shall not be effective until received.  Any Lender giving any Notice to any Loan
Party shall simultaneously send a copy thereof to the Administrative  Agent, and
the Administrative  Agent shall promptly notify the other Lenders of the receipt
by it of any such Notice.

                  11.7     Severability.

                  The provisions of this Agreement are intended to be severable.
If any provision of this  Agreement  shall be held invalid or  unenforceable  in
whole  or in  part  in  any  jurisdiction,  such  provision  shall,  as to  such
jurisdiction,   be   ineffective   to  the   extent   of  such   invalidity   or
unenforceability  without in any manner affecting the validity or enforceability
thereof in any other  jurisdiction  or the  remaining  provisions  hereof in any
jurisdiction.

                  11.8     Governing Law.

                  Each  Letter of Credit and Section 2.9 shall be subject to the
Uniform   Customs  and  Practice  for  Documentary   Credits  (1993   Revision),
International  Chamber  of  Commerce  Publication  No.  500,  as the same may be
revised  or  amended  from  time to time,  and to the  extent  not  inconsistent
therewith,  the internal laws of the Commonwealth of Pennsylvania without regard
to its conflict of laws  principles and the balance of this  Agreement  shall be
deemed to be a contract under the Laws of the  Commonwealth of Pennsylvania  and
for all purposes  shall be governed by and  construed and enforced in accordance
with the internal laws of the Commonwealth of Pennsylvania without regard to its
conflict of laws principles.

                  11.9     Prior Understanding.

                  This  Agreement,  the  other  Loan  Documents  and the  letter
agreement  dated  September  22, 1999,  between the  Administrative  Agent,  the
Syndication  Agents,  and the Borrower  supersede all prior  understandings  and
agreements,  whether  written or oral,  between the  parties  hereto and thereto
relating to the  transactions  provided  for herein and therein,  including  any
prior confidentiality agreements and commitments.

                  11.10    Duration; Survival.

                  All   representations  and  warranties  of  the  Loan  Parties
contained  herein or made in  connection  herewith  shall  survive the making of
Loans and issuance of Letters of Credit and shall not be waived by the execution
and delivery of this Agreement, any investigation by the Administrative Agent or
the Lenders,  the making of Loans,  issuance of Letters of Credit, or payment in
full of the Loans. All covenants and agreements of the Loan Parties contained in
Sections  8.1, 8.2 and 8.3 herein  shall  continue in full force and effect from
and  after the date  hereof so long as the  Borrower  and the  Co-Borrowers  may
borrow or  request  Letters of Credit  hereunder  and until  termination  of the
Commitments  and payment in full of the Loans and  expiration or  termination of
all Letters of Credit.  All  covenants  and  agreements  of the Borrower and the
Co-Borrowers  contained  herein relating to the payment of principal,  interest,
premiums,  additional  compensation or expenses and  indemnification,  including
those set forth in the Notes,  Section 5 and Sections 10.5, 10.7 and 11.3, shall
survive  payment in full of the Loans,  expiration or termination of the Letters
of Credit and termination of the Commitments.

                  11.11    Successors and Assigns.

     (i) This Agreement  shall be binding upon and shall inure to the benefit of
the Lenders,  the  Administrative  Agent,  the Loan Parties and their respective
successors  and  assigns,  except  that none of the Loan  Parties  may assign or
transfer any of its rights and  Obligations  hereunder  or any interest  herein.
Each Lender may, at its own cost, make assignments of or sell  participations in
all or any part of its  Commitment and the Loans made by it to one or more banks
or other entities,  subject to the consent of the Borrower, the Co-Borrowers and
the  Administrative  Agent with respect to any assignee,  such consent not to be
unreasonably  withheld,  provided  that (1) no  consent of the  Borrower  or the
Co-Borrowers  shall be required in the case of an  assignment  by a Lender to an
Affiliate  of such Lender or to the extent an Event of Default has  occurred and
is  continuing,  and  (2)  assignments  may not be made  in  amounts  less  than
$1,000,000.  In the case of an  assignment,  upon receipt by the  Administrative
Agent of the Assignment and  Assumption  Agreement,  the assignee shall have, to
the extent of such assignment  (unless  otherwise  provided  therein),  the same
rights,  benefits  and  obligations  as it would have if it had been a signatory
Lender  hereunder,  the  Commitments  shall  be  adjusted  accordingly,  and the
Assignor shall be relieved from all  obligations  and  liabilities  which accrue
after the Assignment  and based upon the Commitment and related rights  assigned
to the  Assignee.  Upon  surrender of any Note subject to such  assignment,  the
Borrower  and the  Co-Borrowers  shall  execute  and  deliver  a new Note to the
assignee in an amount equal to the amount of the  Revolving  Credit  Commitment,
the Term  Loan A or the Term  Loan B assumed  by it and a new  Revolving  Credit
Note,  Term Note A or Term Note B to the assigning  Lender in an amount equal to
the  Revolving  Credit  Commitment,  Term Loan A or Term Loan B  retained  by it
hereunder.  The assigning Lender shall pay to the Administrative Agent a service
fee in the amount of $3,500 for each assignment. In the case of a participation,
the  participant  shall only have the  rights  specified  in Section  9.2.3 (the
participant's  rights against such Lender in respect of such participation to be
those  set  forth  in the  agreement  executed  by such  Lender  in favor of the
participant  relating  thereto and not to include any voting  rights except with
respect  to  changes of the type  referenced  in  Sections  11.1.1,  11.1.2,  or
11.1.3), all of such Lender's obligations under this Agreement or any other Loan
Document  shall  remain  unchanged,  and all  amounts  payable by any Loan Party
hereunder or thereunder  shall be determined as if such Lender had not sold such
participation.

     (ii) Any assignee or participant  which is not incorporated  under the Laws
of the United States of America or a state thereof shall deliver to the Borrower
and the  Co-Borrowers  and the  Administrative  Agent  the  form of  certificate
described in Section  11.17  relating to federal  income tax  withholding.  Each
Lender may furnish any publicly available information  concerning any Loan Party
or its Subsidiaries and any other  information  concerning any Loan Party or its
Subsidiaries in the possession of such Lender from time to time to assignees and
participants  (including  prospective assignees or participants),  provided that
such assignees and  participants  agree to be bound by the provisions of Section
11.12.

     (iii) Notwithstanding any other provision in this Agreement, any Lender may
at any time  pledge or grant a security  interest  in all or any  portion of its
rights  under  this  Agreement,  its Note and the other  Loan  Documents  to any
Federal Reserve Bank in accordance with Regulation A of the FRB or U.S. Treasury
Regulation 31 CFR Section  203.14  without notice to or consent of the Borrower,
the  Co-Borrowers  or the  Administrative  Agent.  No such  pledge or grant of a
security  interest  shall  release  the  transferor  Lender  of its  obligations
hereunder or under any other Loan Document.

                  11.12    Confidentiality.

                  The  Administrative  Agent and the Lenders  each agree to keep
confidential  all information  obtained from any Loan Party or its  Subsidiaries
which is nonpublic and  confidential  or  proprietary  in nature  (including any
information  the  Borrower  and  the  Co-Borrowers  specifically  designates  as
confidential),  except as provided below,  and to use such  information  only in
connection  with their  respective  capacities  under this Agreement and for the
purposes  contemplated hereby. The Administrative Agent and the Lenders shall be
permitted to disclose such information (i) to outside legal counsel, Affiliates,
accountants and other professional advisors who need to know such information in
connection with the administration and enforcement of this Agreement, subject to
agreement  of such Persons to maintain  the  confidentiality,  (ii) to potential
assignees and participants as contemplated by Section 11.11, (iii) to the extent
requested by any bank  regulatory  authority or, with notice to the Borrower and
the  Co-Borrowers  (to the extent  permitted by  applicable  Law),  as otherwise
required by applicable  Law or by any subpoena or similar legal  process,  or in
connection with any investigation or proceeding  arising out of the transactions
contemplated by this Agreement, (iv) if it becomes publicly available other than
as a result of a breach of this Agreement or becomes available from a source not
known to be subject to confidentiality  restrictions,  or (v) if the Borrower or
the Co-Borrowers shall have consented to such disclosure.

                  11.13    Counterparts.

                  This Agreement may be executed by different  parties hereto on
any  number of  separate  counterparts,  each of  which,  when so  executed  and
delivered,  shall be an  original,  and all  such  counterparts  shall  together
constitute one and the same instrument.

                  11.14    Administrative Agent's or Lender's Consent.

                  Whenever the Administrative Agent's or any Lender's consent is
required to be obtained  under this Agreement or any of the other Loan Documents
as a condition to any action,  inaction,  condition or event, the Administrative
Agent and each Lender shall be  authorized  to give or withhold  such consent in
its sole and absolute discretion and to condition its consent upon the giving of
additional collateral, the payment of money or any other matter.

                  11.15    Exceptions.

                  The representations, warranties and covenants contained herein
shall be  independent  of each other,  and no exception  to any  representation,
warranty  or  covenant  shall  be  deemed  to  be  an  exception  to  any  other
representation, warranty or covenant contained herein unless expressly provided,
nor shall any such  exceptions  be deemed to permit any action or omission  that
would be in contravention of applicable Law.

                  11.16    CONSENT TO FORUM; WAIVER OF JURY TRIAL.

                  EACH  LOAN   PARTY   HEREBY   IRREVOCABLY   CONSENTS   TO  THE
NONEXCLUSIVE  JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY  COUNTY AND
THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF  PENNSYLVANIA,  AND
WAIVES  PERSONAL  SERVICE OF ANY AND ALL PROCESS UPON IT AND  CONSENTS  THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO SUCH
LOAN PARTY AT THE ADDRESSES  PROVIDED FOR IN SECTION 0 AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED  UPON ACTUAL RECEIPT  THEREOF.  EACH LOAN PARTY WAIVES
ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION  INSTITUTED  AGAINST IT AS
PROVIDED  HEREIN  AND  AGREES  NOT TO  ASSERT  ANY  DEFENSE  BASED  ON  LACK  OF
JURISDICTION OR VENUE.  EACH LOAN PARTY,  THE AGENT AND THE LENDERS HEREBY WAIVE
TRIAL  BY JURY IN ANY  ACTION,  SUIT,  PROCEEDING  OR  COUNTERCLAIM  OF ANY KIND
ARISING  OUT OF OR RELATED TO THIS  AGREEMENT,  ANY OTHER LOAN  DOCUMENT  OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.

                  11.17    Tax Withholding Clause.

                  Each Lender or assignee or participant of a Lender that is not
incorporated  under the Laws of the United  States of America or a state thereof
agrees that it will deliver to each of the Borrower,  the  Co-Borrowers  and the
Administrative  Agent  two (2)  duly  completed  copies  of the  following:  (i)
Internal  Revenue  Service  Form W-9,  4224 or 1001,  or other  applicable  form
prescribed  by the  Internal  Revenue  Service,  certifying  that  such  Lender,
assignee or participant is entitled to receive payments under this Agreement and
the other Loan Documents  without  deduction or withholding of any United States
federal  income  taxes,  or is  subject  to such tax at a reduced  rate under an
applicable  tax  treaty,  or (ii)  Internal  Revenue  Service  Form W-8 or other
applicable  form  or a  certificate  of such  Lender,  assignee  or  participant
indicating  that no such  exemption or reduced rate is allowable with respect to
such payments.  Each Lender,  assignee or participant required to deliver to the
Borrower,  the Co-Borrowers and the  Administrative  Agent a form or certificate
pursuant to the preceding  sentence  shall deliver such form or  certificate  as
follows:  (A) each  Lender  which is a party  hereto on the  Closing  Date shall
deliver such form or  certificate  at least five (5) Business  Days prior to the
first date on which any  interest  or fees are payable by the  Borrower  and the
Co-Borrowers  hereunder  for the account of such  Lender;  (B) each  assignee or
participant  shall deliver such form or  certificate  at least five (5) Business
Days before the effective date of such assignment or  participation  (unless the
Administrative  Agent in its sole  discretion  shall  permit  such  assignee  or
participant to deliver such form or certificate less than five (5) Business Days
before  such  date in which  case it shall be due on the date  specified  by the
Administrative Agent). Each Lender,  assignee or participant which so delivers a
Form  W-8,  W-9,  4224 or 1001  further  undertakes  to  deliver  to each of the
Borrower,  the  Co-Borrowers  and the  Administrative  Agent two (2)  additional
copies of such form (or a  successor  form) on or before the date that such form
expires or becomes  obsolete or after the  occurrence  of any event  requiring a
change in the most recent form so delivered by it, and such  amendments  thereto
or  extensions  or  renewals  thereof  as may  be  reasonably  requested  by the
Borrower,  the Co-Borrowers or the Administrative  Agent, either certifying that
such Lender,  assignee or participant is entitled to receive payments under this
Agreement and the other Loan Documents  without  deduction or withholding of any
United States  federal  income taxes or is subject to such tax at a reduced rate
under an applicable tax treaty or stating that no such exemption or reduced rate
is  allowable.  The  Administrative  Agent shall be entitled to withhold  United
States  federal  income  taxes at the full  withholding  rate unless the Lender,
assignee or  participant  establishes  an  exemption  or that it is subject to a
reduced rate as established pursuant to the above provisions.

                  11.18    Joinder of Guarantors.

     Any  Subsidiary of the Borrower which is required to join this Agreement as
a Guarantor pursuant to Section 8.2.6 or Section 8.2.9 shall execute and deliver
to the  Administrative  Agent (i) a Guarantor  Joinder in substantially the form
attached  hereto  as  Exhibit  1.1(G)(1)  pursuant  to which it shall  join as a
Guarantor  each of the  documents  to which the  Guarantors  are  parties;  (ii)
documents  in the forms  described  in Section  7.1 [First  Loans]  modified  as
appropriate to relate to such Subsidiary; and (iii) documents necessary to grant
and perfect Prior Security Interests to the Administrative Agent for the benefit
of the Lenders in all assets held by such  Subsidiary  and in the stock or other
ownership  interests of such  Subsidiary.  The Loan Parties  shall  deliver such
Guarantor Joinder and related documents to the Administrative  Agent within five
(5) Business  Days after the date of the  acquisition  of the  Subsidiary or the
date of the  filing  of  such  Subsidiary's  articles  of  incorporation  if the
Subsidiary  is a  corporation,  the date of the  filing  of its  certificate  of
limited  partnership  if  it  is a  limited  partnership  or  the  date  of  its
organization if it is an entity other than a limited partnership or corporation.

     11.19 Joint and Several Liability of Borrower and Co-Borrowers.

     The Obligations of the Borrower and the Co-Borrowers  under this Agreement,
the Notes and the Loan Documents to which the Borrower and the  Co-Borrowers are
parties shall be joint and several  obligations  and liabilities of the Borrower
and each Co-Borrower, and such Obligations may be enforced by the Administrative
Agent and the Lenders in their sole  discretion  against the Borrower and either
Co-Borrower  either  individually  in any action brought against the Borrower or
either  Co-Borrower or jointly in any action  brought  against both the Borrower
and  one or  more  Co-Borrowers  For  purposes  of  advancing  funds,  rendering
statements,  receiving  requests  from,  or  otherwise  communicating  with  the
Borrower and the Co-Borrowers or in the Administrative Agent's administration of
this Agreement and the related transactions,  each Co-Borrower hereby authorizes
the  Administrative  Agent to treat  the  Borrower  as the sole  agent  for such
Co-Borrower  under the Loan Documents and to deal with it  exclusively,  and any
act done or omitted or any  document,  certificate,  or  instrument  executed or
delivered  by the  Borrower  shall be  binding  on each of them.  To induce  the
Lenders to enter into this  Agreement  and to make  advances of the Loans in the
manner set forth in this  Agreement,  the Borrower and each of the  Co-Borrowers
hereby  represents,  warrants,  covenants and states to each of the Lenders that
(i) the Borrower and each  Co-Borrower  shares with the other common  management
and ownership,  (ii) the Borrower and each Co-Borrower  desires to utilize their
borrowing  potential on a consolidated  basis to the full extent  possible,  and
consistent  with  realizing  such  potential,  to make  available to the Lenders
security  commensurate with the amount and nature of their aggregate borrowings,
(iii) the  Borrower and each  Co-Borrower  has  determined  that it will benefit
specifically  and materially  from the advances of credit  contemplated  by this
Agreement  and that under a joint and several loan facility it is able to obtain
financing on terms more favorable than otherwise available to it separately, and
(iv) the Borrower and each  Co-Borrower  have  requested  and  bargained for the
structure  and  terms of and  security  for the  advances  contemplated  by this
Agreement.

     Until  indefeasible  payment  in full of the Loans and  termination  of all
Letters of
Credit and Commitments,  the Borrower and each Co-Borrower waives and agrees not
to  enforce  any  of  the  rights  it  may  have  against  the  Borrower  or any
Co-Borrower,  including,  but not limited to: (i) any right to be  subrogated in
whole or in part to any right or claim with  respect to any  Obligations  or any
portion  thereof owed to the Lenders which might otherwise arise from payment by
the  Borrower or either  Co-Borrower  on the account of the  Obligations  or any
portion thereof until all the Obligations are indefeasibly  paid in full and the
Letters of Credit and  Commitments  have  terminated;  and (ii) any right of the
Borrower  or either  Co-Borrower  to require  the  marshalling  of assets of the
Borrower,  either  Co-Borrower or any Guarantor which might otherwise arise from
payment by the Borrower,  either  Co-Borrower or any Guarantor to the Lenders on
account of the Obligations or any portion thereof.

     The Borrower and each Co-Borrower agree that the  Administrative  Agent and
the Lenders
may from  time to time and as many  times as the  Administrative  Agent  and the
Lenders, in their absolute discretion, deem appropriate, do any of the following
without  notice  to the  Borrower  or the  Co-Borrowers  and  without  adversely
affecting the validity or  enforceability  of the joint and several liability of
the  Borrower  and the  Co-Borrowers  under this  Agreement  and the Notes:  (i)
release,  surrender,  exchange,  compromise,  or settle the  Obligations  or any
portion  thereof;  (ii) change,  renew, or waive the terms of the Obligations or
any portion thereof; (iii) grant any extension or indulgence with respect to the
payment to the Lenders of the  Obligations  or any portion  thereof;  (iv) enter
into any agreement of forbearance with respect to the Obligations or any portion
thereof; (v) release, surrender, exchange or compromise any security held by the
Lenders for the  Obligations;  (vi)  release  any Person who is a  Guarantor  or
surety or  otherwise  liable  with  respect to the  Obligations  or any  portion
thereof;  and (vii) release,  surrender,  exchange or compromise any security or
Lien held by the  Administrative  Agent for the  benefit of the  Lenders for the
liabilities  of any Person who is a Guarantor or surety for the  Obligations  or
any  portion  thereof.  The  Borrower  and  each  Co-Borrower  agrees  that  the
Administrative  Agent  and the  Lenders  may do any of the  above  as they  deem
necessary or advisable,  in their sole discretion,  without giving any notice to
the Borrower or the  Co-Borrowers,  and that the  Borrower and the  Co-Borrowers
will remain jointly and severally liable for full payment to the  Administrative
Agent and the Lenders of the Obligations.

     If the  joint  and  several  liability  of either  Co-Borrower  under  this
Agreement would be held or determined to be void,  invalid or  unenforceable  on
account  of the  amount of such  Co-Borrower's  aggregate  liability  under this
Agreement,  then,  notwithstanding  any other provision of this Agreement to the
contrary,  the aggregate  amount of such  liability  shall,  without any further
action by the Lenders,  the Borrower,  the Co-Borrowers or any other Person,  be
automatically  limited  and  reduced to the  highest  amount  which is valid and
enforceable as determined in such action or  proceeding,  which may be an amount
which is not greater than the greater of:

     (i) the fair consideration  actually received by such Co-Borrower under the
terms  of and as a  result  of  this  Agreement  and the  related  transactions,
including,  without  limiting the generality of the foregoing,  advances made to
such Co-Borrower or the transfer of property to such Co-Borrower, or

     (ii) ninety-five  percent (95%) of the excess of (1) the amount of the fair
saleable  value  of the  assets  of  such  Co-Borrower  as of the  date  of this
Agreement as  determined in accordance  with  applicable  federal and state laws
governing  determinations  of the insolvency of debtors as in effect on the date
thereof,  over (2) the amount of all  liabilities of such  Co-Borrower as of the
date of this  Agreement,  also as determined on the basis of applicable  federal
and state  laws  governing  the  insolvency  of debtors as in effect on the date
thereof.

                           [SIGNATURE PAGES TO FOLLOW]



<PAGE>




<TABLE>
<CAPTION>



                                                  SCHEDULE 1.1(A)

                                                   PRICING GRID

------------------------------------------------------------------------------------------------------------------------------------
                                           Revolving Credit and    Revolving Credit and
                 Leverage Ratio                 Term Loan A            Term Loan A        Term Loan B   Term Loan B
   Level                                   Euro-Rate Spread and      Base Rate Spread      Euro-Rate     Base Rate    Commitment Fee
   -----
                                           Letter of Credit Fee                             Spread      Spread rate
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

<S>                               <C>    <C>          <C>                     <C>                <C>             <C>             <C>
 I      Less than or equal to 2.0 to 1.0          1.500%                  0.000%             3.000%          1.500%          .375%
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

II      Greater than 2.0 to 1.0 but less          1.750%                  0.250%             3.000%          1.500%          .375%
        than or equal to 2.5 to 1.0
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

III*    Greater than 2.5 to 1.0 but less          2.125%                  0.625%             3.000%          1.500%          .375%
        than or equal to 3.0 to 1.0
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

IV*     Greater than 3.0 to 1.0 but less          2.500%                  1.000%             3.000%          1.500%          .500%
        than or equal to 3.5 to 1.0
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------

VI      Greater than 3.5 to 1.0              see default rate        see default rate      see default    see default        .500%
                                                                                                  rate            rate
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

         For purposes of  determining  the  Applicable  Margin,  the  Applicable
Commitment Fee Rate and Letter of Credit Fee:

         (a) Except for the effect of an Event of Default and the  imposition of
the Default Rate,  the  Applicable  Margin,  Applicable  Commitment Fee Rate and
Letter of Credit  Fee  shall be deemed to be at Level IV from the  Closing  Date
until  the later of (i)  April 1,  2000,  or (ii) the date  which  results  in a
decrease  of the  Applicable  Margin,  Applicable  Commitment  Fee and Letter of
Credit Fee in accordance with paragraph (b) below.

         (b) Subject to the initial  pricing  period set forth in paragraph  (a)
above,  the  Applicable  Margin,  Applicable  Commitment  Fee Rate and Letter of
Credit Fee shall be adjusted,  and any increase or decrease therein shall become
effective on the first day of each month following the due date for the delivery
of each  Compliance  Certificate  in the  form of  Exhibit  8.3.4,  based on the
Leverage Ratio as calculated in such Compliance Certificate.


         *The default rate will apply to Levels III and IV based upon changes in
the Leverage Ratio pursuant to Section 8.2.16



<PAGE>



<TABLE>
<CAPTION>



                                                  SCHEDULE 1.1(B)

                                 COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES


                          SCHEDULE 1.1(B)COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES

Part 1 - Commitments of Lenders and Addresses for Notices to Lenders



                                                                        Amount of             Amount of
                                                   Amount of       Commitment for Term   Commitment for Term
                   Lender                        Commitment for          Loans A               Loans B          Total Commitment
                                               Revolving Credit
                                                     Loans

<S>     <C>    <C>    <C>    <C>    <C>    <C>
National City Bank of Pennsylvania
National City Center, 20 Stanwix Street
Pittsburgh, PA  15222-4802
Attention:    Stephen C. Findlay,
              Corporate Banking Group
Telephone:     (814) 871-1375
Telecopy:      (814) 455-5495

Bank of America
NationsBank Corporate Center
100 N. Tryon Street, 8th Floor
NC1-007-08-04
Charlotte, NC  28255
Attention:    Timothy Spanos
Telephone:     (704) 386-4507
Telecopy:      (704) 388-0960


Harris Trust and Savings Bank
111 West Monroe, P.O. Box 755
Chicago, IL  60609
Attention:    William A. McDonnell,
              Vice President
Telephone:     (312) 750-8708
Telecopy:      (312) 750-3834





Bank of Montreal
111 West Monroe, P.O. Box 755
Chicago, IL  60609
Attention:    William A. McDonnell,
              Vice President
Telephone:     (312) 750-8708
Telecopy:      (312) 750-3834

LIST ADDITIONAL BANKS


              Total                            $100,000,000        $125,000,000          $100,000,000          $325,000,000
                                                ===========         ===========           ===========           ===========


































<PAGE>





Firstar Bank, National Association
425 Walnut Street, ML 9220
Cincinnati, OH  45202
Attention:    Kenneth Kilmer
Telephone:     (513) 632-3019
Telecopy:      (513) 632-2040


LaSalle National Bank
135 South LaSalle Street
Chicago IL  60603
Attention:    David P. Gibson,
              Commercial Banking
Telephone:     (312) 904-7641
Telecopy:      (312) 904-5483

SunTrust Bank, Central Florida,
National Association
200 South Orange Avenue, Tower 4
Orlando, FL  32801
Attention:    Rhonda Smith,
              Vice President
Telephone:     (407) 237-4924
Telecopy:      (407) 237-6894

Manufacturers and Traders Trust
Company
One Fountain Plaza
Buffalo, NY  14203-1495
Attention:    Chris Kania
              Vice President
Telephone:     (716) 848-7335
Telecopy:      (716) 848-7318


Mercantile Bank of St. Louis, N.A.
One Merchantile Center
12th Floor
St. Louis, MO  63101
Attention:    Timothy W. Hassler,
              Vice President
Telephone:     (314) 418-8046
Telecopy:      (314) 418-2203

PNC Bank, National Association
9th and State Streets
P.O. Box 8480
Erie, PA  16553
Attention:  David O. Matthews
                  Senior Vice President
Telephone:   (814) 871-9292
Telecopy:    (814) 871-9583


Bank Austria Creditanstalt Corporate
Finance, Inc.
Two Greenwich Plaza
Greenwich, CT  06830
Attention:  Catherine MacDonald
Telephone:   (203) 861-6592
Telecopy:   (203) 861-0297




         Total                                 $100,000,000        $125,000,000          $100,000,000          $325.000,000
                                                ===========         ===========           ===========           ===========


</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                                                  SCHEDULE 1.1(B)

                                 COMMITMENTS OF LENDERS AND ADDRESSES FOR NOTICES




Part 2 - Addresses for Notices to Borrower, Co-Borrower and Guarantors


<S>     <C>    <C>    <C>    <C>    <C>    <C>
AGENT

                  NATIONAL CITY BANK OF PENNSYLVANIA
                  National City Center
                  20 Stanwix Street
                  Pittsburgh, PA  15222-4802
                  Attention:     Stephen C. Findlay
                                 Senior Vice President, Corporate Banking Group

                  Telephone:     (814) 871-1375
                  Telecopy:      (814) 455-5495


BORROWER:

                  RENT-WAY, INC.
                  One Rent-Way Place
                  Erie, PA  16505
                  Attention:     Jeffrey A. Conway
                                 Vice President and Chief Financial Officer

                  Telephone:        (814) 836-0618
                  Telecopy:         (814) 835-6865


CO-BORROWERS:

                  RENT-WAY OF TTIG, L.P.
                  One Rent-Way Place
                  Erie, PA  16505
                  Attention:     Jeffrey A. Conway
                                 Vice President and Chief Financial Officer

                  Telephone:        (814) 836-0618
                  Telecopy:         (814) 835-6865






                  RENTAVISION INC.
                  One Rent-Way Place
                  Erie, PA  16505
                  Attention:     Jeffrey A. Conway
                                 Vice President and Chief Financial Officer

                  Telephone:        (814) 836-0618
                  Telecopy:         (814) 835-6865


GUARANTORS:

                  Send to each Guarantor, in care of the Borrower, at Borrower's
address.
</TABLE>








































                       AMENDMENT NO. 1 TO CREDIT AGREEMENT


         THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT (the  "Amendment") is dated as
of November 17, 1999,  and is made by and among  RENT-WAY,  INC., a Pennsylvania
corporation  (the  "Borrower"),  RENT-WAY  OF TTIG,  L.P.,  an  Indiana  limited
partnership,  and RENTAVISION  INC., a New York  Corporation  (Rent-Way of TTIG,
L.P.  and  Rentavision   Inc.  are  referred  to  herein   collectively  as  the
"Co-Borrowers" and each separately as a "Co-Borrower"),  each of the GUARANTORS,
each of the LENDERS (as defined in the Credit Agreement defined below), NATIONAL
CITY  BANK OF  PENNSYLVANIA  in its  capacity  as  administrative  agent for the
Lenders under the Credit Agreement  (hereinafter referred to in such capacity as
the  "Administrative  Agent"),  BANK  OF  AMERICA,  N.A.,  in  its  capacity  as
documentation  agent for the Lenders,  and BANK OF MONTREAL and HARRIS TRUST AND
SAVINGS BANK, in their capacity as syndication agents.

                              W I T N E S S E T H:

                  WHEREAS, the parties hereto are parties to that certain Credit
Agreement dated as of September 23, 1999 (the "Credit  Agreement"),  pursuant to
which the Lenders  provided to the Borrower and the  Co-Borrowers a $100,000,000
revolving credit facility, $125,000,000 in Term Loans A and $100,000,000 in Term
Loans B;

                  WHEREAS,  the Borrower and the Co-Borrowers have requested the
Lenders to amend the Credit  Agreement  (i) to permit the Borrower to repurchase
outstanding  capital stock of the Borrower,  and (ii) to permit the Loan Parties
to make an  investment  in and a loan to dPi  Teleconnect,  L.L.C.,  a  Delaware
limited liability company ("dPi").

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

     1.  Definitions.  Defined terms used herein unless otherwise defined herein
shall have the meanings ascribed to them in the Credit Agreement.

         2.       Section 8.2.4 is hereby amended and restated as follows:

                  "8.2.4............Loans and Investments.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to, at any time make or suffer to remain  outstanding  any loan or
advance to, or purchase,  acquire or own any stock,  bonds,  notes or securities
of,  or any  partnership  interest  (whether  general  or  limited)  or  limited
liability  company  interest in, or any other investment or interest in, or make
any capital contribution to, any other Person, or agree, become or remain liable
to do any of the foregoing, except:





     .........(i)......trade credit extended on usual and customary terms in the
ordinary course of business;

     .........(ii).....advances  to employees to meet expenses  incurred by such
employees in the ordinary course of business;

                  .........(iii)....Permitted Acquisitions;

                  .........(iv).....Permitted Investments;

     .........(v)......loans,  advances and  investments  in other Loan Parties,
provided  however,  that  additional  loans,  advances and investments in Action
Rent-to-Own  Holdings of South  Carolina,  Inc., a South  Carolina  corporation,
shall  be  limited  to  $500,000  in  the  aggregate;  and  .........(vi).....an
investment not in excess of $6,500,000 for the purchase of a sixty percent (60%)
ownership   interest  in  the  limited   liability   company  interests  of  dPi
Teleconnect, L.L.C., a Delaware limited liability company ("dPi"), and loans and
advances  not in  excess  of  $3,000,000  to dPi at any  one  time  outstanding,
provided however, that the Loan Parties' ownership interests in dPi and the note
obligations  of dPi to the Loan Parties  shall be pledged to the  Administrative
Agent for the benefit of the Lenders. For purposes of this Credit Agreement, the
financial  results  of dPi  shall  be  included  in the  consolidated  financial
statements of the Borrower,  as determined and  consolidated  in accordance with
GAAP, but dPi shall not otherwise  constitute a Subsidiary  subject to the terms
and conditions of this Credit  Agreement and the Loan Documents  which relate to
the Subsidiaries of the Loan Parties.

         3.       Section 8.2.5 is hereby amended and restated as follows:

                  "8.2.5............Dividends and Related Distributions.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to,  make or pay,  or agree to become or remain  liable to make or
pay,  any  dividend  or  other  distribution  of any  nature  (whether  in cash,
property,  securities or otherwise) on account of or in respect of its shares of
capital stock,  partnership  interests or limited liability company interests on
account of the purchase, redemption,  retirement or acquisition of its shares of
capital stock (or warrants,  options or rights therefor),  partnership interests
or limited  liability  company  interests,  except that (i) the Loan Parties may
make dividends or other  distributions  payable to another Loan Party,  (ii) the
Borrower may pay  principal,  interest or dividends  on the  Subordinated  Debt,
subject to (y) the  restrictions  on  prepayments  in Section 8.2.22 and (z) the
restrictions on payments  contained in the  subordination  and other  provisions
contained in the Subordinated  Loan Documents,  and (iii) so long as no Event of
Default or Potential  Default  shall exist prior to or after giving  effect to a
repurchase of the Borrower's  outstanding capital stock, the Borrower may redeem
or repurchase in the market shares of its outstanding capital stock in an amount
such that the  consideration  paid by the Borrower does not exceed $5,000,000 in
the aggregate for all such redemptions and repurchases."



<PAGE>




         4.       Section 8.2.9 is hereby amended and restated as follows:

     "8.2.9............Subsidiaries, Partnerships and Joint Ventures.

     Each of the Loan  Parties  shall  not,  and  shall  not  permit  any of its
Subsidiaries  to, own or create  directly or indirectly any  Subsidiaries  other
than (i) any  Subsidiary  which has joined this  Agreement  as  Guarantor on the
Closing Date; (ii) any Subsidiary formed after the Closing Date which joins this
Agreement as a Guarantor  pursuant to Section 11.18,  provided that the Required
Lenders  shall  have  consented  to such  formation  and  joinder  and that such
Subsidiary  and the Loan  Parties,  as  applicable,  shall grant and cause to be
perfected  first priority Liens to the  Administrative  Agent for the benefit of
the Lenders in the assets held by, and stock of or other ownership interests in,
such  Subsidiary;  and (iii) the investment in dPi permitted in accordance  with
Section  8.2.4(vi).  Each of the Loan  Parties  shall not become or agree to (1)
become a general or  limited  partner  in any  general  or limited  partnership,
except that the Loan  Parties  may be general or limited  partners in other Loan
Parties,  (2) become a member or manager of, or hold a limited liability company
interest  in, a limited  liability  company  (other than the  investment  in dPi
permitted in accordance  with Section  8.2.4(vi)),  except that the Loan Parties
may be members or managers of, or hold limited  liability  company interests in,
other Loan  Parties,  or (3)  become a joint  venturer  or hold a joint  venture
interest in any joint venture.

5.  Conditions  of  Effectiveness   of  this  Amendment  and  Restatement.   The
effectiveness of this Amendment is expressly  conditioned  upon  satisfaction of
each of the following conditions precedent:

(a)  Representations  and  Warranties;  No  Defaults.  The  representations  and
warranties  of the Borrower and the  Co-Borrowers  contained in Article 6 of the
Credit  Agreement  shall be true and  accurate  on the date hereof with the same
effect as though such  representations and warranties had been made on and as of
such date (except  representations  and  warranties  which  relate  solely to an
earlier date or time,  which  representations  and warranties  shall be true and
correct on and as of the specific dates or times  referred to therein),  and the
Borrower  and the  Co-Borrowers  shall  have  performed  and  complied  with all
covenants and conditions  hereof; no Event of Default or Potential Default under
the Credit  Agreement shall have occurred and be continuing or shall exist.  The
execution by the Borrower and the  Co-Borrower of this Amendment shall be deemed
to be a certification of all such matters as of the date hereof.

(b) Loan Documents.  The  Administrative  Agent shall be in receipt of such Loan
Documents and  amendments  to existing Loan  Documents and related UCC financing
statements and such promissory notes and ownership  certificates as requested by
the Administrative  Agent in connection with the Collateral to be granted to the
Administrative  Agent for the  benefit  of the  Lenders  as a result of the Loan
Parties investments in and loans to dPi.

(c) Legal Details; Counterparts. All legal details and proceedings in connection
with  the  transactions  contemplated  by this  Amendment  shall  be in form and
substance  satisfactory to the Administrative  Agent. The  Administrative  Agent
shall  have  received  counterparts  of  this  Amendment  duly  executed  by the
Borrower,  the Co-Borrowers,  the Guarantors and the Required  Lenders,  and the
Administrative Agent shall have received all such other counterpart originals or
certified or other copies of such documents and  proceedings in connection  with
such  transactions,  in form and substance  satisfactory  to the  Administrative
Agent.  This  Amendment  may be executed by the parties  hereto in any number of
separate  counterparts,  each of which when taken together and duly executed and
delivered shall together constitute one and the same instrument.

6. Force and Effect. Except as expressly modified by this Amendment,  the Credit
Agreement  and the other Loan  Documents  are hereby  ratified and confirmed and
shall remain in full force and effect after the date hereof.  By their execution
and delivery of this Amendment,  the Guarantors acknowledge and agree that their
respective  obligations and liabilities  under the Guaranty  Agreement extend to
all Obligations of the Borrower and the Co-Borrowers, or either one of them. The
Loan  Parties  acknowledge  and agree that the  Security  Agreements  previously
executed by the Loan  Parties and all other Loan  Documents,  including  without
limitation,  all documents which grant liens and security  interests in favor of
the  Administrative  Agent for the benefit of the Lenders,  remain in full force
and effect and secure the joint and several  Obligations of the Borrower and the
Co-Borrowers, and to the extent set forth in such Loan Documents, the other Loan
Parties.

7. Governing Law. This Amendment shall be deemed to be a contract under the laws
of the  Commonwealth of  Pennsylvania  and for all purposes shall be governed by
and  construed  and  enforced  in  accordance  with  the  internal  laws  of the
Commonwealth of Pennsylvania without regard to its conflict of laws principles.

8. Effective Date. This Amendment shall be dated as of and shall be effective as
of the date and year first  above  written,  which date shall be the date of the
satisfaction  of all  conditions  precedent to  effectiveness  set forth in this
Amendment.

                         [SIGNATURES BEGIN ON NEXT PAGE]


<PAGE>


                   [SIGNATURE PAGE 1 OF 11 TO AMENDMENT NO. 1]

                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Amendment No. 1 to Credit Agreement as of the day and year first above written.

WITNESS/ATTEST:                     RENT-WAY, INC., "Borrower"


                                    By:
                                    Name: ______________________________
                                    Title: _______________________________
[Seal]

WITNESS/ATTEST:                     RENT-WAY OF TTIG,L.P.,"Co-Borrower"
                                    By: Rent-Way Developments, Inc.,
                                    its General Partner


                                    By:
                                    Name: ______________________________
                                    Title: _______________________________
[Seal]

WITNESS/ATTEST:                     RENTAVISION INC.,  "Co-Borrower"


                                    By:
                                    Name: ______________________________
                                    Title: _______________________________
[Seal]

WITNESS/ATTEST:                     ACTION RENT-TO-OWN HOLDINGS OF
                                    SOUTH CAROLINA, INC., "Guarantor"


                                    By:
                                    Name: ______________________________
                                    Title: _______________________________
[Seal]



<PAGE>


                   [SIGNATURE PAGE 2 OF 11 TO AMENDMENT NO. 1]


WITNESS/ATTEST:                     RENT-WAY OF TOMORROW, INC.
                                    "Guarantor"


                                    By:
                                    Name: ______________________________
                                    Title : ______________________________
[Seal]

WITNESS/ATTEST:                     RENT-WAY OF MICHIGAN, INC.
                                    "Guarantor"


                                    By:
                                    Name: ______________________________
                                    Title: _______________________________
[Seal]

WITNESS/ATTEST:                     RENT-WAY DEVELOPMENTS, INC.
                                    "Guarantor"


                                    By:
                                    Name: ______________________________
                                    Title: _______________________________
[Seal]

WITNESS/ATTEST:                     AMERICA'S RENT-TO-OWN CENTER,
                                    INC., "Guarantor"


                                    By:
                                    Title: _______________________________
[Seal]





<PAGE>


                  [SIGNATURE PAGE 3 OF 11 1 TO AMENDMENT NO. 1]





                                             NATIONAL CITY BANK OF
                                             PENNSYLVANIA, as Administrative
                                             Agent and as a Lender



                                             By:
                                             Title:




                                             NATIONAL CITY BANK



                                             By:
                                             Title:









<PAGE>


                   [SIGNATURE PAGE 4 OF 11 TO AMENDMENT NO. 1]





                                             HARRIS TRUST AND SAVINGS BANK, as a
                                             Syndication Agent and as a Lender



                                             By:
                                             Title:




                                             BANK OF MONTREAL, as a Syndication
                                             Agent and as a Lender



                                             By:
                                             Title:



                                             By:
                                             Title:









<PAGE>


                   [SIGNATURE PAGE 5 OF 11 TO AMENDMENT NO. 1]


                                             BANK OF AMERICA, N.A., as
                                             Documentation Agent and as a
                                             Lender



                                              By:
                                              Title:





<PAGE>


                   [SIGNATURE PAGE 6 OF 11 TO AMENDMENT NO. 1]


                                             LASALLE BANK NATIONAL ASSOCIATION



                                             By:
                                             Title:









<PAGE>


                   [SIGNATURE PAGE 7 OF 11 TO AMENDMENT NO. 1]





                                             SUNTRUST BANK, CENTRAL
                                             FLORIDA, N.A.



                                             By:
                                             Title:





<PAGE>


                   [SIGNATURE PAGE 8 OF 11 TO AMENDMENT NO. 1]





                                        MANUFACTURERS AND TRADERS TRUST COMPANY



                                             By:
                                             Title:





<PAGE>


                   [SIGNATURE PAGE 9 OF 11 TO AMENDMENT NO. 1]


                                             FIRSTAR BANK, NATIONAL
                                             ASSOCIATION



                                             By:
                                             Title:





<PAGE>


                  [SIGNATURE PAGE 10 OF 11 TO AMENDMENT NO. 1]


                                             PNC BANK, NATIONAL ASSOCIATION



                                             By:
                                             Title:





<PAGE>



                  [SIGNATURE PAGE 11 OF 11 TO AMENDMENT NO. 1]


                                             BANK AUSTRIA CREDITANSTALT
                                             CORPORATE FINANCE, INC.



                                             By:
                                             Title:



                                             Title:







<PAGE>

                                   Exhibit 21

                                  Subsidiaries


     RTO Holding Co., Inc., a Delaware corporation

     ATRO, Inc., a South Carolina corporation

     Action  Rent-To-Own  Holdings of South  Carolina,  Inc.,  a South  Carolina
corporation

     RTO Operating,  Inc., a Delaware  corporation doing business as Home Choice
Lease or Own



<PAGE>


                                   Exhibit 23

                       Consent of Independent Accountants


     We consent to the incorporation by reference in the registration  statement
of Rent-Way,  Inc. on Form S-8 (File Nos.  33-86090,  333-13355,  333-49355  and
333-87855)  of  our  report  dated  November  24,  1999  on  our  audits  of the
consolidated financial statements of Rent-Way, Inc. and its Subsidiaries,  as of
September 30, 1999 and 1998,  and for the years ended  September 30, 1999,  1998
and 1997, which report is included in this Annual Report on Form 10-K.



                                                     PricewaterhouseCoopers LLP


Cleveland, Ohio
December 22, 1999