Document:

<PAGE>

                                                                   EXHIBIT 10.13
                                                                   -------------

                       ANTHONY & SYLVAN POOLS CORPORATION
                       ----------------------------------
                          2001 LONG-TERM INCENTIVE PLAN

1.       Purpose

         The purpose of the Anthony & Sylvan Pools Corporation 2001 Long-Term
Incentive Plan (the "Plan") is to promote the long-term growth and performance
of Anthony & Sylvan Pools Corporation (the "Company"). The Plan provides an
opportunity for employees and directors of the Company to participate through
share ownership in the long-term growth and success of the Company, enhances the
Company's ability to attract and retain persons with desired abilities, provides
additional incentives for such persons and identifies interests of employees,
directors and shareholders of the Company.

2.       Definitions

         (a) "Award" means any form of stock option, stock appreciation right,
restricted shares, share or share-based award or performance share granted to a
Participant under the Plan.

         (b) "Award Agreement" means a written agreement between the Company and
a Participant setting forth the terms, conditions and limitations applicable to
an Award.

         (c) "Board" means the Board of Directors of the Company.

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

         (e) "Committee" means the Compensation Committee of the Company's
Board, or such other committee of the Board that is designated by the Board to
administer the Plan, provided that the Committee shall be constituted so as to
satisfy any applicable legal requirements, including the requirements of Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 162(m) of the Code or any respective successor
rule.

         (f) "Fair Market Value" means the avenge of the closing prices of
Shares as reported on the Nasdaq Stock Market for the preceding ten (10) days on
which sales of Shares were made on the Nasdaq Stock Market.

         (g) "Participant" means (i) any employee of the Company, (ii) any
employee of any direct or indirect subsidiary of the Company, (iii) any director
of the Company, or (iv) any other person whose selection the Committee
determines to be in the best interests of the Company, to whom an Award is made
under the Plan.

         (h) "Shares" means the common stock, without par value, of the Company.

3.       Shares Available for Awards

         Subject to adjustment as provided in Section 11 below, the aggregate
number of Shares which may be awarded under the Plan shall be four hundred
thousand (400,000) Shares. No more than one hundred and twenty thousand
(120,000) Shares shall be the subject of Awards to any individual Participant in
any one calendar year. Shares issuable under the Plan may consist of authorized
and unissued Shares or treasury Shares.

         Any Shares issued by the Company through the assumption or substitution
of outstanding grants previously made by an acquired corporation or entity shall
not reduce the number of Shares available for Awards under the Plan. Any Shares
issued by the Company through the conversion or substitution of outstanding
grants previously made by Essef Corporation shall not reduce the number of
Shares available for Awards under the Plan. If any Shares subject to any Award
granted under the Plan are forfeited or if such Award otherwise terminates
without the issuance of such Shares or payment of other consideration in lieu of
such Shares, the Shares subject to such Award, to the extent of

                                       26
<PAGE>

any such forfeiture or termination, shall again be available for grant under the
Plan as if such Shares had not been subject to an Award.

4.       Administration

         The Plan shall be administered by the Committee, which shall have full
power and authority to interpret the Plan, to grant waivers of Plan restrictions
and to adopt such rules, regulations and policies for carrying out the Plan as
it may deem necessary or proper in order to further the purposes of the Plan. In
particular, the Committee shall have the authority to (i) select Participants to
receive Awards, (ii) determine the number and type of Awards to be granted,
(iii) determine the terms and conditions, not inconsistent with the terms
hereof, of any Award granted, (iv) interpret the terms and provisions of the
Plan and any Award granted, (v) prescribe the form of any agreement or
instrument executed in connection with any Award, and (vi) establish, amend and
rescind such rules, regulations and policies for the administration of the Plan
as it may deem advisable from time to time.

5.       Awards

         The Committee shall determine the type(s) of Award(s) to be made to
each Participant and shall set forth in the related Award Agreement the terms,
conditions and limitations applicable to each Award. Awards may include but are
not limited to those listed in this Section 5. Awards may be made singly, in
combination, in tandem or in exchange for a previously granted Award, and also
may be made in combination or in tandem with, in replacement of, or as
alternatives to, grants or rights under any other employee plan of the Company,
including the plan of any acquired entity.

         (a) Stock options. Awards may be made in the form of stock options,
which may be incentive stock options within the meaning of Section 422 of the
Code or nonstatutory stock options not intended to qualify under Section 422 of
the Code. Incentive stock options may be granted only to employees. The
aggregate Fair Market Value (determined at the time the option is granted) of
Shares as to which incentive stock options are exercisable for the first time by
a Participant during any calendar year (under the Plan and any other plan of the
Company) shall not exceed $100,000 (or such other limit as may be required by
the Code from time to time). The exercise price of stock options granted under
the Plan shall be determined by the Committee. The exercise price of a
nonstatutory stock option may be at a discount to Fair Market Value on the date
of the grant. The exercise price of an incentive stock option shall be not less
than 100% of Fair Market Value on the date of the grant. A stock option granted
under the Plan shall be exercisable in whole or in such installments and at such
times and upon such terms as may be determined by the Committee, provided that
no incentive stock option shall be exercisable more than ten years after the
date of grant. A participant may pay the exercise price of a stock option in
cash, Shares or a combination of cash and Shares. The Committee shall establish
appropriate procedures for accepting Shares in payment of the exercise price of
a stock option and may impose such conditions as it deems appropriate on such
use of Shares. The Committee is authorized to provide for the automatic granting
of an additional stock option to an Optionee who uses Shares to exercise a stock
option and the Committee shall establish appropriate procedures with respect to
such additional stock options relating to (i) the exercise price of such
additional stock options, (ii) the number of Shares to be covered by such
additional stock options, (iii) the vesting period for such additional stock
options, (iv) the status of such additional stock options as incentive stock
options or non-statutory stock options, and (v) the limitations contained in
Section 3 of this Plan concerning the aggregate number of Shares that may be
awarded under this Plan.

         (b) Stock Appreciation Rights. Awards may be granted in the form of
stock appreciation rights ("SARs"). SARs shall entitle the recipient to receive
a payment, in cash or Shares, equal to the appreciation in market value of a
stated number of Shares from the price stated in the Award Agreement to the Fair
Market Value on the date of exercise or surrender. SARs may be granted either
separately or in conjunction with other Awards granted under the Plan. Any SAR
related to a nonstatutory stock option may be granted at the same time such
option is granted or any time thereafter before exercise or expiration of such
option. Any SAR related to an incentive stock option must be granted at the same
time such option is granted. Any SAR related to an option shall be

                                       27
<PAGE>

exercisable only to the extent the related option is exercisable. In the case of
any SAR related to any option, the SAR or applicable portion thereof shall
terminate and no longer be exercisable upon the termination or exercise of the
related option. Similarly, upon exercise of an SAR as to some or all of the
Shares covered by a related option, the related option shall be canceled
automatically to the extent of the SARs exercised, and such Shares shall not
thereafter be eligible for grant. The Committee may impose such conditions or
restrictions upon the exercise of any SAR as it shall deem appropriate.

         (c) Restricted Shares. Awards may be granted in the form of restricted
Shares in such numbers and at such times as the Committee shall determine.
Awards of restricted Shares shall be subject to such terms, conditions or
restrictions as the Committee deems appropriate including, but not limited to,
restrictions on transferability, requirements of continued employment,
individual performance or financial performance of the Company. The period of
vesting and forfeiture restrictions shall be established by the Committee at the
time of grant. During the period in which any restricted Shares are subject to
forfeiture restrictions, the Committee may, in its discretion, grant to the
Participant to whom such restricted Shares have been awarded, all or any of the
rights of a shareholder with respect to such restricted Shares, including the
right to vote such Shares and to receive dividends with respect to such Shares.

         (d) Performance Shares. Awards may be made in the form of Shares that
are earned only after the attainment of predetermined performance targets as
established by the Committee at the time an Award is made ("Performance
Shares"). A performance target shall be based upon one or any combination of the
following: (i) revenues of the Company; (ii) operating income of the Company;
(iii) net income of the Company; (iv) earnings per Share; (v) the Company's
return on equity; (vi) cash flow of the Company; (vii) Company shareholder total
return; (viii) return on assets; (ix) return on investment; (x) asset turnover;
(xi) liquidity; (xii) capitalization; (xiii) stock price; (xiv) expenses; (xv)
operating profit and margin; (xvi) retained earnings; (xvii) market share;
(xviii) sales to targeted customers; (xix) customer satisfaction; (xx) quality
measures; (xxi) productivity; (xxii) safety measures; or (xxiii) educational and
technical skills of employees. Performance targets may also be based on the
attainment of levels of performance of the Company and/or any of its affiliates
or divisions under one or more of the measures described above relative to the
performance of other businesses. The Committee shall be permitted to make
adjustments when determining the attainment of a performance target to reflect
extraordinary or nonrecurring items or events, or unusual nonrecurring gains or
losses identified in the Company's financial statements, as long as any such
adjustments are made in a manner consistent with Section 162(m) of the Code to
the extent applicable. Awards of Performance Shares made to Participants subject
to Section 162(m) of the Code are intended to qualify under Section 162(m) and
provisions of such Awards shall be interpreted in a manner consistent with that
intent to the extent appropriate. The foregoing provisions of this Section 5(d)
also shall be applicable to Awards of restricted Shares made under Section 5(c)
to the extent such Awards of restricted Shares are subject to the financial
performance of the Company. At the end of the applicable performance period,
Performance Shares shall be converted into Shares (or cash or a combination of
Shares and cash, as set forth in the Award Agreement) and distributed to
Participants based upon the applicable performance entitlement. Award payments
made in cash rather than the issuance of Shares shall not, by reason of such
payment in cash, result in additional Shares being available under the Plan.

         (e) Stock Awards. Awards may be made in Shares or on a basis valued in
whole or in part by reference to, or otherwise based upon, Shares. Share awards
shall be subject to conditions established by the Committee and set forth in the
Award Agreement.

         (f) Awards to Directors. Each new non-employee director shall be
granted options immediately upon first becoming a director and at each Annual
Meeting of shareholders thereafter provided that the non-employee director
continues holding such position following the meeting. The terms and conditions
of such grants shall be determined by the full Board at the time of such grants.

         (g) Integration with Deferred Compensation Plan. The Committee may
establish such procedures as it deems appropriate to permit a Participant to
cancel or surrender all or any portion of an Award in exchange for a credit to
the Participant's Deferred

                                       28
<PAGE>

Compensation Account maintained under the Company's Deferred Compensation Plan
for Employees and Directors.

6.       Payment of Awards; Deferrals

         Payment of Awards may be made in the form of Shares, cash or a
combination of Shares and cash and may include such restrictions as the
Committee shall determine, including restrictions on transfer and forfeiture
provisions. With Committee approval, payments may be deferred, either in the
form of installments or a future lump sum payment. The Committee may permit
Participants to elect to defer payments of some or all types of Awards in
accordance with procedures established by the Committee to assure that such
deferrals comply with applicable requirements of the Code including the
capability to make further deferrals for payment after retirement. The Committee
may also establish rules and procedures for the crediting of interest on
deferred cash payments and dividend equivalents for deferred payments
denominated in Shares.

7.       Tax Withholding

         The Company shall have the authority to withhold, or to require a
Participant to remit to the Company, prior to issuance or delivery of any Shares
or cash relating to an Award made under the Plan, an amount sufficient to
satisfy federal, state and local tax withholding requirements associated with
any Award. In addition, the Company may, in its sole discretion, permit a
Participant to satisfy any tax withholding requirements, in whole or in part, by
(i) delivering to the Company Shares held by such Participant having a Fair
Market Value equal to the amount of the tax or (ii) directing the Company to
retain Shares having such Fair Market Value and otherwise issuable to the
Participant under the Plan.

8.       Termination of Employment or Service as a Director

         If the employment of a Participant (or such Participant's service as a
director) terminates for any reason, all unexercised, deferred and unpaid Awards
shall be exercisable or paid in accordance with the applicable Award Agreement,
which may provide that the Committee may authorize, as it deems appropriate, the
acceleration and/or continuation of all or any part of Awards granted prior to
such termination.

9.       Nonassignability

         Except as may be otherwise provided in the relevant Award Agreement, no
Award or any benefit under the Plan shall be assignable or transferable, or
payable to or exercisable by, anyone other than the Participant to whom it was
granted.

10.      Change in Control

         (a) In the event of a Change in Control (as defined below) of the
Company, and except as the Board may expressly provide otherwise, (i) all stock
options or SARs then outstanding shall become fully exercisable as of the date
of the Change in Control, whether or not then otherwise exercisable, (ii) all
restrictions and conditions of all Awards of restricted Shares then outstanding
shall be deemed satisfied as of the date of the Change in Control, and (iii) all
Awards of Performance Shares shall be deemed to have been fully earned as of the
date of the Change in Control.

         (b) A "Change in Control" of the Company shall have occurred when any
of the following events shall occur:

         (i) The Company is merged, consolidated or reorganized into or with
         another corporation or other legal person, and immediately after such
         merger, consolidation or reorganization less than a majority of the
         combined voting power of the then-outstanding securities of such
         corporation or person immediately after such transaction are held in
         the aggregate by the holders of Voting Stock (as that term is hereafter
         defined) of the Company immediately prior to such transaction;

         (ii) The Company sells all or substantially all of its assets to any
         other corporation or other legal person, less than a majority of the
         combined voting power

                                       29
<PAGE>

         of the then-outstanding securities of such corporation or person
         immediately after such sale are held in the aggregate by the holders of
         Voting Stock of the Company immediately prior to such sale;

         (iii) There is a report filed or required to be filed on Schedule 13D
         on Schedule l4D-1 (or any successor schedule, form or report), each as
         promulgated pursuant to the Exchange Act, disclosing that any person
         (as the term "person" is used in Section l3(d)(3) or Section l4(d)(2)
         of the Exchange Act) has become the beneficial owner (as the term
         "beneficial owner, is defined under Rule l3d-3 or any successor rule or
         regulation promulgated under the Exchange Act) of securities
         representing more than 50% of the combined voting power of the
         then-outstanding securities entitled to vote generally in the election
         of directors of the Company ("Voting Stock"); or

         (iv) The Company files a report or proxy statement with the Securities
         and Exchange Commission pursuant to the Exchange Act disclosing in
         response to Form 8-K or Schedule 14A (or any successor schedule, form
         or report or item therein) that a change in control of the Company has
         or may have occurred or will or may occur in the future pursuant to any
         then-existing contract or transaction.

         Notwithstanding the foregoing provisions of Section 10(b)(iii) or (iv)
hereof, unless otherwise determined in a specific case by majority vote of the
Board, a "Change in Control" shall not be deemed to have occurred for purposes
of the Plan solely because (i) the Company, (ii) an entity in which the Company
directly or indirectly beneficially owns 50% or more of the voting securities or
interest, or (iii) any Company-sponsored employee stock ownership plan or any
other employee benefit plan of the Company, either files or becomes obligated to
file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-l, Form 8-K or Schedule l4A (or any successor schedule, form or
report or item therein) under the Exchange Act, disclosing beneficial ownership
by it of shares of Voting Stock, whether in excess of 50% or otherwise, or
because the Company reports that a change in control of the Company has or may
have occurred or will or may occur in the future by reason of such beneficial
ownership. Further, a "Change in Control" shall not be deemed to have occurred
by reason of any change resulting from the Company's bankruptcy, insolvency or
otherwise for the benefit of the Company's creditors.

11.      Adjustments upon Changes of Capitalization

         In the event of any change in the outstanding Shares by reason of a
reorganization, recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation or any change in the corporate
structure or Shares of the Company, the number of Shares as to which Awards may
be granted under the Plan, including limitations relating to incentive stock
option Awards and maximum Awards to individual Participants, the number of
Shares issuable pursuant to then outstanding Awards, and/or, if appropriate, the
prices of Shares related to outstanding Awards, shall be appropriately and
proportionately adjusted.

12.      Rights of Employees

         Nothing in the Plan shall interfere with or limit in any way the right
of the Company or any subsidiary of the Company to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continued
employment with the Company or any subsidiary of the Company.

13.      Amendment, Suspension or Termination of Plan and Awards

         The Board may amend, suspend or terminate the Plan at any time,
provided that no such action shall be taken that would impair the rights under
an outstanding Award without the Participant's consent.

The Board may amend the terms of any outstanding Award, prospectively or
retroactively, but no such amendment shall impair the rights of any Participant
without the Participant's consent and no such amendment shall have the effect,
with respect to any employee subject to Section 162(m) of the Code, of
increasing the amount of any Award from the amount that would otherwise be
payable pursuant to the formula and/or goals previously established for

                                       30
<PAGE>

such Participant.

14.      Governing Law

         The Plan, together with all determinations and actions made or taken in
connection therewith, to the extent not otherwise governed by the Code or other
laws of the United States, shall be governed by the laws of the State of Ohio.

15.      Effective and Termination Dates

         The Plan shall become effective on the date it is approved by the
shareholders of the Company. The Plan shall continue in effect until terminated
by the Board, at which time all outstanding Awards shall remain outstanding in
accordance with their applicable terms and conditions.

                                       31<PAGE>

                                                                    Exhibit 4.1

                               SECURITY AGREEMENT

         THIS SECURITY AGREEMENT (the "AGREEMENT"), dated as of January 11,
2002, is entered into by and each of the undersigned parties listed on the
signature pages hereto and each of the other persons and entities that become
bound hereby from time to time by joinder, assumption, or otherwise (each a
"DEBTOR" and collectively the "DEBTORS"), and National City Bank, as Agent (the
"AGENT") for the Banks (as defined below);

                                WITNESSETH THAT:

         WHEREAS, the Debtors are (or will be with respect to after-acquired
property) the legal and beneficial owners and the holders of the Collateral (as
defined in Section 1 hereof); and

         WHEREAS, pursuant to that certain Credit Agreement (as it may hereafter
from time to time be restated, amended, modified or supplemented, the "CREDIT
AGREEMENT") of even date herewith by and among the Agent, the Banks party
thereto (the "BANKS"), the Guarantors party thereto (the "GUARANTORS") and
Rainbow Rentals, Inc., an Ohio corporation (the "BORROWER"), the Agent and the
Banks have agreed to make certain loans to the Borrower; and

         WHEREAS, the obligation of the Agent and the Banks to make loans under
the Credit Agreement is subject to the condition, among others, that the Debtors
secure their obligations to the Agent and the Banks under the Credit Agreement,
the other Loan Documents and otherwise as more fully described herein in the
manner set forth herein.

         NOW, THEREFORE, intending to be legally bound hereby, the parties
hereto covenant and agree as follows:

         1. Terms which are defined in the Credit Agreement and not otherwise
defined herein are used herein as defined therein. The following words and terms
shall have the following meanings, respectively, unless the context hereof
otherwise clearly requires:

            (a) "CODE" means the Uniform Commercial Code as in effect in the
State of Ohio on the date hereof and as amended from time to time, except to the
extent that the conflict of law rules of such Uniform Commercial Code shall
apply the Uniform Commercial Code as in effect from time to time in any other
state to specific property or other matters.

            (b) "COLLATERAL" means all of any Debtor's right, title and interest
in, to and under the following described property of such Debtor (each
capitalized term used in this Section 1(b) shall have in this Agreement the
meaning given to it by the Code):

                (i) all now existing and hereafter acquired or arising Accounts,
Goods, General Intangibles, Payment Intangibles, Deposit Accounts, Chattel Paper
(including, without limitation, Electronic Chattel Paper), Documents,
Instruments, Software, Investment Property, Letters of Credit, Letter-of-Credit
Rights, advices of credit, money, Commercial Tort Claims as listed on SCHEDULE B
hereto (as such Schedule is amended or supplemented from time to time),
Equipment, Inventory, Fixtures, and Supporting Obligations, together with all
products of and Accessions to any of the foregoing and all Proceeds of any of
the foregoing (including without limitation all insurance policies and proceeds
thereof);

<PAGE>

                (ii) to the extent, if any, not included in clause (i) above,
each and every other item of personal property and fixtures, whether now
existing or hereafter arising or acquired, including, without limitation, all
licenses, contracts and agreements, and all collateral for the payment or
performance of any contract or agreement, together with all products and
Proceeds (including all insurance policies and proceeds) of any Accessions to
any of the foregoing;

                (iii) all present and future business records and information,
including computer tapes and other storage media containing the same and
computer programs and software (including without limitation, source code,
object code and related manuals and documentation and all licenses to use such
software) for accessing and manipulating such information.

            (c) "DEBT" shall mean and include the following: (i) all now
existing and hereafter arising Indebtedness and Obligations of each and every
Debtor to the Agent, the Banks, or any of their respective Affiliates under the
Credit Agreement or any of the other Loan Documents, including all obligations,
liabilities, and indebtedness, whether for principal, interest, fees, expenses
or otherwise, of each and every Debtor to the Agent, the Banks, or any of their
respective Affiliates, now existing or hereafter incurred under the Credit
Agreement or the Notes or the Guaranty Agreement or any of the other Loan
Documents as any of the same or any one or more of them may from time to time be
amended, restated, modified, or supplemented, together with any and all
extensions, renewals, refinancings, and refundings thereof in whole or in part
(and including obligations, liabilities, and indebtedness arising or accruing
after the commencement of any bankruptcy, insolvency, reorganization, or similar
proceeding with respect to the Borrower or which would have arisen or accrued
but for the commencement of such proceeding, even if the claim for such
obligation, liability or indebtedness is not enforceable or allowable in such
proceeding, and including all obligations, liabilities and indebtedness arising
from any extensions of credit under or in connection with the Loan Documents
from time to time, regardless whether any such extensions of credit are in
excess of the amount committed under or contemplated by the Loan Documents or
are made in circumstances in which any condition to extension of credit is not
satisfied); (ii) all reimbursement obligations of each and every Debtor with
respect to any one or more Letters of Credit issued by Agent or any Bank; (iii)
all indebtedness, loans, obligations, expenses and liabilities of each and every
Debtor to the Agent or any of the Banks, or any of their respective Affiliates,
arising out of any Bank Provided Interest Rate Hedge provided by the Agent, such
Banks or such Affiliates pursuant to the Credit Agreement; and (iv) any sums
advanced by the Agent or the Banks or which may otherwise become due pursuant to
the provisions of the Credit Agreement, the Notes, this Agreement, or any other
Loan Documents or pursuant to any other document or instrument at any time
delivered to the Agent in connection therewith, including commitment, letter of
credit, agent or other fees and charges, and indemnification obligations under
any such document or instrument, together with all interest payable on any of
the foregoing, whether such sums are advanced or otherwise become due before or
after the entry of any judgment for foreclosure or any judgment on any Loan
Document or with respect to any default under any of the Debt.

            (d) "Receivables" means all of the Collateral except Equipment and
Inventory.

                                      -2-
<PAGE>

         2. As security for the due and punctual payment and performance of the
Debt in full, each Debtor hereby agrees that the Agent and the Banks and
their respective Affiliates shall have, and each Debtor hereby grants to and
creates in favor of the Agent for the benefit of itself, the Banks and their
respective Affiliates, a continuing first priority lien on and security interest
under the Code in and to the Collateral subject only to Permitted Liens. Without
limiting the generality of Section 4 below, each Debtor further agrees that with
respect to each item of Collateral as to which (i) the creation of a valid and
enforceable security interest is not governed exclusively by the Code or (ii)
the perfection of a valid and enforceable first priority security interest
therein under the Code cannot be accomplished either by the Agent taking
possession thereof or by the filing in appropriate locations of appropriate Code
financing statements executed by such Debtor, such Debtor will at its expense
execute and deliver to the Agent and hereby does authorize the Agent to execute
and file such documents, agreements, notices, assignments and instruments and
take such further actions as may be requested by the Agent from time to time for
the purpose of creating a valid and perfected first priority Lien on such item,
subject only to Permitted Liens, enforceable against such Debtor and all third
parties to secure the Debt.

         3. Each Debtor represents and warrants to the Agent and the Banks that
(a) such Debtor has good and marketable title to its Collateral, (b) except for
the security interest granted to and created in favor of the Agent for the
benefit of itself and the Banks hereunder and Permitted Liens, all the
Collateral is free and clear of any Lien (c) each Debtor will defend the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein, (d) each Account and General Intangible is
genuine and enforceable in accordance with its terms and such Debtor will defend
the same against all claims, demands, recoupment, setoffs, and counterclaims at
any time asserted, and (e) at the time any Account or General Intangible becomes
subject to this Agreement, each such Account or General Intangible will be a
good and valid Account representing a bona fide sale of goods or services by
such Debtor and such goods will have been shipped to the respective account
debtors or the services will have been performed for the respective account
debtors, (or for those on behalf of whom the account debtors are obligated on
the Accounts) and no such Account or General Intangible will at such time be
subject to any claim for credit, allowance, setoff, recoupment, defense,
counterclaim or adjustment by any account debtor or otherwise, (f) the exact
legal name of the Debtor is as set forth on SCHEDULE A hereto, and (g) the state
of incorporation, formation or organization, as applicable, of such Debtor is as
set forth on SCHEDULE A hereto.

         4. Each Debtor will faithfully preserve and protect the Agent's
security interest in the Collateral as a prior perfected security interest under
the Code, superior and prior to the rights of all third Persons, except for
holders of Permitted Liens, and will do all such other acts and things and will,
upon request therefor by the Agent, execute, deliver, file and record, and each
Debtor hereby authorizes the Agent to so file, all such other documents and
instruments, including, without limitation, financing statements (with or
without the signature of any Debtor), security agreements, assignments and
documents and powers of attorney with respect to the Collateral, and pay all
filing fees and taxes related thereto, as the Agent in its reasonable discretion
may deem necessary or advisable from time to time in order to attach, continue,
preserve, perfect, and protect said security interest (including the filing at
any time or times after the date hereof of financing statements under, and in
the locations advisable pursuant to, the Code); and, each Debtor hereby
irrevocably appoints the Agent, its officers, employees and

                                      -3-
<PAGE>

agents, or any of them, as attorneys-in-fact for such Debtor to execute,
deliver, file and record such items for such Debtor and in such Debtor's name,
place and stead. This power of attorney, being coupled with an interest, shall
be irrevocable for the life of this Agreement. Each Debtor acknowledges and
agrees that (i) the power of attorney herein granted shall in no way be
construed as to benefit such Debtor; (ii) the Agent herein granted this power of
attorney shall have NO duty to exercise any powers granted hereunder for the
benefit of such Debtor; and (iii) the Agent herein granted this power of
attorney shall, to the extent exercisable, exercise any and all powers granted
hereunder for the benefit of the Agent and the Banks. The Agent hereby accepts
this power of attorney and all powers granted hereunder for the benefit of the
Agent and the Banks.

         5. Each Debtor covenants and agrees that:

            (a) it will defend the Agent's and the Banks' right, title and lien
on and security interest in and to the Collateral and the proceeds thereof
against the claims and demands of all Persons whomsoever, other than any Person
claiming a right in the Collateral pursuant to a Permitted Lien;

            (b) it will not suffer or permit to exist on any Collateral any Lien
except for Permitted Liens;

            (c) it will not take or omit to take any action, the taking or the
omission of which might result in a material alteration (except as permitted by
the Credit Agreement) or impairment of the Collateral or of the Agent's rights
under this Agreement;

            (d) it will not sell, assign or otherwise dispose of any portion of
the Collateral except as permitted in Section [8.2.7] [Disposition of Assets or
Subsidiaries] of the Credit Agreement;

            (e) it will (i) except for such Collateral delivered to the Agent
pursuant to this Section or otherwise that is now or hereafter under the control
of the Agent, obtain and maintain sole and exclusive possession of the
Collateral, (ii) maintain its chief executive office and keep the Collateral and
all records pertaining thereto at the locations specified on the Security
Interest Data Summary attached as SCHEDULE A hereto, unless it shall have given
the Agent prior notice and taken any action reasonably requested by the Agent to
maintain its security interest therein, (iii) notify the Agent if an Account
becomes evidenced or secured by an Instrument or Chattel Paper and deliver to
the Agent upon the Agent's request therefor all Collateral consisting of
Instruments and Chattel Paper immediately upon such Debtor's receipt of a
request therefor, (iv) deliver to the Agent possession of all Collateral the
possession of which is required to perfect the Agent's lien thereon or security
interest therein or the possession of which grants priority over a Person filing
a financing statement with respect thereto, (v) execute control agreements and
cause other Persons to execute acknowledgments in form and substance
satisfactory to the agent evidencing the Agent's control with respect to all
Collateral the control or acknowledgment of which perfects the Agent's security
interest therein, including Letters of Credit, Letter of Credit Rights,
Electronic Chattel Paper, Deposit Accounts and Investment Property, and (vi)
keep materially accurate and complete books and records concerning the

                                      -4-
<PAGE>

Collateral and such other books and records as the Agent may from time to time
reasonably require; and

            (f) it will promptly furnish to the Agent such information and
documents relating to the Collateral as the Agent may reasonably request,
including, without limitation, all invoices, Documents, contracts, Chattel
Paper, Instruments and other writings pertaining to such Debtor's contracts or
the performance thereof, all of the foregoing to be certified upon request of
the Agent by an authorized officer of such Debtor;

            (g) it shall immediately notify the Agent if any Account arises out
of contracts with the United States or any department, agency or instrumentality
thereof or any one or more of the states of the United States or any department,
agency, or instrumentality thereof, and will execute any instruments and take
any steps required by the Agent so that all monies due and to become due under
such contract shall be assigned to the Agent and notice of the assignment given
to and acknowledged by the appropriate government agency or authority under the
Federal Assignment of Claims Act;

            (h) such Debtor will not change its state of incorporation,
formation or organization, as applicable, without providing thirty (30) days
prior written notice the Agent;

            (i) such Debtor will not change its name without providing thirty
(30) days prior written notice to the Agent;

            (j) such Debtor shall preserve its corporate existence and shall not
(a) in one, or a series of related transactions, merge into or consolidate with
any other entity, the survivor of which is not such Debtor, or (b) sell all or
substantially all of its assets;

            (k) if any Debtor shall at any time acquire a commercial tort claim,
as defined in the Code, such Debtor shall immediately notify the Agent in a
writing signed by such Debtor of the details thereof and grant to the Agent for
the benefit of the Banks in such writing a security interest therein and in the
proceeds thereof, with such writing to be in form and substance satisfactory to
the Agent and such writing shall constitute a supplement to SCHEDULE B hereto;

            (l) each Debtor hereby authorizes the Agent to, at any time and from
time to time, file in any one or more jurisdictions financing statements that
describe the Collateral, together with continuation statements thereof and
amendments thereto, without the signature of such Debtor and which contain any
information required by the Code or any other applicable statute applicable to
such jurisdiction for the sufficiency or filing office acceptance of any
financing statements, continuation statements, or amendments. Each Debtor agrees
to furnish any such information to the Agent promptly upon request. Any such
financing statements, continuation statements, or amendments may be signed by
Agent on behalf of such Debtor if the Agent so elects and may be filed at any
time in any jurisdiction;

            (m) such Debtor shall at any time and from time to time take such
steps as the Agent may reasonably request as are necessary for the Agent to
insure the continued perfection of the Agent's and the Banks' security interest
in the Collateral with the same priority required hereby and the preservation of
its rights therein.

                                      -5-
<PAGE>

         6. Each Debtor assumes full responsibility for taking any and all
necessary steps to preserve the Agent's and the Banks' rights with respect to
the Collateral against all Persons other than anyone asserting rights in respect
of a Permitted Lien. The Agent shall be deemed to have exercised reasonable care
in the custody and preservation of the Collateral in its possession if the Agent
takes such action for that purpose as such Debtor shall request in writing,
PROVIDED that such requested action will not, in the judgment of the Agent,
impair the security interest in the Collateral created hereby or the Agent's and
the Banks' rights in, or the value of, the Collateral, and PROVIDED FURTHER that
such written request is received by the Agent in sufficient time to permit the
Agent to take the requested action.

         7. (a) At any time and from time to time whether or not an Event of
Default then exists and without prior notice to or consent of any Debtor, the
Agent may at its option take such actions as the Agent deems appropriate (i) to
attach, perfect, continue, preserve and protect the Agent's and the Banks' first
priority security interest in or lien on the Collateral, and/or (ii) to inspect,
audit and verify the Collateral, including reviewing all of such Debtor's books
and records and copying and making excerpts therefrom, PROVIDED that prior to an
Event of Default or a Potential Default, the same is done with advance notice
during normal business hours to the extent access to such Debtor's premises is
required, and (iii) to add all liabilities, obligations, costs and expenses
reasonably incurred in connection with the foregoing clauses (i) and (ii) to the
Debt, to be paid by the Debtors to the Agent for the benefit of the Agent and
the Banks upon demand;

            (b) At any time and from time to time after an Event of Default
exists and is continuing and without prior notice to or consent of any Debtor,
the Agent may at its option take such action as the Agent deems appropriate (i)
to maintain, repair, protect and insure the Collateral, and/or (ii) to perform,
keep, observe and render true and correct any and all covenants, agreements,
representations and warranties of any Debtor hereunder, and (iii) to add all
liabilities, obligations, costs and expenses reasonably incurred in connection
with the foregoing clauses (i) and (ii) to the Debt, to be paid by any Debtor to
the Agent for the benefit of the Agent and the Banks upon demand.

         8. After there exists any Event of Default under the Credit Agreement:

            (a) The Agent shall have and may exercise all the rights and
remedies available to a secured party under the Code in effect at the time, and
such other rights and remedies as may be provided by Law and as set forth below,
including without limitation to take over and collect all of any Debtor's
Receivables and all other Collateral, and to this end each Debtor hereby
appoints the Agent, its officers, employees and agents, as its irrevocable, true
and lawful attorneys-in-fact with all necessary power and authority to (i) take
possession immediately, with or without notice, demand, or legal process, of any
of or all of the Collateral wherever found, and for such purposes, enter upon
any premises upon which the Collateral may be found and remove the Collateral
therefrom, (ii) require any Debtor to assemble the Collateral and deliver it to
the Agent or to any place designated by the Agent at such Debtor's expense,
(iii) receive, open and dispose of all mail addressed to any Debtor and notify
postal authorities to change the address for delivery thereof to such address as
the Agent may designate, (iv) demand payment of the Receivables, (v) enforce
payment of the Receivables by legal proceedings or otherwise, (vi) exercise all
of any Debtor's rights and remedies with respect to the collection of

                                      -6-
<PAGE>

the Receivables, (vii) settle, adjust, compromise, extend or renew the
Receivables, (viii) settle, adjust or compromise any legal proceedings brought
to collect the Receivables, (ix) to the extent permitted by applicable Law, sell
or assign the Receivables upon such terms, for such amounts and at such time or
times as the Agent deems advisable, (x) discharge and release the Receivables,
(xi) take control, in any manner, of any item of payment or proceeds from any
account debtor, (xii) prepare, file and sign any Debtor's name on any Proof of
Claim in Bankruptcy or similar document against any account debtor, (xiii)
prepare, file and sign any Debtor's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables,
(xiv) do all acts and things necessary, in the Agent's sole discretion, to
fulfill any Borrower's, Guarantor's or Debtor's obligations to the Agent or the
Banks under the Credit Agreement, Loan Documents or otherwise, (xv) endorse the
name of any Debtor upon any check, Chattel Paper, Document, Instrument, invoice,
freight bill, bill of lading or similar document or agreement relating to the
Receivables or Inventory; (xvi) use any Debtor's stationery and sign such
Debtor's name to verifications of the Receivables and notices thereof to account
debtors; (xvii) access and use the information recorded on or contained in any
data processing equipment or computer hardware or software relating to the
Receivables, Inventory, or other Collateral or proceeds thereof to which any
Debtor has access, (xviii) demand, sue for, collect, compromise and give
acquittances for any and all Collateral, (xix) prosecute, defend or compromise
any action, claim or proceeding with respect to any of the Collateral, and (xx)
take such other action as the Agent may deem appropriate, including extending or
modifying the terms of payment of any Debtor's debtors. This power of attorney,
being coupled with an interest, shall be irrevocable for the life of this
Agreement. To the extent permitted by Law, each Debtor hereby waives all claims
of damages due to or arising from or connected with any of the rights or
remedies exercised by the Agent pursuant to this Agreement, except claims for
physical damage to the Collateral arising from gross negligence or willful
misconduct by the Agent. Each Debtor acknowledges and agrees that (i) the power
of attorney herein granted shall in no way be construed as to benefit such
Debtor; (ii) the Agent herein granted this power of attorney shall have NO duty
to exercise any powers granted hereunder for the benefit of such Debtor; and
(iii) the Agent herein granted this power of attorney shall, to the extent
exercisable, exercise any and all powers granted hereunder for the benefit of
the Agent and the Banks. The Agent hereby accepts this power of attorney and all
powers granted hereunder for the benefit of the Agent and the Banks.

            (b) The Agent shall have the right to lease, sell or otherwise
dispose of all or any of the Collateral at public or private sale or sales for
cash, credit or any combination thereof, with such notice as may be required by
Law (it being agreed by each Debtor that, in the absence of any contrary
requirement of Law, ten (10) days' prior notice of a public or private sale of
Collateral shall be deemed reasonable notice), in lots or in bulk, for cash or
on credit, all as the Agent, in its sole discretion, may deem advisable. Such
sales may be adjourned from time to time with or without notice. The Agent shall
have the right to conduct such sales on any Debtor's premises or elsewhere and
shall have the right to use any Debtor's premises without charge for such sales
for such time or times as the Agent may see fit. The Agent may purchase all or
any part of the Collateral at public or, if permitted by Law, private sale and,
in lieu of actual payment of such purchase price, may set off the amount of such
price against the Debt.

         9. The lien on and security interest in each Debtor's Collateral
granted to and created in favor of the Agent by this Agreement shall be for the
benefit of the Agent and the Banks and

                                      -7-
<PAGE>

their respective Affiliates. Each of the rights, privileges, and remedies
provided to the Agent hereunder or otherwise by Law with respect to any Debtor's
Collateral shall be exercised by the Agent only for its own benefit and the
benefit of the Banks, and any of such Debtor's Collateral or proceeds thereof
held or realized upon at any time by the Agent shall be applied as set forth in
Section 9.2.5 [Application of Proceeds; Collateral Sharing] of the Credit
Agreement. Each Debtor shall remain liable to the Agent and the Banks and their
respective Affiliates for and shall pay to the Agent for the benefit of itself
and the Banks and their respective Affiliates any deficiency which may remain
after such sale or collection.

         10. If the Agent repossesses or seeks to repossess any of the
Collateral pursuant to the terms hereof because of the occurrence of an Event of
Default, then to the extent it is commercially reasonable for the Agent to store
any Collateral on any of any Debtor's premises, each Debtor hereby agrees to
lease to the Agent on a month-to-month tenancy for a period not to exceed one
hundred twenty (120) days at the Agent's election, at a rental of One Dollar
($1.00) per month, the premises on which the Collateral is located, provided it
is located on premises owned or leased by such Debtor.

         11. Upon indefeasible payment in full of the Debt, the expiration of
all Commitments and Letters of Credit, and termination of the Credit Agreement,
this Agreement shall terminate and be of no further force and effect, and the
Agent shall thereupon promptly return to each Debtor such of the Collateral and
such other documents delivered by such Debtor hereunder as may then be in the
Agent's possession, subject to the rights of third parties. Until such time,
however, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.

         12. No failure or delay on the part of the Agent in exercising any
right, remedy, power or privilege hereunder shall operate as a waiver thereof or
of any other right, remedy, power or privilege of the Agent hereunder; nor shall
any single or partial exercise of any such right, remedy, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. No waiver of a single Event of Default shall
be deemed a waiver of a subsequent Event of Default. All waivers under this
Agreement must be in writing. The rights and remedies of the Agent under this
Agreement are cumulative and in addition to any rights or remedies which it may
otherwise have, and the Agent may enforce any one or more remedies hereunder
successively or concurrently at its option.

         13. All notices, statements, requests and demands given to or made upon
either party hereto in accordance with the provisions of this Agreement shall be
given or made as provided in Section 11.6 [Notices] of the Credit Agreement.

         14. Each Debtor agrees that as of the date hereof, all information
contained on the Security Interest Data Schedule attached hereto as SCHEDULE A
is accurate and complete and contains no omission or misrepresentation. Each
Debtor shall promptly notify the Agent of any changes in the information set
forth thereon.

         15. Each Debtor acknowledges that the provisions hereof giving the
Agent rights of access to books, records and information concerning the
Collateral and such Debtor's operations and providing the Agent access to such
Debtor's premises are intended to afford the Agent with

                                      -8-
<PAGE>

immediate access to current information concerning such Debtor and its
activities, including without limitation, the value, nature and location of the
Collateral so that the Agent can, among other things, make an appropriate
determination after the occurrence of an Event of Default, whether and when to
exercise its other remedies hereunder and at Law, including without limitation,
instituting a replevin action should any Debtor refuse to turn over any
Collateral to the Agent. Each Debtor further acknowledges that should such
Debtor at any time fail to promptly provide such information and access to the
Agent, each Debtor acknowledges that the Agent would have no adequate remedy at
Law to promptly obtain the same. Each Debtor agrees that the provisions hereof
may be specifically enforced by the Agent and waives any claim or defense in any
such action or proceeding that the Agent has an adequate remedy at Law.

         16. This Agreement shall be binding upon and inure to the benefit of
the Agent, the Banks and their respective successors and assigns, and each
Debtor and each of its respective successors and assigns, except that no debtor
may assign or transfer such Debtor's obligations hereunder or any interest
herein.

         17. This Agreement shall be deemed to be a contract under the laws of
the State of Ohio and for all purposes shall be governed by and construed in
accordance with the laws of said state excluding its rules relating to conflicts
of law.

         18. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

         19. Each Debtor hereby irrevocably submits to the nonexclusive
jurisdiction of any Ohio State or Federal Court sitting in Cleveland, Ohio, in
any action or proceeding arising out of or relating to this Agreement, and
Debtors hereby irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such Ohio State or Federal court. Each
Debtor hereby waives to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of any such action or proceeding.

         20. EXCEPT AS PROHIBITED BY LAW, EACH DEBTOR HEREBY WAIVES ANY RIGHT IT
MAY HAVE TO A TRIAL BY A JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER DOCUMENTS OR TRANSACTIONS RELATING THERETO.

         21. This Agreement may be executed in any number of counterparts, and
by different parties hereto in separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute one and the same instrument. Each Debtor acknowledges and agrees that
a telecopy transmission to the Agent or any Bank of the signature pages hereof
purporting to be signed on behalf of any Debtor shall constitute effective and
binding execution and delivery hereof by such Debtor.

                            [SIGNATURE PAGE FOLLOWS]

                                      -9-
<PAGE>

                  [SIGNATURE PAGE 1 OF 1 TO SECURITY AGREEMENT]

         IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed and delivered this Agreement as of the day and
year first above set forth.

                                       RAINBOW RENTALS, INC.

                                       By:                                (SEAL)
                                          --------------------------------------
                                       Name:
                                             -----------------------------------
                                       Title:
                                              ----------------------------------

                                       NATIONAL CITY BANK, as Agent

                                       By:
                                          --------------------------------------
                                       Name:
                                             -----------------------------------
                                       Title:
                                              ----------------------------------

<PAGE>

                                   SCHEDULE A
                                       TO
                               SECURITY AGREEMENT

                         SECURITY INTEREST DATA SUMMARY

         1. The chief executive office of ____________________ (each a "Debtor")
is located at:

                                    ----------------
                                    ----------------
                                    ----------------
                                               County
                                    ----------

         2. Each Debtor's true and full name is as follows: _________________.
Each Debtor uses no trade names or fictitious names.

         3. Each Debtor's form of organization is as follows:

         4. Each Debtor's state of organization is as follows:

         5. Each Debtor's EIN # is as follows:

         6. Each Debtor's organization ID # is (if any exists) is as follows:

         7. All of each Debtor's personal property which has not been delivered
to the Agent pursuant to the terms of this Agreement or the Credit Agreement is
now, and will be at all future times, located at such Debtor's chief executive
office as described in Paragraph 1 above, except as specified below:

         8. All of each Debtor's books and records, including those relating to
accounts payable and accounts receivable, are kept at such Debtor's chief
executive office as described in Paragraph 1 above, except as specified below:

<PAGE>

                                   SCHEDULE B

                             COMMERCIAL TORT CLAIMS

None.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00036-of-00352.parquet"}]]