AARON RENTS INC, S-3, 1998-03-31

AARON RENTS INC
S-3, 1998-03-31
EQUIPMENT RENTAL & LEASING, NEC

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1998.

REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

AARON RENTS, INC.
(Exact name of issuer as specified in its charter)

<TABLE>
<S> <C>
GEORGIA 58-0687630
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>

309 E. PACES FERRY ROAD
ATLANTA, GEORGIA 30305-2377
(404) 231-0011
(Address, including zip code, and telephone number, including area code, of
issuer's principal executive offices)
KEITH C. GROEN
VICE PRESIDENT, LEGAL AND SECRETARY

AARON RENTS, INC.
309 E. PACES FERRY ROAD, ATLANTA, GEORGIA 30305-2377
(404) 231-0011
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

COPIES TO:

<TABLE>
<S> <C>
MICHAEL H. TROTTER DAVID M. CARTER
KILPATRICK STOCKTON LLP HUNTON & WILLIAMS
1100 PEACHTREE STREET 951 EAST BYRD STREET
ATLANTA, GEORGIA 30309-4530 RICHMOND, VIRGINIA 23219-4074
TELEPHONE: (404) 815-6500 TELEPHONE: (804) 788-8200
</TABLE>

---------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, par value $.50 per share... 2,875,000 shares $23.438 $67,384,250
===================================================================================================================

<CAPTION>
================================================== ===================

AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTRATION FEE
- -------------------------------------------------- -------------------
<S> <C>
Common Stock, par value $.50 per share... $19,879
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
</TABLE>

(1) Includes 375,000 shares that may be sold by the Company upon exercise of the
Underwriters' over-allotment option.
(2) In accordance with Rule 457(c), the registration fee has been calculated on
the basis of $23.438 per share, the average of the high and low sale prices
of the Company's Common Stock reported on The New York Stock Exchange on
March 25, 1998.

THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED MARCH 31, 1998

2,500,000 SHARES

AARON RENTS, INC.
COMMON STOCK

Of the 2,500,000 shares of Common Stock being offered hereby, 2,100,000
shares are being offered by the Company and 400,000 shares are being offered by
the Selling Shareholder. The Company will not receive any of the proceeds from
the sale of the shares of Common Stock by the Selling Shareholder.

The Common Stock is listed on the New York Stock Exchange under the symbol
"RNT." On March 30, 1998, the last reported sales price of the Common Stock was
$23.625 per share. Holders of the Common Stock have no voting rights except as
provided in the Company's Articles of Incorporation or as required by Georgia
law. Only the holders of shares of the Company's Class A Common Stock vote for
the election of directors of the Company and on most other matters. See
"Description of Capital Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------

<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDER(2)
-------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Per Share................... $ $ $ $
Total(3).................... $ $ $ $
</TABLE>

- ---------------
(1) The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of this offering estimated at $ , $
of which are payable by the Company and $ of which are payable by the
Selling Shareholder.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 375,000 shares of Common Stock to cover over-allotments, if
any. If such option is exercised in full, the total Price to Public,
Underwriting Discount, Proceeds to Company, and Proceeds to Selling
Shareholder will be $ , $ , $ and $ ,
respectively. See "Underwriting."
---------------------

The shares of Common Stock are being offered by the Underwriters named
herein, subject to prior sale, when, as and if delivered to and accepted by the
Underwriters, and subject to certain conditions. Delivery of the shares is
expected against payment therefor on or about , 1998, at the offices
of Wheat First Securities, Inc., Richmond, Virginia.

WHEAT FIRST UNION
INTERSTATE/JOHNSON LANE
CORPORATION
SUNTRUST EQUITABLE SECURITIES

The date of this Prospectus is , 1998
<PAGE> 3

[PHOTO OF COMPANY STORE AND MAP OF UNITED STATES
INDICATING LOCATIONS OF COMPANY STORES]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET
PRICE, PURCHASES OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN
THE COMMON STOCK MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
i
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial data appearing elsewhere in this Prospectus. Unless
otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment option will not be exercised.

THE COMPANY

Aaron Rents, Inc. ("Aaron Rents" or the "Company") is a U.S. leader in the
rent-to-rent and rental purchase industries with 402 stores in 32 states. The
Company offers both individual and business customers a wide range of
residential and office furniture, accessories, consumer electronics, and
household appliances for rental, rental purchase and sale. The Company's major
operating divisions are the Aaron Rents' Rent-to-Rent Division, the Aaron's
Rental Purchase Division, the Aaron Rents' Convention Furnishings Division and
MacTavish Furniture Industries Division, which manufactures much of the
furniture for the Company's rental and rental purchase stores. Aaron Rents'
strategic focus is on expanding its higher growth rental purchase business while
also growing its rent-to-rent business in selected markets.

At March 31, 1998, Aaron Rents had 297 Company-operated stores and 105
franchised stores in 32 states nationwide. There were 107 rent-to-rent stores in
its Aaron Rents' Rent-to-Rent Division, 183 Company-operated rental purchase
stores in its Aaron's Rental Purchase Division, 105 franchised Aaron's Rental
Purchase stores, and seven Aaron Rents' Convention Furnishings stores.

The estimated potential size of the United States rent-to-own market is
19.6 million households of which only 2.7 million are being served currently by
the industry. According to the Association of Progressive Rental Organizations
("APRO"), the national trade association representing the rent-to-own industry,
there are approximately 7,500 rent-to-own stores in the United States,
approximately 50% of which are owned or franchised by the ten largest companies
in the industry. Industry-wide revenues are believed to have been approximately
$4.7 billion in 1996. The rent-to-rent industry, although more mature, is highly
competitive and is consolidating, with only a handful of companies accounting
for a substantial share of the market. The estimated size of the furniture
component of the rent-to-rent industry is greater than $600 million in annual
rental revenues.

The Aaron Rents' Rent-to-Rent Division is well-positioned to take advantage
of the growing demand for furniture rental services. Management believes this
demand is driven by continued growth in employment, the increasing importance of
flexibility and outsourcing to American businesses and the impact of a more
mobile and transitory population. Business customers, which represent an
increasing portion of rental customers, enter into leases for office furniture
to meet seasonal, temporary or start-up needs. Business customers also lease
residential furniture in order to provide furnishings for relocated employees or
those on temporary assignment.

The Aaron's Rental Purchase Division focuses on providing durable household
goods to lower to middle income consumers with limited or no access to
traditional credit sources such as bank financing, installment credit or credit
cards. The Company's rental purchase program allows customers to obtain
merchandise without incurring additional debt or long-term obligations.
Management believes that the segment of the U.S. population which its rental
purchase division targets is large and that the needs of these customers
generally are underserved.

In 1992, the Company began franchising Aaron's Rental Purchase stores to
place stores in selected markets where the Company has no immediate plans to
enter. The Company believes that its franchise program allows the Company to
grow more quickly, increase its name exposure in new markets and achieve
economies of scale in purchasing, manufacturing and advertising for its rental
purchase stores. The Company opened 12, 25 and 40 franchised rental purchase
stores in 1995, 1996 and 1997, respectively.

products. The Company owns five furniture manufacturing plants and operates four
bedding manufacturing facilities, which supply approximately 49% of the
furniture rented or sold by the Company.

The Company has grown significantly in recent years. Its growth is
attributed to the opening of Company-operated and franchised rental purchase
stores, as well as to the expansion of its rent-to-rent business and selected
acquisitions. The Company expects to continue to grow its store base and plans
to open five to 10 rent-to-rent stores, 10 to 15 Company-operated rental
purchase stores and 45 to 50 new franchised rental purchase stores in 1998.
Total revenues have increased from $155.7 million for calendar year 1992 to
$310.8 million for calendar year 1997, and earnings before income taxes
increased from $9.7 million in 1992 to $30.2 million in 1997, representing a
14.8% and 25.5% compound annual growth rate in the Company's revenues and
earnings before income taxes, respectively. The increase in revenues was driven
by a significant increase in rental purchase revenues, which increased from
$22.5 million for 1992 to $139.3 million for 1997, representing a 44.0% compound
annual growth rate. During the same period, rent-to-rent revenues increased from
$111.3 million to $162.3 million.

The Company believes it possesses a valuable brand name in the rental
business, as well as operating characteristics which differentiate it from its
competitors. For instance, the Company's rental purchase concept is unique by
offering 12-month rental purchase agreements, larger and more attractive store
showrooms and a wider selection of merchandise. In the rent-to-rent business,
the Company believes that its ability to deliver residential and office
furniture and equipment to its customers quickly and efficiently gives the
Company an advantage over furniture retailers who often require several weeks to
effect delivery. By having its own manufacturing capabilities, an extensive
distribution network and sophisticated management information systems, the
Company is well-positioned to meet the distinct needs of its rent-to-rent and
rental purchase customers.

The Company was established by R. Charles Loudermilk, Sr. in 1955, and was
incorporated under the laws of Georgia in 1962. Its principal business address
is 309 E. Paces Ferry Road, Atlanta, Georgia, where its telephone number is
(404) 231-0011.

THE OFFERING

<TABLE>
<S> <C> <C>
Common Stock Offered by:
The Company............................................... 2,100,000 shares
The Selling Shareholder................................... 400,000 shares
Common Stock to be Outstanding After the Offering(1):
Common Stock.............................................. 17,250,391 shares
Class A Common Stock...................................... 3,836,506 shares
Use of Proceeds............................................. To reduce indebtedness and for
general corporate purposes, including
opening additional stores and
expanding manufacturing and
distribution capacity. See "Use of
Proceeds."
NYSE Market Symbols:
Common Stock.............................................. RNT
Class A Common Stock...................................... RNT.A
</TABLE>

- ---------------

(1) Does not include 2,000,500 shares of Common Stock subject to stock options
outstanding at December 31, 1997.

2
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

(Dollar Amounts in Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED
DECEMBER 31, YEAR ENDED YEAR ENDED
1995(1) DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1996 1997
------------- ------------ ------------
<S> <C> <C> <C>
SYSTEMWIDE REVENUES(2).................................. $ 256,500 $ 306,200 $ 364,306
---------- ---------- ----------
INCOME STATEMENT DATA
Revenues:
Rentals and Fees...................................... $ 182,311 $ 208,463 $ 231,207
Retail Sales.......................................... 47,190 52,757 58,602
Non-Retail Sales...................................... 5,809 8,770 14,621
Other................................................. 2,465 4,255 6,321
---------- ---------- ----------
237,775 274,245 310,751
---------- ---------- ----------
Costs and Expenses:
Retail Cost of Sales.................................. 33,057 37,848 42,264
Non-Retail Cost of Sales.............................. 5,217 8,320 13,650
Operating Expenses.................................... 119,590 135,012 149,728
Depreciation of Rental Merchandise.................... 55,408 64,437 71,151
Interest.............................................. 3,172 3,449 3,721
---------- ---------- ----------
216,444 249,066 280,514
---------- ---------- ----------
Earnings Before Income Taxes............................ 21,331 25,179 30,237
Income Taxes............................................ 8,113 9,786 11,841
---------- ---------- ----------
Net Earnings............................................ $ 13,218 $ 15,393 $ 18,396
========== ========== ==========
Earnings Per Share...................................... $ .68 $ .81 $ .96
Earnings Per Share Assuming Dilution.................... .66 .77 .94
Dividends Per Share Common Stock........................ .05 .04 .04
Dividends Per Share Class A Common Stock................ .02 .04 .04
Weighted Average Common Shares Outstanding Assuming
Dilution.............................................. 19,995,000 19,984,000 19,662,000
OPERATING DATA
Stores Open at End of Period:
Rental Purchase....................................... 106 135 181
Rent-to-Rent.......................................... 104 103 105
Convention Furnishings................................ 2 2 6
---------- ---------- ----------
Total Company-Operated Stores......................... 212 240 292
Franchise Stores...................................... 36 61 101
---------- ---------- ----------
Total Systemwide Stores............................... 248 301 393
========== ========== ==========
COMPONENTS OF REVENUES
Rental Purchase Stores.................................. $ 88,480 $ 111,587 $ 139,327
Rent-to-Rent Stores..................................... 140,823 154,075 162,306
Convention Furnishings.................................. 1,819 2,631 2,096
Franchise Revenues...................................... 1,463 2,905 4,961
Other Revenues.......................................... 5,190 3,047 2,061
---------- ---------- ----------
$ 237,775 $ 274,245 $ 310,751
========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA
Rental Merchandise, Net..................................... $176,968 $176,968
Total Assets................................................ 239,382 239,382
Total Debt.................................................. 76,486 29,579
Shareholders' Equity........................................ 116,455 163,362
</TABLE>

- ---------------

(1) The Company changed its fiscal year end from March 31 to December 31,
effective December 31, 1995.
(2) Systemwide revenues include revenues of franchised Aaron's Rental Purchase
stores.
(3) Adjusted to give effect to the sale by the Company of 2,100,000 shares of
Common Stock offered hereby at an assumed public offering price of $23.625
per share, and the application of the net proceeds therefrom. See "Use of
Proceeds."

3
<PAGE> 7

RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating an investment in the Common
Stock offered hereby. This Prospectus contains certain forward-looking
statements (as such term is defined in the Securities Act of 1933, as amended
(the "Securities Act")) which represent expectations or beliefs, including but
not limited to, statements concerning industry performance, and the Company's
operations, performance and financial condition, including, in particular, the
likelihood of the Company's success in developing and expanding its business.
These statements are based upon a number of assumptions and estimates which are
inherently subject to significant uncertainties, many of which are beyond the
control of the Company. Actual results may differ materially from those
expressed or implied by such forward-looking statements. Factors that could
cause actual results to differ materially include, but are not limited to, those
set forth below.

RISKS ASSOCIATED WITH EXPANSION STRATEGY

An important part of the Company's growth strategy is the opening of new
rent-to-rent and rental purchase stores. The Company's ability to continue
opening new stores will depend, among other things, upon its ability to hire
management and personnel to staff the new stores, and to find suitable sites at
reasonable rental rates to locate new stores. From time to time the Company also
expects to pursue opportunistic acquisitions of rent-to-rent and rental purchase
operations. Although the Company believes that the operations of its prior
acquisitions, including the acquisitions of RentMart Rent-to-Own, Inc. and
Blackhawk Convention Services, Inc. in December 1997, have been successfully
integrated into the Company's operations, there can be no assurance that future
acquisitions will be consummated on acceptable terms or that any acquired
companies will be successfully integrated. While the Company believes that the
market for its stores is underserved and offers attractive expansion
opportunities, it does not know if consumer preferences will remain unchanged,
or the extent to which its competitors may seek to serve the market.

SIGNIFICANT COMPETITION

The Company's businesses are highly competitive. The Company competes in
the rent-to-rent market with national and local companies and, to a lesser
extent, with apartment owners who purchase furniture for rental to tenants. In
the rent-to-own market, the Company's competitors include national, regional and
local operators of rent-to-own stores. Some of these competitors may have
significantly greater financial and operating resources, and in certain markets,
greater name recognition, than the Company. See "Business -- Competition."

RISKS ASSOCIATED WITH SIGNIFICANT GOVERNMENT REGULATION

The Company believes that 48 states specifically regulate rent-to-own
transactions, including states in which the Company currently operates Aaron's
Rental Purchase stores. Most of these states have enacted disclosure laws which
require rent-to-own companies to disclose to their customers the total number of
payments, total amount and timing of all payments to acquire ownership of any
item, any other charges that may be imposed by the Company and miscellaneous
other items. The most restrictive states limit the total amount that a customer
may be charged for an item to twice the "retail" price for the item, or regulate
the amount of "interest" that rent-to-own companies may charge on rent-to-own
transactions, generally defining "interest" as rental fees paid in excess of the
"retail" price of the goods. The Company's long-established policy in all states
is to fully disclose the terms of its rental purchase transactions as a matter
of good business ethics and customer service.

At the present time, no federal law specifically regulates the rent-to-own
industry. Federal legislation has been proposed from time to time to regulate
the industry. Management cannot predict whether any such legislation will be
enacted and what the impact of such legislation would be. Although the Company
is unable to predict the results of these or any additional regulatory
initiatives, the Company does not believe that the existing and proposed
regulations will have a material adverse impact on the Company's rental purchase
or other operations. See "Business -- Government Regulation."

4
<PAGE> 8

LIMITED VOTING RIGHTS

The Company's capital stock consists of Common Stock and Class A Common
Stock. Only the holders of shares of Class A Common Stock vote for the election
of directors of the Company and on most other matters. The Common Stock has only
limited voting rights. See "Description of Capital Stock."

CONTROL BY AND DEPENDENCE UPON PRINCIPAL SHAREHOLDER

R. Charles Loudermilk, Sr., the Company's Chief Executive Officer and
Chairman of the Board, will own or control approximately 62.2% of the Company's
voting Class A Common Stock and approximately 16.5% of the non-voting Common
Stock outstanding following this offering. As a result, Mr. Loudermilk will
continue to be able to elect all the directors of, and otherwise effectively
control, the Company. The Company believes that it has benefited substantially
from Mr. Loudermilk's leadership and that if it were to lose his services at any
time in the near future such loss could have an adverse effect on the Company's
business and operations. See "Management."

USE OF PROCEEDS

The net proceeds to the Company (after deducting underwriting discounts and
estimated offering expenses payable by the Company) from the sale of the shares
of Common Stock offered hereby by the Company at an assumed public offering
price of $23.625 per share are estimated to be $46.9 million ($55.3 million if
the Underwriters' over-allotment option is exercised in full). The Company
intends to use the net proceeds to reduce indebtedness and for general business
purposes, including opening additional rent-to-rent and Aaron's Rental Purchase
stores and expansion of manufacturing and distribution capacity. As of March 23,
1998, an aggregate of $74.9 million was outstanding under the Company's
revolving credit facility bearing interest at a weighted average rate of 6.69%.

5
<PAGE> 9

CAPITALIZATION

The following table shows the capitalization of the Company as of December
31, 1997, and as adjusted to give effect to the sale of the 2,100,000 shares of
Common Stock offered by the Company at an assumed public offering price of
$23.625 per share, and the application of the net proceeds therefrom. This table
should be read in conjunction with the Company's Consolidated Financial
Statements and the related notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total Debt.................................................. $ 76,486 $ 29,579
-------- --------
Shareholders' Equity
Common Stock, par value $.50 per share -- Authorized
25,000,000 shares; 16,170,987 shares issued, 18,270,987
shares issued as adjusted.............................. 8,085 9,135
Class A Common Stock, par value $.50 per
share -- Authorized 25,000,000 shares; 5,361,761 shares
issued................................................. 2,681 2,681
Additional paid-in capital................................ 15,484 61,341
Retained earnings......................................... 113,864 113,864
Less: Treasury Shares at Cost
Common Stock, 1,058,041 shares............................ (9,523) (9,523)
Class A Common Stock, 1,525,255 shares.................... (14,136) (14,136)
-------- --------
Total Shareholders' Equity.................................. 116,455 163,362
-------- --------
Total Capitalization.............................. $192,941 $192,941
======== ========
</TABLE>

6
<PAGE> 10

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Company's Common Stock and Class A Common Stock are listed on the New
York Stock Exchange ("NYSE") under the symbols "RNT" and "RNT.A," respectively.
Prior to March 20, 1998, the Common Stock and Class A Common Stock were quoted
on the The Nasdaq National Market ("Nasdaq") under the symbols "ARON" and
"ARONA," respectively. The following table shows, for the periods indicated, the
high and low sales price per share for the Common Stock and Class A Common Stock
as reported by Nasdaq for dates prior to March 20, 1998, and as reported by the
NYSE for dates thereafter, and the cash dividends paid per share.

<TABLE>
<CAPTION>
COMMON STOCK CLASS A COMMON STOCK
----------------------------- -----------------------------
CASH CASH
DIVIDENDS DIVIDENDS
PER PER
FISCAL YEAR ENDED HIGH LOW SHARE HIGH LOW SHARE
- ----------------- ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996
First Quarter......................... $10.125 $ 9.000 $10.875 $ 8.875
Second Quarter........................ 15.000 9.875 $0.02 15.125 10.875 $0.02
Third Quarter......................... 13.625 11.000 15.750 11.50
Fourth Quarter........................ 14.625 11.125 0.02 15.000 12.750 0.02
December 31, 1997
First Quarter......................... 12.750 10.250 14.000 9.875
Second Quarter........................ 13.375 10.375 0.02 13.750 10.000 0.02
Third Quarter......................... 17.750 15.250 17.875 12.250
Fourth Quarter........................ 19.813 15.625 0.02 18.500 15.125 0.02
December 31, 1998
First Quarter (through March 30,
1998).............................. 23.750 17.000 22.875 15.750
</TABLE>

On March 30, 1998, the last sale price of the Common Stock as reported by
the NYSE was $23.625 per share. As of March 27, 1998, there were 861 holders of
record of the Common Stock and 171 holders of record of the Class A Common
Stock. The Company believes it has in excess of 2,900 beneficial holders of the
Common Stock and 600 beneficial holders of the Class A Common Stock.

The Company's Articles of Incorporation provide that no cash dividends may
be paid on the Class A Common Stock unless equal or higher dividends are paid on
the Common Stock. See "Description of Capital Stock."

7
<PAGE> 11

SELECTED CONSOLIDATED FINANCIAL DATA
(Dollar amounts in thousands, except per share amounts)

The income statement data and balance sheet data presented below for, and
as of the end of, each of the periods set forth below, are derived from the
Consolidated Financial Statements of the Company. Such Consolidated Financial
Statements at December 31, 1995, 1996 and 1997, and for the years ended December
31, 1996 and 1997 have been audited by Ernst & Young LLP, independent auditors.
Such Consolidated Financial Statements for the twelve months ended December 31,
1995 have been prepared by management and are unaudited. Such data should be
read in conjunction with the Consolidated Financial Statements and the related
notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1995(1) DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1996 1997
-------------------- ----------------------- -----------------------
<S> <C> <C> <C>
SYSTEMWIDE REVENUES(2)...................... $ 256,500 $ 306,200 $ 364,306
----------- ----------- -----------
INCOME STATEMENT DATA
Revenues:
Rentals and Fees.......................... $ 182,311 $ 208,463 $ 231,207
Retail Sales.............................. 47,190 52,757 58,602
Non-Retail Sales.......................... 5,809 8,770 14,621
Other..................................... 2,465 4,255 6,321
----------- ----------- -----------
237,775 274,245 310,751
----------- ----------- -----------
Costs and Expenses:
Retail Cost of Sales...................... 33,057 37,848 42,264
Non-Retail Cost of Sales.................. 5,217 8,320 13,650
Operating Expenses........................ 119,590 135,012 149,728
Depreciation of Rental Merchandise........ 55,408 64,437 71,151
Interest.................................. 3,172 3,449 3,721
----------- ----------- -----------
216,444 249,066 280,514
----------- ----------- -----------
Earnings Before Income Taxes................ 21,331 25,179 30,237
Income Taxes................................ 8,113 9,786 11,841
----------- ----------- -----------
Net Earnings................................ $ 13,218 $ 15,393 $ 18,396
=========== =========== ===========
Earnings Per Share.......................... $ .68 $ .81 $ .96
Earnings Per Share Assuming Dilution........ .66 .77 .94
Dividends Per Share Common Stock............ .05 .04 .04
Dividends Per Share Class A Common Stock.... .02 .04 .04
Weighted Average Common Shares Outstanding
Assuming Dilution......................... 19,995,000 19,984,000 19,662,000
OPERATING DATA
Stores Open at End of Period:
Rental Purchase........................... 106 135 181
Rent-to-Rent.............................. 104 103 105
Convention Furnishings.................... 2 2 6
----------- ----------- -----------
Total Company-Operated Stores............. 212 240 292
Franchise Stores.......................... 36 61 101
----------- ----------- -----------
Total Systemwide Stores................... 248 301 393
=========== =========== ===========
COMPONENTS OF REVENUES
Rental Purchase Stores.................... $ 88,480 $ 111,587 $ 139,327
Rent-to-Rent Stores....................... 140,823 154,075 162,306
Convention Furnishings.................... 1,819 2,631 2,096
Franchise Revenues........................ 1,463 2,905 4,961
Other Revenues............................ 5,190 3,047 2,061
----------- ----------- -----------
$ 237,775 $ 274,245 $ 310,751
=========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------------------------
1995 1996 1997
------------------- ----------------------- -----------------------
<S> <C> <C> <C>
BALANCE SHEET DATA
Rental Merchandise, Net..................... $ 122,311 $ 149,984 $ 176,968
Total Assets................................ 158,645 198,103 239,382
Total Debt.................................. 37,479 55,365 76,486
Shareholders' Equity........................ 91,094 107,335 116,455
</TABLE>

- ---------------

(1) The Company changed its fiscal year end from March 31 to December 31,
effective December 31, 1995.
(2) Systemwide revenues include rental revenues of franchised Aaron's Rental
Purchase stores.

8
<PAGE> 12

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

GENERAL

The Company has grown significantly since 1992. Total revenues have
increased from $155.7 million for calendar year 1992 to $310.8 million for
calendar year 1997, and earnings before income taxes increased from $9.7 million
in 1992 to $30.2 million in 1997, representing a 14.8% and 25.5% compound annual
growth rate in the Company's revenues and earnings before income taxes,
respectively. The increase in revenues was driven by a significant increase in
rental purchase revenues, which increased from $22.5 million for 1992 to $139.3
million for 1997, representing a 44.0% compound annual growth rate. During the
same period, rent-to-rent revenues increased from $111.3 million to $162.3
million. The Company has recorded 24 consecutive quarters of record revenues and
25 consecutive quarters of record earnings.

The Company's primary growth vehicle over the past five years has been in
its distinctive rental purchase concept that appeals predominantly to the middle
and upper segment of the rent-to-own market. The Company has grown this business
primarily through the opening of new Company-operated stores and the development
of a franchise program. Since December 31, 1992, the Company has added 139
Company-operated rental purchase stores and 102 franchised rental purchase
stores, bringing the total stores open at March 31, 1998, to 183
Company-operated stores and 105 franchised stores open, a total of 288 Aaron's
Rental Purchase stores systemwide. In addition, the Company was operating 107
rent-to-rent stores at March 31, 1998, a net decrease of two stores since
December 31, 1992.

The Company is the only rental company in the United States that
manufactures its own furniture. Through its MacTavish Furniture Industries
Division, the Company produced $45 million of product in 1997. The Company
believes the ability to produce and distribute its own furniture is a
competitive advantage.

Although the Company has grown its business primarily over the last five
years through the opening of new stores, the Company has also pursued
opportunistic acquisitions of rent-to-rent and rental purchase operations. In
December 1997, it made two strategic acquisitions. The Company acquired the
assets of RentMart Rent-To-Own, Inc. for $18 million in cash, including its 40
stores in Dallas, Houston, and San Antonio, doubling the total number of Aaron's
Rental Purchase stores open in Texas. Also in December the Company purchased for
$3.5 million in cash the assets of Blackhawk Convention Services, Inc. with
operations in Chicago, New York, and Las Vegas. This convention furnishings
business, combined with the Company's existing presence in Atlanta, Cincinnati,
Dallas and Orlando, enables the Company to serve most of the major convention
cities of the United States and also increase business to the Company's present
and future rent-to-rent stores. Although the Company has made few major
acquisitions in the recent past, it will continue to search for selective
acquisitions in both the rental purchase and rent-to-rent markets as
opportunities become available.

During 1995, the Company changed its fiscal year end from March 31 to
December 31, which resulted in a nine month fiscal year ended December 31, 1995.
The decision to change the fiscal year end was made for more convenience in both
internal and external communications. To aid comparative analysis, the Company
has elected to present the results of operations for the twelve months ended
December 31, 1995 (unaudited), along with the years ended December 31, 1996 and
December 31, 1997.

KEY COMPONENTS OF INCOME

Revenues. Total revenues consist of four categories: rentals and fees,
retail sales, non-retail sales and other. Rentals and fees include all revenue
derived from rental agreements in the Company's rental purchase and rent-to-rent
stores, including those agreements that result in the customer acquiring
ownership at the end of the term. Retail sales primarily represents sales of
both new and rental return furniture in the rent-to-rent division. Non-retail
sales primarily represents merchandise sales to the Company's franchisees. Other
primarily represents franchise fee and royalty income from the Company's
franchise stores, and other miscellaneous revenues.

9
<PAGE> 13

Cost of Sales. Cost of sales is separated into two components: Retail cost
of sales and Non-retail cost of sales. Retail cost of sales represents the
depreciated cost of merchandise sold through the Company's stores. Non-retail
cost of sales is primarily the cost of merchandise sold to the Company's
franchisees.

Depreciation of Rental Merchandise. Depreciation of rental merchandise
reflects the expense associated with depreciating merchandise held for rent and
rented to customers by the Company's rental purchase and rent-to-rent stores.
Merchandise is depreciated whether on rent or not.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain Income
Statement data as a percentage of rentals and fees, retail and non-retail sales
or total revenues.

<TABLE>
<CAPTION>
TWELVE
MONTHS ENDED
DECEMBER 31, YEAR ENDED YEAR ENDED
1995 DECEMBER 31, DECEMBER 31,
(UNAUDITED) 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Rentals and Fees....................................... 76.7% 76.0% 74.4%
Retail Sales........................................... 20.1 19.2 18.9
Non-Retail Sales....................................... 2.2 3.2 4.7
Other.................................................. 1.0 1.6 2.0
----- ----- -----
Total Revenues......................................... 100.0 100.0 100.0
Cost of Sales as a % of Retail Sales..................... 70.4 71.7 72.1
Cost of Sales as a % of Non-Retail Sales................. 88.8 94.9 93.4
Operating Expenses as a % of Total Revenues.............. 50.3 49.2 48.2
Depreciation of Rental Merchandise as a % of Rentals and
Fees................................................... 30.4 30.9 30.8
Interest as a % of Total Revenues........................ 1.3 1.3 1.2
Earnings Before Income Taxes as a % of Total Revenues.... 9.0 9.2 9.7
Net Earnings as a % of Total Revenues.................... 5.6 5.6 5.9
</TABLE>

Year Ended December 31, 1997 versus Year Ended December 31, 1996

Total revenues for 1997 increased $36.5 million (13.3%) to $310.8 million
compared to $274.2 million in 1996 due primarily to a $22.7 million (10.9%)
increase in rentals and fees revenues, plus an $11.7 million (19.0%) increase in
sales. Of this increase in rentals and fees revenues, $19.2 million (84.4%) was
attributable to the Aaron's Rental Purchase Division. Rentals and fees revenues
from the Company's rent-to-rent operations increased $3.5 million (3.3%) during
the same period.

Revenues from retail sales increased $5.8 million (11.1%) to $58.6 million
in 1997, from $52.8 million for the same period last year. This increase was
primarily due to increased sales of both new and rental return furniture in the
rent-to-rent division. Non-retail sales, which primarily represent merchandise
sold to Aaron's Rental Purchase franchisees, increased $5.9 million (66.7%) to
$14.6 million compared to $8.8 million for the same period last year. The
increased sales are due to the growth of the franchise operations.

Other revenues for 1997 increased $2.1 million (48.6%) to $6.3 million
compared to $4.3 million in 1996. This increase was attributable to franchise
fee and royalty income increasing $2.1 million (70.8%) to $5.0 million compared
to $2.9 million last year, reflecting the addition of 40 new franchise stores in
1997 and improved operating revenues at mature franchise stores.

Cost of sales from retail sales increased $4.4 million (11.7%) to $42.3
million compared to $37.8 million, and as a percentage of sales, increased
slightly to 72.1% from 71.7% primarily due to product mix. Cost of sales from
non-retail sales increased $5.3 million (64.1%) to $13.7 million from $8.3
million, and as a percentage of sales, decreased to 93.4% from 94.9%. The
decrease in 1997 in cost of sales as a percentage of sales is due to slightly
higher margins on sales through the Company's distribution centers.

10
<PAGE> 14

Operating expenses increased $14.7 million (10.9%) to $149.7 million from
$135.0 million. As a percentage of total revenues, operating expenses were 48.2%
in 1997 and 49.2% in 1996. Operating expenses declined as a percentage of total
revenues between years due to the spreading of expenses over higher revenues.

Depreciation of rental merchandise increased $6.7 million (10.4%) to $71.2
million from $64.4 million, and as a percentage of total rentals and fees,
decreased to 30.8% from 30.9%.

Interest expense increased $272,000 (7.9%) to $3.7 million compared to $3.4
million. As a percentage of total revenues, interest expense was 1.2% in 1997
compared to 1.3% in 1996. The slight decrease in interest expense as a
percentage of revenues was due to the effect of lower debt levels as a
percentage of revenues throughout the year being offset by slightly higher
interest rates.

Income tax expense increased $2.1 million (21.0%) to $11.8 million compared
to $9.8 million. The Company's effective tax rate was 39.2% in 1997 compared to
38.9% in 1996, primarily due to higher state income taxes.

As a result, net earnings increased $3.0 million (19.5%) to $18.4 million
for 1997 compared to $15.4 million for the same period in 1996. As a percentage
of total revenues, net earnings were 5.9% in 1997 and 5.6% in 1996.

Year Ended December 31, 1996 versus Twelve Months Ended December 31, 1995
(unaudited)

Total revenues for 1996 increased $36.5 million (15.3%) to $274.2 million
compared to $237.8 million in 1995 due primarily to a $26.2 million (14.3%)
increase in rentals and fees revenues, plus an $8.5 million (16.1%) increase in
sales. Of this increase in rentals and fees revenues, $16.6 million (19.6%) was
attributable to the Aaron's Rental Purchase Division. Rentals and fees revenues
from the Company's rent-to-rent operations increased $9.5 million (9.8%) during
the same period.

Revenues from retail sales increased $5.6 million (11.8%) to $52.8 million
in 1996, from $47.2 million for the same period last year. This increase was due
to increased sales of both new and rental return furniture in the rent-to-rent
division. Non-retail sales, which represent wholesale sales to primarily Aaron's
Rental Purchase franchisees, increased $3.0 million (51.0%) to $8.8 million
compared to $5.8 million for the same period last year. The increased sales are
due to the growth of the franchise operations.

Other revenues increased $1.5 million (105.4%) to $2.9 million compared to
$1.4 million last year. This increase was due to adding 25 new franchise stores
in 1996 as well as older franchise stores gaining in revenues.

Cost of sales from retail sales increased $4.8 million (14.5%) to $37.8
million compared to $33.1 million, and as a percentage of sales, increased
slightly to 71.7% from 70.1% primarily due to product mix. Cost of sales from
non-retail sales increased $3.1 million (59.5%) to $8.3 million from $5.2
million, and as a percentage of sales, increased to 94.9% from 89.8%. The
increase in cost of sales as a percentage of sales is due to a larger percentage
of franchise sales in 1996 which are at lower margins than other miscellaneous
wholesale sales.

Operating expenses increased $15.4 million (12.9%) to $135.0 million from
$119.6 million. As a percentage of total revenues, operating expenses were 49.2%
in 1996 and 50.3% in 1995. Operating expenses declined as a percentage of total
revenues between years due to the spreading of expenses over higher revenues.

Depreciation of rental merchandise increased $9.0 million (16.3%) to $64.4
million and, as a percentage of total rentals and fees, increased to 30.9% from
30.4%. This increase is primarily due to a change in the rental merchandise mix
during the year.

Interest expense increased $277,000 (8.7%) to $3.4 million compared to $3.2
million. As a percentage of total revenues, interest is unchanged at 1.3% due to
stability in interest rates during 1996.

Income tax expense increased $1.7 million (20.6%) to $9.8 million compared
to $8.1 million. The Company's effective tax rate was 38.9% in 1996 versus 38.0%
for the same period in 1995.

11
<PAGE> 15

As a result, net earnings increased $2.2 million (16.5%) to $15.4 million
for 1996 compared to $13.2 million for the same period in 1995. As a percentage
of total revenues, net earnings were 5.6% in both 1996 and 1995.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow from operations for the years ended December 31, 1997 and 1996
was $105.3 million and $89.5 million, respectively. Such cash flows include
profits on the sale of rental return merchandise. The Company's primary capital
requirements consist of acquiring rental merchandise for both rent-to-rent and
Company-operated Aaron's Rental Purchase stores. As the Company continues to
grow, the need for additional rental merchandise will continue to be the
Company's major capital requirement. These capital requirements historically
have been financed through bank credit, cash flow from operations, trade credit
and proceeds from the sale of rental return merchandise.

The Company has financed its growth through a revolving credit agreement
with several banks, trade credit and internally generated funds. The revolving
credit agreement provides for unsecured borrowings up to $90.0 million which
includes a $6.0 million credit line to fund daily working capital requirements.
At December 31, 1997, an aggregate of $75.9 million was outstanding under this
facility, bearing interest at an average rate of 6.57%. The Company uses
interest rate swap agreements as part of its overall long-term financing
program. At December 31, 1997, the Company had swap agreements with notional
principal amounts of $40 million which effectively fixed the interest rates on
an equal amount under the Company's revolving credit agreement at 6.93%.

The Company believes that the expected cash flows from operations, proceeds
from the sale of rental return merchandise, bank borrowings and vendor credit,
together with the proceeds of this offering, will be sufficient to fund the
Company's capital and liquidity needs for at least the next 24 months.

In February 1997, the Company's Board of Directors authorized the
repurchase of up to 1,000,000 shares of the Company's Common Stock and Class A
Common Stock. During 1997, 795,000 shares were purchased at an aggregate cost of
$8.9 million.

The Company has paid dividends for eleven consecutive years. A $.02 per
share dividend on Common Stock and on Class A Common Stock was paid in January
1997 and July 1997, for a total fiscal year cash outlay of $761,000. The Company
currently expects to continue its policy of paying dividends.

YEAR 2000

The Year 2000 issue arises from the widespread use of computer programs
that rely on two-digit date codes to perform computations or decision-making
functions. The Company's significant computer programs, including financial,
accounting, store operating and point of sale software, have recently been or
are in the process of being updated. The upgrading and rewriting of the
Company's software is being done to gain further strategic advantages over its
competitors and is not the result of any anticipated Year 2000 issues. However,
as part of the Company's continuing process to update systems, management has
required that vendor purchased and internally developed software be Year 2000
compliant. Therefore, based on recent and continuing strategic enhancement of
the Company's software, management does not expect any material impact to the
Company's business, operations or financial condition as a result of Year 2000
issues.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (FAS 131), which is effective for 1998. FAS
131 establishes standards for the way that public companies report information
about operating segments in annual financial statements and requires that those
companies report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The Company will
adopt the new requirements in its annual financial statements in 1998.
Management has not completed its analysis of the effect of FAS 131 on its
reported segments.

12
<PAGE> 16

BUSINESS

GENERAL

Aaron Rents is a U.S. leader in the rent-to-rent and rental purchase
industries with 402 stores in 32 states. The Company offers both individual and
business customers a wide range of residential and office furniture,
accessories, consumer electronics, and household appliances for rental, rental
purchase and sale. The Company's major operating divisions are the Aaron Rents'
Rent-to-Rent Division, the Aaron's Rental Purchase Division, the Aaron Rents'
Convention Furnishings Division and MacTavish Furniture Industries Division,
which manufactures much of the furniture for the Company's rental and rental
purchase stores. Aaron Rents' strategic focus is on expanding its higher growth
rental purchase business while also growing its rent-to-rent business in
selected markets.

The Aaron Rents' Rent-to-Rent Division is well-positioned to take advantage
of the growing demand for furniture rental services. Management believes this
demand to be driven by continued growth in employment, the increasing importance
of flexibility and outsourcing to American businesses and the impact of a more
mobile and transitory population. Business customers, which represent an
increasing portion of rental customers, enter into leases for office furniture
to meet seasonal, temporary or start-up needs. Business customers also lease
residential furniture in order to provide furnishings for relocated employees or
those on temporary assignment.

The Company is the only rental company in the United States that
manufactures its own furniture. By manufacturing its own specially designed
residential and office furniture through its MacTavish Furniture Industries
Division, the Company enjoys an advantage over many of its competitors.
Manufacturing enables the Company to control the quality, cost, timing, styling,
durability and quantity of its furniture rental products. The Company owns five
furniture manufacturing plants and operates four bedding manufacturing
facilities, which supply approximately 49% of the furniture rented or sold by
the Company.

13
<PAGE> 17

INDUSTRY OVERVIEW

The Rent-To-Own Industry

In a typical rent-to-own transaction, the customer has the option to
acquire merchandise over a fixed term, usually 18 to 24 months, by making weekly
rental payments. The customer may cancel the agreement at any time by returning
the merchandise to the store, with no further rental obligation. The average
rental period in the industry is about four months, because the majority of
customers do not rent the item to the full term of the agreement. If the
customer rents the item to the full term, he obtains ownership of the item,
though he has the option to purchase it at any time.

The rent-to-own industry is a growing segment of the retail industry that
offers an alternative to traditional methods of acquiring furniture, electronics
and appliances. The rent-to-own concept is particularly popular with consumers
who are unable to pay for merchandise in cash or who lack the credit to qualify
under conventional financing programs. It is also popular with consumers who,
despite good credit, do not wish to incur additional debt, have only a temporary
need for the merchandise, or desire to try out a particular brand or model
before purchasing it. Historically, electronic goods have been the dominant
product category rented and sold in the industry although furniture items are
growing rapidly in popularity.

The Company believes its rental purchase concept differs significantly from
the typical rent-to-own program. Compared to the typical rent-to-own stores,
Aaron's Rental Purchase stores offer shorter agreement terms which are payable
on a monthly basis and have generally lower total payments to acquire
merchandise. Aaron's Rental Purchase stores offer a larger selection of
merchandise in general and a greater percentage of furniture merchandise in
particular, and have a larger and more visually appealing store layout. The
Company believes that its rental purchase customers demand and can afford both
higher quality merchandise and more competitive pricing on total agreement terms
compared to the typical rent-to-own customer.

The Company's rental purchase transactions differ from sales by home
furnishings retailers in that rental purchase allows the option, but not the
obligation, to purchase merchandise while paying a similar "all-in" agreement
price. Rental purchase allows the customer to have the item serviced free of
charge or replaced at any time during the rental agreement, and allows the
Company to re-rent an item to another customer if the agreement does not go to
term.

The Company's rental purchase operations differ from the rent-to-rent
business. A typical rental purchase customer, while usually lacking the cash or
credit resources to acquire merchandise, desires the option of ownership and may
have the intention to utilize rental purchase to achieve ownership. Accordingly,
in rental purchase transactions, the customer is willing to pay a higher monthly
payment for the ownership option, as compared to the rent-to-rent customer.
Typically, the Company's rental purchase customers are more style and brand name
conscious than rent-to-rent customers who regard the merchandise as temporary.
Aaron's

14
<PAGE> 18

Rental Purchase stores are attractively appointed and are typically in or near a
shopping center strategically located near the residences of its target
customers, as opposed to the rent-to-rent store whose typical location is in an
office park that services destination customers from a broad geographical area.

The Rent-To-Rent Industry

The furniture component of the rent-to-rent industry is estimated to be
greater than $600 million in annual rental revenues. The demand for rental
products is believed to be related to the mobility of the population, which
relies upon rented merchandise to fulfill temporary needs. The industry is
highly competitive and consolidating, with only a handful of companies
accounting for a substantial share of the market.

The rent-to-rent industry serves both individual and business customers who
generally have immediate, temporary needs for office or residential merchandise
but who generally do not seek to own the merchandise. Residential merchandise is
rented to individuals seeking to rent merchandise for their own homes and
apartments, apartment complex managers seeking to provide furnished apartments,
and third party companies that provide interim housing for their corporate
clients. Office merchandise is rented by customers ranging from small businesses
and professionals who are in need of office furnishings but need to conserve
capital, to large corporations with temporary or seasonal needs.

In the typical rent-to-rent transaction, the customer agrees to rent one or
more items for a minimum of three months, which may be extended by the customer
on a month-to-month basis. Although many rental agreements give the customer the
option of purchasing the rented item, most customers do not enter into the
transaction with the desire to own the rented merchandise.

GROWTH AND OPERATING STRATEGIES

Aaron Rents is expanding its business through growth strategies that focus
on the opening of additional Company-operated rent-to-rent and rental purchase
stores, and franchised rental purchase stores. In addition, the Company seeks to
enhance profitability through operating strategies which differentiate the
Company from its competitors and improve operating efficiencies. The key
elements of the Company's growth and operating strategies are summarized below.

Growth Strategies

- EXPAND COMPANY-OPERATED RENTAL PURCHASE OPERATIONS IN SELECTED GEOGRAPHIC
MARKETS. The Company currently expects to open 10 to 15 additional
Company-operated Aaron's Rental Purchase stores during 1998, and to open
comparable numbers of stores in each of the next several years. The
Company's strategy is to open rental purchase stores primarily in the
Company's existing geographic markets where it can cluster stores to
realize the benefits of economies of scale in marketing and distribution
and other operating efficiencies.

- EXPAND AARON'S RENTAL PURCHASE FRANCHISE PROGRAM. The Company uses its
franchise program to place Aaron's Rental Purchase stores in selected
markets where the Company has no immediate plans to enter. The Company
believes that its franchise program allows the Company to grow more
quickly and increase its name exposure in new markets with a relatively
low investment of capital by the Company. In addition, the larger number
of systemwide rental purchase stores enables the Company and its
franchisees to realize economies of scale in purchasing, manufacturing
and advertising for its rental purchase stores. Franchise fees and
royalties also represent a growing source of revenues for the Company.
The Company expects that approximately 45 to 50 franchised Aaron's Rental
Purchase stores will open in 1998, and expects a larger number of stores
to open in each of the next several years.

- EXPAND RENT-TO-RENT OPERATIONS. The Company believes that there are
growth opportunities in the rent-to-rent market, particularly in the
business sector. The Company has recently begun opening rent-to-rent
operations in new markets to better serve its national business customers
and is also expanding its presence in existing markets. The recent
introduction of warehouse-only stores in new markets has

15
<PAGE> 19

allowed the Company to enter markets at a lower cost. The Company
believes that its rent-to-rent business will continue to provide the
Company with cash flow to finance a significant amount of the planned
expansion of the Aaron's Rental Purchase Division. The Company expects to
open five to 10 rent-to-rent stores in 1998 in existing and new markets.

Operating Strategies

- PROVIDE HIGH LEVELS OF CUSTOMER SERVICE AND SATISFACTION. The Company
demonstrates its commitment to superior customer service by providing
large, attractive and conveniently located showrooms, offering a wide
selection of quality merchandise at competitive prices and flexible
acquisition options, and providing customers quick delivery of rented
merchandise, in many cases by same or next day delivery. The Company has
established an employee training program designed to enhance the customer
relations skills of its employees.

- DIFFERENTIATE AARON'S RENTAL PURCHASE CONCEPT. The Company believes that
the success of its rental purchase operations is attributable to its
distinctive approach to the business that sets it apart from its
rent-to-own competitors. The Company has pioneered innovative approaches
to meeting changing customer needs that differ from those of its
competitors -- such as offering 12-month rental purchase agreements which
result in a lower "all-in" price, larger and more attractive store
showrooms, and a wider selection of merchandise. Most rental purchase
customers make their rental payments in person, and the Company uses
these frequent visits to strengthen customer relationships and make
rental purchase customers feel welcome in the Company's stores.

- TARGET RENT-TO-RENT BUSINESS CUSTOMERS. The Company has successfully
operated rent-to-rent stores for over 40 years, using its superior
customer service, prompt delivery and wide selection of rental furniture
to attract a growing number of business customers. The Company believes
that its ability to obtain and deliver furniture and equipment to its
business customers quickly and efficiently gives the Company an advantage
over general furniture retailers who often require several weeks to
effect delivery. In addition, the location of a warehouse next to each
showroom permits the store manager to exercise greater control over
inventory, merchandise condition and pickup and deliveries, resulting in
more efficient and consistent service for the customer. The Company has
also recently opened warehouse-only locations in a few selected markets
where the Company is seeking an immediate presence at a lower cost. The
warehouse-only locations rely on outside sale representatives who target
business customers.

- MANAGE FURNITURE REQUIREMENTS THROUGH MANUFACTURING AND
DISTRIBUTION. The Company believes that its furniture manufacturing
capability and distribution center network give it a strategic advantage
over its competitors by enabling the Company to control the quality,
cost, timing, styling, durability and quantity of a substantial portion
of its rental furniture merchandise. This control allows the Company to
offer prompt delivery of rented furniture and provides the Company a
reliable source of rental furniture.

- UTILIZE PROPRIETARY MANAGEMENT INFORMATION SYSTEMS. The Company has
developed proprietary computerized information systems to systematically
pursue cash collections and merchandise returns and to match inventory
with demand. Each of the Company's stores, including franchised rental
purchase stores, is linked by computer directly to corporate
headquarters, which enables headquarters to monitor the performance of
each store on a daily basis. Its separate systems are tailored to meet
the distinct needs of the Company's rent-to-rent and rental purchase
operations.

OPERATING DIVISIONS

Rental Purchase -- Aaron's Rental Purchase

The Company established its Aaron's Rental Purchase Division in 1987. At
March 31, 1998, there were 183 Company-operated Aaron's Rental Purchase stores
in 16 states and 105 franchised Aaron's Rental Purchase stores in 27 states. The
Company has developed a distinctive concept for its Aaron's Rental

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<PAGE> 20

Purchase stores with specific merchandising selection and store layout, pricing
and agreement terms for the customers it seeks to attract. The Company believes
that these features create a store and rental purchase concept that is
significantly different from the operations of most other rent-to-own stores,
the Company's traditional rent-to-rent business, and the operations of home
furnishings retailers who finance merchandise.

The typical Aaron's Rental Purchase store layout consists of a combination
showroom and warehouse of 8,000 to 10,000 square feet, with an average of
approximately 8,700 total square feet. In selecting new locations for Aaron's
Rental Purchase stores, the Company generally looks for sites in well-maintained
strip shopping centers strategically located within ten miles of established
working class neighborhoods and communities with good access. Many of the
Company's stores are placed near existing rent-to-own stores of competitors.
Each rental purchase store maintains at least two trucks and crews for pickups
and deliveries, and generally offers same or next day delivery for addresses
located within 15 miles of the store. The Company emphasizes a broad selection
of brand name products for its electronics and appliance items, and offers
customers a wide selection of furniture, including furniture manufactured by the
Company's MacTavish Furniture Industries Division. Aaron's Rental Purchase
stores also offer computers and jewelry.

Aaron's Rental Purchase stores structure the pricing of merchandise to be
less expensive than similar items offered by other rent-to-own operators, and
substantially equivalent to the "all-in" contract price of similar items offered
by home furnishings retailers who finance merchandise. Over 81% of the Company's
rental purchase agreements have monthly payments as compared to the industry
standard weekly payments, and most monthly agreements are for 12 months compared
to the industry standard of 18 to 24 months. Approximately 37% of Aaron's Rental
Purchase agreements go to term, in contrast to an industry average of less than
25%. The merchandise from the agreements that do not go to term is either
re-rented or sold.

The Aaron's Rental Purchase Division's 11 clearance centers serve primarily
as retail outlets for final sales of rental return merchandise that will not be
rented again, although they also sell some new merchandise. Sales by the
clearance centers, together with sales at the Company's rental purchase stores,
are instrumental in enabling the Company to maximize residual values of
depreciated rental merchandise.

Aaron's Rental Purchase Franchise Program

The Company began franchising Aaron's Rental Purchase stores in selected
markets in 1992, and has continued to attract many franchisees. It is not
anticipated that franchised stores will compete with Company-operated stores, as
franchises are primarily awarded in markets into which the Company has no
presence and no current plans to expand. As of March 31, 1998, 206 franchises
had been sold to 56 franchisees, and 105 franchise stores were open. The Company
believes that its relations with its franchisees are good.

Franchisees are approved on the basis of the applicant's business
background and financial resources. The Company generally seeks franchisees who
will enter into development agreements for several stores, although many
franchisees currently operate a single store. Most franchisees are involved in
the day-to-day operations of the stores.

The Company enters into franchise agreements with its franchisees to govern
the opening and operation of franchised stores. Under the Company's current
agreement, the franchisee is required to pay a franchise fee of $35,000 per
store. Agreements are for a term of 10 years (with one 10-year renewal option)
and require payment to the Company of a royalty of 5% of weekly cash
collections.

The Company assists each franchisee in selecting the proper site for each
store. Because of the importance of location to the Aaron's Rental Purchase
concept, one of the Company's Pre-Opening Directors visits the intended market
and helps guide the franchisee through the selection process. Once a site is
selected, the Company helps in designing the floor plan, including the proper
layout of the showroom and warehouse. In addition, the Company provides
assistance in assuring that the design and decor of the showroom is consistent
with the Company's requirements. The Company also leases the exterior signage to
the franchisee, and assists with placing pre-opening advertising, ordering
initial inventory and purchasing delivery vehicles.

The Company has an arrangement with a syndicate of banks to provide
financing to qualifying franchisees to assist with the establishment and
operation of their stores. A primary component of the financing program is
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<PAGE> 21

an inventory financing plan which provides franchisees with the capital to
purchase inventory. For established franchisees, the Company has arranged for
these institutions to provide a revolving credit line to allow franchisees the
flexibility to expand. The Company guarantees a portion of amounts outstanding
under the franchisee financing programs.

All franchisees are required to complete a comprehensive training program
and to operate their franchised Aaron's Rental Purchase stores in compliance
with the Company's policies, standards and specifications, including such
matters as decor, rental agreement terms, hours of operation, pricing and
merchandise. Franchisees are not required to purchase their rental merchandise
from the Company, although many do so in order to take advantage of bulk
purchasing discounts and favorable delivery terms. Many also purchase their
rental furniture from the Company's MacTavish Furniture Industries facilities.

The Company conducts a financial audit of its franchise stores every six to
12 months and also conducts regular operational audits, generally visiting each
franchise store almost as often as it visits its Company-owned stores. In
addition, the Company's proprietary management information system links each
store to corporate headquarters. With this system, each night the Company
automatically retrieves detailed financial information regarding the number of
customers served during the day, the revenues received and the status of all
accounts receivable. This information is compiled nightly into a detailed report
of every franchised and Company-operated rental purchase store, which is then
immediately made available to corporate and store management. On a weekly basis,
the system also automatically debits the franchisee's bank account for the 5%
royalty fee, resulting in essentially a 100% collection rate on franchise
royalties.

Rent-to-Rent -- Aaron Rents and Sells Furniture

The Company has been in the rent-to-rent business for over 40 years and is
the second largest furniture rent-to-rent company in the United States. The
rent-to-rent business accounted for approximately 53% of the Company's total
revenues for the fiscal year ended December 31, 1997. The Company rents new and
rental return merchandise to both the individual and the business segments of
the rent-to-rent industry, with a growing focus on rentals of residential and
office furniture to business customers. As of March 31, 1998, the Company
operated 107 rent-to-rent stores in 22 states.

Rental agreements may give the customer the option to purchase the
merchandise rented, though few customers exercise the purchase option. Items
held for rent, whether new or rental return, are also available for purchase and
rental purchase at all rent-to-rent stores.

The Company's typical rent-to-rent store layout consists of a combination
showroom and warehouse comprising about 21,000 square feet. Each residential
showroom features attractive displays of dining-room, living-room and bedroom
furniture in a number of styles, fabrics, materials and colors. Office rental
showrooms feature lines of desks, chairs, conference tables, credenzas, sofas
and accessories. The Company believes that having a warehouse next to each
showroom permits the store manager to exercise greater control over inventory,
merchandise condition and pickup and deliveries, resulting in more efficient and
consistent service for the customer. The Company has also recently opened
warehouse-only locations in a few selected markets where the Company is seeking
an immediate presence at a lower cost. The warehouse-only locations rely on
outside sale representatives who target business customers.

Each rent-to-rent store generally offers next day delivery for addresses
located within 50 miles of the store, and maintains at least one truck and a
crew for pickups and deliveries. The Company believes that its ability to obtain
and deliver furniture and equipment to its business customers quickly and
efficiently gives the Company an advantage over general furniture retailers who
often require several weeks to effect delivery.

The Aaron Rents' Rent-to-Rent Division's four clearance stores serve
primarily as retail outlets for final sales of rental return merchandise that
will not be rented again, though they also sell new merchandise. Sales by the
clearance stores, together with sales at the clearance centers located in most
of the Company's rent-to-rent stores, are instrumental in enabling the Company
to maximize residual values of depreciated rental merchandise.

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<PAGE> 22

The Company generally sells rental return merchandise at or above its book
value (cost less depreciation) plus selling expenses, a price which is usually
considerably lower than the price for comparable new merchandise. Most
merchandise held for sale in clearance stores may also be acquired through a
rental purchase option. Because new merchandise is sold at the same location as
rental return merchandise, the Company has the opportunity to sell both new and
rental return merchandise to customers who may have been attracted to the store
by the advertising and price appeal of rental return merchandise. The ability to
sell new and rental return merchandise at the same location allows for more
efficient use of facilities and personnel and minimizes overhead.

Aaron Rents' Convention Furnishings

The Aaron Rents' Convention Furnishings Division specializes in supplying
conventions and events of various sizes with furniture (such as tables, chairs,
desks and sofas) on a temporary basis. The division primarily serves various
national and local vendors that organize events at large convention centers. The
division also serves various smaller events on a regular basis with the
assistance of its rent-to-rent stores which have served smaller events for more
than 20 years. Convention rentals are characterized by very short terms
(generally one week) and significantly higher rental rates due to the
labor-intensive nature of the business.

The Company's convention furnishings stores are generally located near the
Company's existing distribution or warehouse facilities to enable the Company to
respond quickly and efficiently to the division's needs. The division also
benefits from the ability to sell its used furnishings through the Company's
clearance centers, which allows the division to keep its inventory refreshed.

In December 1997, the Company acquired the assets of Blackhawk Convention
Services, Inc., including three locations in Chicago, New York and Las Vegas. An
additional location was added in Dallas in the first quarter of 1998. As of
March 31, 1998, the Company had seven convention furnishings store locations.

FURNITURE MANUFACTURING

The Company believes that its manufacturing capability gives it a strategic
advantage over its competitors by enabling the Company to control the quality,
cost, timing, styling, durability and quantity of its furniture rental products.
As the only major furniture rental company that manufactures its own furniture,
the Company believes its 391,000 square feet of manufacturing facilities provide
it more flexibility in scheduling production runs and in meeting inventory needs
than rental companies that do not manufacture their own furniture and are
dependent upon third party suppliers. The Company's MacTavish Furniture
Industries Division has manufactured furniture for the Company's rental stores
since 1971. The division has five manufacturing plants and four bedding
manufacturing facilities which supply 50% of the Company's rent-to-rent
furniture and bedding needs and 46% of Company-operated rental purchase stores'
furniture and bedding needs. Overall, approximately 49% of the furniture rented
or sold by the Company is manufactured by MacTavish Furniture Industries. The
Company's manufacturing plants have the capacity to meet the Company's needs for
such furniture for the foreseeable future. The Company also does limited
manufacturing of residential furniture for several unaffiliated furniture
retailers.

MacTavish Furniture Industries manufactures upholstered living-room
furniture (including contemporary sofas, sofabeds, chairs and modular sofa and
ottoman collections in a variety of natural and synthetic fabrics and leathers),
bedding (including standard sizes of mattresses and box springs), office
furniture (including desks, credenzas, conference tables, bookcases and chairs),
and bedroom furniture (including bedroom sets, headboards, dressers, mirrors,
chests and night tables). The Company has designed special features for the
furniture it manufactures which make its furniture more durable and better
equipped for frequent transportation than furniture purchased from third
parties. These features include knock-down construction of upholstered furniture
products for easy replacement of worn or damaged parts at lower cost;
standardization of components; reduction of parts and features susceptible to
wear or damage; more resilient foam; durable, soil-resistant fabrics and sturdy
frames for longer life and higher residual value; and collapsible box springs
and devices which allow sofas to stand on end for easier and more efficient
transport. The Company has patent applications pending for certain of these
features. The Company also manufactures

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<PAGE> 23

replacement covers of all styles and fabrics of its upholstered furniture for
use in reconditioning rental return furniture.

The principal raw materials used in manufacturing are fabric, foam,
wire-innerspring assemblies, cotton liners and hardwoods. All of these materials
are purchased in the open market from sources not affiliated with the Company.
The Company is not dependent on any single supplier, and none of the raw
materials are in short supply. The Company generally maintains a three or four
week inventory of such materials.

STORE OPERATIONS

Management

The Company's rent-to-rent stores are managed by the President of the
division and are organized geographically into five regions, each supervised by
a vice president who is primarily responsible for monitoring individual store
performance and inventory levels within the respective regions. The Aaron's
Rental Purchase Division is managed separately by the President of the division,
who has five regional managers performing similar responsibilities.

Stores are directly supervised by 18 rent-to-rent regional managers and 30
rental purchase district managers. At the individual store level, the store
manager is responsible for customer and credit relations, deliveries and
pickups, warehouse and inventory management, and certain marketing efforts.
Store managers are also responsible for inspecting rental return furniture to
determine whether it should be sold as is, rented again as is, repaired and
sold, or reconditioned for additional rental. A significant portion of the store
manager's compensation is dependent upon store revenues and profits.

Executive management at the Company's headquarters directs and coordinates
purchasing, financial planning and control, manufacturing, employee training,
and new store site selection for the Company-operated stores. The Company's
internal audit department conducts periodic audits of every store, including
audits of Company-operated rental purchase stores several times each year, and
semi-annual audits of rent-to-rent stores and franchised rental purchase stores.
The Company's business philosophy has always emphasized strict cost containment
and fiscal controls. Executive and store level management monitor expenses
vigilantly to contain costs. All invoices are paid out of the Company's
headquarters in order to enhance fiscal accountability. The Company believes
that its careful attention to the expense side of its operations has enabled it
to maintain financial stability and profitability.

Management Information Systems

The Company utilizes computer-based management information systems to
facilitate cash collections, merchandise returns and inventory monitoring.
Through the use of proprietary software developed by the Company, each of the
Company's stores is linked by computer directly to corporate headquarters, which
enables headquarters to monitor the performance of each store on a daily basis.
A different system is used to run the rent-to-rent and rental purchase
operations due to the significant differences in the businesses. At the store
level, the store manager is better able to track inventory on the showroom floor
and in the warehouse to minimize delivery times, assist with product purchasing
and match customer needs with available inventory.

Rental Agreement Approval, Renewal and Collection

One of the keys to the success of the Company's Aaron's Rental Purchase
operations is its ability to achieve timely cash collections. Individual store
managers utilize the Company's computerized information system on a daily basis
to track cash collections. They contact customers within a few days of when
their rental payments are due in order to encourage customers to keep their
agreement current and in force (rather than having to return the merchandise for
non-payment of rent) and to renew their agreements for an additional rental
period. Careful attention to cash collections is particularly important in the
rental purchase operations, where the customer typically has the option to
cancel the agreement at any time and each payment is considered a renewal of the
agreement rather than a collection of a receivable.

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<PAGE> 24

Each rent-to-rent store performs a credit check on most of its residential
and business customers. The Company generally performs no formal credit check
with respect to rental purchase customers other than to verify employment or
other reliable sources of income and personal references supplied by the
customer. All of the Company's rental agreements for residential and office
merchandise require rental payments in advance, and the merchandise normally is
picked up if a payment is significantly in arrears.

Net bad debt losses from rent-to-rent rentals as a percentage of
rent-to-rent rental revenues were approximately 1.9%, 2.6%, and 3.0% for the
fiscal years ended December 31, 1997 and 1996, and for the nine months ended
December 31, 1995. The Company does not extend credit to rental purchase
customers. For the same periods, net merchandise shrinkage for both divisions as
a percentage of combined rental revenues was 2.3%, 2.5% and 3.0%, respectively.
The Company believes that its collection and repossession policies comply with
applicable legal requirements, and the Company disciplines any employee that it
discovers deviating from such policies.

Customer Service

The Company believes that customer service is one of the most important
elements in the success of its rent-to-rent and rental purchase businesses.
Customer satisfaction is critical because the customer usually has the option of
returning the rented merchandise at any time. The Company's goal is to make its
customers feel positive about the Company and its products from the moment they
enter the Company's showrooms. Rented items are serviced at no charge to the
customer, and quick, free delivery is available in many cases. In order to
increase rentals at existing stores, the Company fosters relationships with
existing customers to attract recurring business, and many new rental and rental
purchase agreements are attributable to repeat customers.

Because of the importance of customer service, the Company believes that a
prerequisite for successful operations and growth is skilled, effective
employees who value the Company's customers and project a genuine desire to
serve the customers' needs. The Company has a comprehensive employee training
program at its Atlanta headquarters for all rent-to-rent store managers and
employees covering all areas of the Company's operations, with a heavy emphasis
on customer service. Additionally, four field trainers are based out of the
regional offices. Store managers and employees in the Aaron's Rental Purchase
stores have similar training primarily on site by the division's training staff
and regional managers. The Company's policy of promoting from within aids in
employee retention and commitment to the Company's customer service and other
business philosophies, which also allows the Company to realize greater benefits
from its employee training programs.

PURCHASING AND DISTRIBUTION

The Company's product mix is determined by store managers in consultation
with the regional managers and regional vice presidents, based on an analysis of
customer demands. In the Company's rent-to-rent division, furniture is the
primary merchandise category, accounting for approximately 93% of rent-to-rent
rental revenues for the year ended December 31, 1997. In the Aaron's Rental
Purchase Division, electronics, furniture, appliances other accounted for
approximately 54%, 30%, 14% and 2%, respectively, of rental purchase rental
revenues for the year ended December 31, 1997. With approval from the applicable
operating management, store managers send their orders to the rental purchase or
rent-to-rent purchasing department at headquarters. The applicable purchasing
department reviews all purchase orders to determine whether merchandise needs
may be satisfied out of existing inventory at other stores before contacting
vendors. If inventory is available at other stores, the purchasing department
arranges for inventory shipments between stores. Virtually all merchandise for
the Company's stores is purchased by the Company's six buyers, three of whom are
solely responsible for rental purchase merchandise.

The Company purchases the majority of its merchandise directly from
manufacturers, with the balance from local distributors. The Company's largest
supplier is its MacTavish Furniture Industries manufacturing division, which
supplies approximately 49% of the furniture rented or sold by the Company. The
Company has no long-term agreements for the purchase of merchandise and believes
that its relationships with suppliers are excellent.

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Both rent-to-rent and rental purchase operations utilize distribution
centers to control inventory. Rent-to-rent stores in geographic proximity to the
Company's rent-to-rent distribution facility in Richmond, Virginia order
merchandise directly from the distribution center. The remaining rent-to-rent
stores receive merchandise directly from vendors who ship to the stores'
attached warehouses. All rental purchase stores order directly from the
Company's four rental purchase distribution centers located in Auburndale,
Florida; Dallas and Houston, Texas; and Duluth, Georgia. Rental purchase stores
typically have smaller warehouses with less inventory storage space than the
Company's rent-to-rent stores. Vendors ship directly to the distribution
centers.

Distribution centers result in freight savings from truckload discounts and
a more efficient distribution of merchandise. The Company utilizes its nine
tractor trailers, its local delivery trucks, and various contract carriers to
make weekly deliveries to individual stores. The Company recently began
construction of a 200,000 square foot furniture distribution facility in Cairo,
Georgia, which is located near the Company's furniture manufacturing plants in
Coolidge, Georgia and Quincy, Florida.

MARKETING AND ADVERTISING

In its rental purchase operations, the Company relies heavily on store
traffic, direct mail and television advertising to reach its target markets.
Rental purchase stores are located within neighborhood communities, and will
typically distribute mass mailings of promotional material every two weeks, with
the goal of reaching every known household within a specified radius of each
store at least 12 times per year. In addition, delivery personnel are trained to
leave promotional material at the door of each residence within five doors of
the delivery destination. In concentrated geographic markets, and for special
promotions, the Company also utilizes local television and radio advertising for
special promotions.

The Company markets its rent-to-rent operations through its outside sales
staff for personal contact with apartment complex managers for the residential
market as well as the decision maker for the office market. It also relies on
the use of brochures, newspapers, radio, television, direct mail, trade
publications, yellow pages and over the Internet (http://www.aaronrents.com) to
reach its residential and office rental and sales customers. The Company
believes that such advertising benefits its residential and office rental and
sales operations because of increased awareness of rental and purchase options
along with name recognition.

COMPETITION

The Company's businesses are highly competitive. The Company competes in
the rent-to-rent market with national and local companies and, to a lesser
extent, with apartment owners who purchase furniture for rental to tenants. The
Company believes that CORT Business Services Corporation and Globe Business
Resources, Inc. are its most significant rent-to-rent competitors. In the
rent-to-own market, the Company competes with several larger companies with
substantially greater financial resources than the Company. The Company believes
that the largest rent-to-own companies include Rent-A-Center (a division of
Thorn plc), Renters Choice, Inc., Alrenco, Inc., and Rent-Way, Inc.

Although definitive industry statistics are not available, management
believes that the Company is one of the largest furniture rental companies in
the United States. Management also believes that it generally has a favorable
competitive position in that industry because of its manufacturing capabilities,
prompt delivery, competitive pricing, name recognition and commitment to
customer service.

GOVERNMENT REGULATION

The Company believes that 48 states specifically regulate rent-to-own
transactions, including states in which the Company currently operates Aaron's
Rental Purchase stores. Most of these states have enacted disclosure laws which
require rent-to-own companies to disclose to its customers the total number of
payments, total amount and timing of all payments to acquire ownership of any
item, any other charges that may be imposed by the Company and miscellaneous
other items. The most restrictive states limit the total amount that a customer
may be charged for an item to twice the "retail" price for the item, or regulate
the amount of "interest" that rent-to-own companies may charge on rent-to-own
transactions, generally defining
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<PAGE> 26

"interest" as rental fees paid in excess of the "retail" price of the goods. The
Company's long-established policy in all states is to disclose the terms of its
rental purchase transactions as a matter of good business ethics and customer
service.

The Company's Aaron's Rental Purchase franchise program is subject to
Federal Trade Commission ("FTC") regulation and various state laws regulating
the offer and sale of franchises. Several state laws also regulate substantive
aspects of the franchisor-franchisee relationship. The FTC requires the Company
to furnish to prospective franchisees a franchise offering circular containing
prescribed information. A number of states in which the Company might consider
franchising also regulate the sale of franchises and require registration of the
franchise offering circular with state authorities. The Company believes it is
in material compliance with all applicable franchise laws.

PROPERTIES

The Company leases space for substantially all of its store and warehouse
operations under operating leases expiring at various times through June, 2007.
Most of the leases contain renewal options for additional periods ranging from
one to fifteen years at rental rates generally adjusted on the basis of the
consumer price index or other factors.

The following table sets forth certain information regarding the Company's
furniture manufacturing plants, bedding facilities and distribution centers:

<TABLE>
<CAPTION>
LOCATION PRIMARY USE SQUARE FT.
- -------- ----------- ----------
<S> <C> <C>
Coolidge, Georgia................... Furniture Manufacturing 77,000
Coolidge, Georgia................... Furniture Manufacturing 43,000
Coolidge, Georgia................... Furniture Manufacturing 38,000
Quincy, Florida..................... Furniture Manufacturing 80,000
Quincy, Florida..................... Furniture Manufacturing 91,000
Duluth, Georgia..................... Bedding Facility 30,000
Coolidge, Georgia................... Bedding Facility 3,000
Houston, Texas...................... Bedding Facility 13,000
Orlando, Florida.................... Bedding Facility 15,800
Richmond, Virginia.................. Rent-to-Rent Distribution Center 98,000
Auburndale, Florida................. Rental Purchase Distribution Center 40,000
Dallas, Texas....................... Rental Purchase Distribution Center 92,000
Duluth, Georgia..................... Rental Purchase Distribution Center 67,000
Houston, Texas...................... Rental Purchase Distribution Center 70,000
</TABLE>

The Company's executive and administrative offices occupy approximately
49,000 square feet in an 11-story, 80,000 square-foot office building that the
Company owns in Atlanta. The Company leases most of the remaining space to third
parties under leases with remaining terms averaging 2- 1/2 years. All of the
Company's facilities are well maintained and adequate for their current and
reasonably foreseeable uses.

LEGAL PROCEEDINGS

The Company is not currently a party to any legal proceedings the result of
which it believes could have a material adverse impact upon its business or
financial condition.

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<PAGE> 27

EMPLOYEES

At March 31, 1998, the Company had approximately 3,100 employees. None of
the Company's employees are covered by a collective bargaining agreement, and
the Company believes that its relations with its employees are good.

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<PAGE> 28

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following shows certain information about the executive officers,
directors and certain key employees of the Company as of March 31, 1998.

<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
- ---- --- --------------------------
<S> <C> <C>
R. Charles Loudermilk, Sr.... 70 Chief Executive Officer and Chairman of the Board of
Directors
Robert C. Loudermilk, Jr..... 38 President, Chief Operating Officer and Director
Gilbert L. Danielson......... 51 Vice President, Finance, Chief Financial Officer and
Director
Keith C. Groen............... 55 Vice President, Legal, Secretary and Director
William Kenneth Butler, Jr... 45 President, Aaron's Rental Purchase Division
Brian E. Stahl............... 41 President, Aaron Rents' Rent-to-Rent Division
Mitchell S. Paull............ 39 Vice President and Treasurer
Robert P. Sinclair, Jr....... 36 Controller
Ronald W. Allen.............. 56 Director
Leo Benatar.................. 68 Director
Earl Dolive.................. 80 Director
J. Rex Fuqua................. 48 Director
Ingrid Saunders Jones........ 52 Director
M. Collier Ross.............. 71 Director
R.K. Sehgal.................. 56 Director
</TABLE>

Mr. Loudermilk, Sr. has served as Chief Executive Officer and Chairman of
the Board of the Company since the Company's incorporation in 1962, and as
President until 1997. He has been a director of America's Mart Corporation,
owner and manager of the Atlanta Merchandise Mart, since 1996. He is one of the
founders and a director of The Buckhead Community Bank, formerly a director of
the Chattahoochee Bank, and formerly the Chairman of the Board of Directors of
the Metropolitan Atlanta Rapid Transit Authority.

Mr. Loudermilk, Jr. has served as President and Chief Operating Officer of
the Company since 1997. He has been a Director of the Company since 1983. He
served as Vice President, Real Estate of the Company from 1993 until 1997. From
1992 to 1993, he was a self-employed real estate investor. From 1990 to 1991,
Mr. Loudermilk, Jr., was Executive Vice President of Ball Stalker Co., then a
subsidiary of the Company. He also served as a Vice President of the Company
from 1990 to 1991, General Manager of the Company's MacTavish Furniture
Industries division from 1987 to 1988, and Store Manager with the Company from
1985 to 1987. Mr. Loudermilk, Jr. is the son of Mr. Loudermilk, Sr.

Mr. Danielson has served as Vice President, Finance and Chief Financial
Officer and Director of the Company since 1990.

Mr. Groen has served as Vice President, Legal of the Company since 1984. He
has been a Director of the Company and Secretary since 1987.

Mr. Butler joined the Company in 1974 as a Store Manager. He served as Vice
President of the Aaron's Rental Purchase division from 1986 to 1995 and
currently is President of that Division. He was also the Company's National
Merchandising and Sales Manager from 1983 to 1986, Western Regional Manager from
1982 to 1983, and Regional Manager for the Washington/Baltimore Region from 1978
to 1982.

Mr. Stahl joined the Company in 1981 as an Assistant Store Manager. He
served as Regional Vice President of the Northeastern Region of the Aaron Rents'
Rent-to-Rent Division from 1990 to 1995 and currently is President of that
Division.

Mr. Paull joined the Company in 1991 as Treasurer. In 1995, he was elected
a Vice President of the Company and assumed responsibility for the Company's
manufacturing operations.

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<PAGE> 29

Mr. Sinclair has served as Controller of the Company since 1990 and as
Chief Financial Officer of the Aaron's Rental Purchase Division since 1995. From
1987 to 1990, he was an auditor with Ernst & Young, independent auditors.

Mr. Allen has served as a Director of the Company since 1997. He was
Chairman and Chief Executive Officer of Delta Air Lines, an international
passenger air carrier, from 1987 to 1997, President from 1983 to 1987 and May
1993 to 1997, and Chief Operating Officer from 1983 to 1997. He currently serves
as a Director of The Coca-Cola Company.

Mr. Benatar has served as a Director of the Company since 1994. He has been
an associated consultant with A.T. Kearney, Inc., a management consultant and
executive search company, since 1996. He was Chairman of Engraph, Inc. and
served as Chief Executive Officer of that company from 1981 to 1995. Mr. Benatar
serves as a Director of Interstate Bakeries Corporation, Mohawk Industries,
Inc., Riverwood International Corporation, Paxar Corporation and Schuller
Corporation. He previously served as Chairman of the Federal Reserve Bank of
Atlanta.

Mr. Dolive has served as a Director of the Company since 1977. He currently
serves as a Director of Exide Corporation, Pameco Corp. and Greenway
Corporation, and he serves as Director Emeritus of Genuine Parts Company. Prior
to his retirement in 1988, he was Vice Chairman of the Board of Genuine Parts
Company, a distributor of automobile replacement parts.

Mr. Fuqua has served as a Director of the Company since 1996. He has been
President and Chief Executive Officer of Realan Capital Corporation, a
privately-held real estate investment corporation, since 1985. He also has been
President and Chief Executive Officer of Fuqua Capital Corporation, a
privately-held investment management corporation, since 1987. Previously, he was
Chairman of the Board of Directors of Fuqua Enterprises, Inc., a company engaged
in the manufacture and sale of medical products. Mr. Fuqua serves as a Director
of Graham-Field Health Products, Inc.

Ms. Jones has served as a Director of the Company since 1995. She has been
Vice President of Corporate External Affairs of The Coca-Cola Company and
Chairperson of The Coca-Cola Foundation since 1991. Previously, she was an
Assistant Vice President of The Coca-Cola Company.

Gen. Ross has served as Director of the Company since 1996. He has been a
self-employed management consultant since 1992. He is the former Executive Vice
President of Sidwell-Ross and Associates, Inc., a management and technical
consulting firm. Gen. Ross retired from the United States Army in 1983 as a Lt.
General after 39 years of distinguished service.

Mr. Sehgal has served as a Director of the Company since 1994. He has been
Vice Chairman and Chief Executive Officer of H. J. Russell and Company, a
construction and property management company, since 1996. He was President and
Chief Executive Officer of The Williams Group International, Inc., a holding
company for various engineering and specialty services companies, from 1995 to
1996. He was Chairman and Chief Executive Officer of Law Companies Group, Inc.,
a holding company for various engineering and consulting companies, serving in
various capacities with that company from 1963 to 1994.

26
<PAGE> 30

SELLING SHAREHOLDER

Of the 2,500,000 shares of Common Stock offered hereby, 400,000 shares are
being sold by R. Charles Loudermilk, Sr., the Company's Chief Executive Officer
and Chairman of the Board since the Company's incorporation in 1962. Mr.
Loudermilk also served as the Company's President until 1997. The following
table sets forth, as of March 10, 1998 and as adjusted to reflect the sale of
shares being offered hereby, certain information regarding Mr. Loudermilk's
ownership of Class A and Common Stock.

<TABLE>
<CAPTION>
BEFORE THE OFFERING AFTER THE OFFERING
---------------------------- --------------------------
CLASS OF SHARES PERCENT SHARES TO SHARES PERCENT
COMMON BENEFICIALLY OF CLASS BE SOLD IN BENEFICIALLY OF CLASS
SHAREHOLDER STOCK(1) OWNED OUTSTANDING OFFERING OWNED OUTSTANDING
- ----------- -------- ------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
R. Charles Loudermilk, Sr........... Class A 2,384,262(2) 62.15% -- 2,384,262 62.15%
Common 3,253,045(3) 21.47% 400,000 2,853,045 16.54%
</TABLE>

- ---------------

(1) Amounts shown do not reflect that the Common Stock is convertible, on a
share for share basis, into shares of Class A Common Stock (i) by resolution
of the Board of Directors, if, as a result of the existence of the Class A
Common Stock, either class is excluded from listing on the New York Stock
Exchange Market or any national securities exchange on which it is then
listed, and (ii) automatically if the outstanding shares of Class A Common
Stock fall below 10% of the aggregate outstanding shares of both classes of
Common Stock.
(2) Includes 242,348 shares of Common Stock held by a trust for the benefit of a
daughter of Mr. Loudermilk, Sr. of which Mr. Loudermilk, Sr. serves as
trustee.
(3) Includes 8,045 shares of Common Stock held in Mr. Loudermilk's account in
the Company's 401(k) Plan.

Upon completion of this offering, Mr. Loudermilk will continue to be able
to elect all of the directors of, and otherwise effectively control, the
Company. Because the Common Stock is non-voting, Mr. Loudermilk will continue to
be able to sell additional shares of Common Stock in the future without
adversely affecting his voting percentage.

The Company leased from Mr. Loudermilk, Sr. a 51,000 square foot building
housing two stores and a vacant facility in Oklahoma City under a lease which
was to expire in 1999 at a basic monthly rental of $14,007, less the monthly
rent of $2,625 from the partial subtenant currently in the vacant facility. All
insurance, taxes, assessments and other charges related to the property were
paid by the Company as additional rent under the lease. Mr. Loudermilk, Sr.
purchased the building in November 1980 from the Company at its cost of
$950,000. He sold the building to a party unrelated either to the Company or to
Mr. Loudermilk, Sr. on February 7, 1997.

The Company leases a 49,000 square foot building housing four stores in
Alexandria, Virginia from a general partnership of which Mr. Loudermilk, Sr. is
a 25% partner under a lease expiring in 1999 at a basic monthly rental of
$17,726, subject to escalation every five years based on the consumer price
index, but not to exceed 5%. All insurance, taxes, assessments and other charges
related to the property are paid by the Company as additional rent under the
lease. The building was constructed by the Company at a cost of $1,200,000 and
was purchased by the partnership at the Company's cost upon the building's
completion in May 1980.

The Company leased a 27,000 square foot building housing one store and a
subtenant in College Station, Texas from a general partnership composed of
Messrs. Loudermilk, Sr. and Loudermilk, Jr. under a lease which was to expire in
1999 at a basic monthly rental of $6,000, less the monthly rent of $1,500 from
the partial subtenant. All insurance, taxes, assessments and other charges
related to the property were paid by the Company as additional rent under the
lease. The partnership sold the building to a party unrelated either to the
Company or the Loudermilks in March 1998.

During 1996, the Company purchased substantially all of the assets utilized
in the operation of two rental purchase stores located in Pensacola, Florida
that were franchised to a corporation owned by H. Ford

27
<PAGE> 31

Bohannon and Linda L. Bohannon, the son-in-law and daughter, respectively, of
R.C. Loudermilk, Sr., and an unrelated partner. The purchase price was $922,000.

The Company believes that the property sales, lease terms and asset
purchase described above are as favorable as those that could have been obtained
at the same time from unaffiliated parties.

During 1997, the Company made certain cash advances for personal expenses
to Mr. Loudermilk, Sr. The maximum amount of such indebtedness outstanding since
March 31, 1995 was $86,179. Interest was charged on the advances at the rate of
6% and, as of March 31, 1998, the outstanding balance of such advances was
$10,000.

Each of two irrevocable trusts holds a cash value life insurance policy on
the life of Mr. Loudermilk, Sr., the aggregate face value of which is
$4,400,000. The Company and the Trustee of such trusts are parties to
split-dollar agreements pursuant to which the Company has agreed to make all
payments on the policies until Mr. Loudermilk, Sr.'s death. Upon his death, the
Company will receive the aggregate cash value of those policies, which as of
December 31, 1997 represented $795,999, and the balance of such policies will be
payable to the trusts or beneficiaries of such trusts. The premiums paid by the
Company on these policies totaled $162,804 in 1995, $173,316 in 1996 and
$184,876 in 1997.

DESCRIPTION OF CAPITAL STOCK

The Company is authorized by its Articles of Incorporation to issue 50
million shares of common stock, par value $.50 per share, consisting of 25
million shares of voting Class A Common Stock and 25 million shares of
non-voting Common Stock. The Company is also authorized to issue 1 million
shares of Preferred Stock, par value $1.00 per share. On March 27, 1998, the
Company had issued and outstanding 3,836,506 shares of Class A Common Stock,
15,150,391 shares of Common Stock and no shares of Preferred Stock.

Shareholders' rights and related matters are governed by the Georgia
Business Corporation Code, the Company's Articles of Incorporation, and its
By-Laws. Certain provisions of the Articles of Incorporation and By-Laws of the
Company, which are summarized below, could have the effect of preventing a
change in control of the Company. The cumulative effect of these terms could
make it more difficult for any person or entity to acquire or exercise control
of the Company and to make changes in management more difficult. The following
summary is qualified in its entirety by reference to the Company's Articles of
Incorporation and By-Laws, which set forth the full rights, powers and
limitations of each class of the Company's capital stock.

COMMON STOCK AND CLASS A COMMON STOCK

Voting

The Class A Common Stock has one vote per share on all matters submitted to
the Company's shareholders, except to the extent voting rights may be affected
by the Common Stock protection feature (the "Common Stock Protection Feature")
described below. The Common Stock does not entitle the holders thereof to any
vote except as described below or as otherwise required by law.

Actions submitted to a vote of shareholders are generally voted upon only
by holders of Class A Common Stock. Thus, the holders of Class A Common Stock
may elect, by plurality of the votes cast, the entire Board of Directors and, by
the affirmative vote of a majority of the votes entitled to be cast, approve any
merger, consolidation or share exchange or the liquidation or dissolution of the
Company. The holders of Class A Common Stock may, by the affirmative vote of a
majority of the votes entitled to be cast, amend the Company's Articles of
Incorporation, except that amendments adversely affecting the rights of the
Common Stock shareholders would also require the affirmative vote of two-thirds
of the outstanding shares of Common Stock voting as a separate class.

Under the Company's Articles of Incorporation, holders of Common Stock are
not entitled to vote on any matters, except for amendments to the Company's
Articles of Incorporation (i) adversely changing the designation, rights,
preferences or limitations of the Common Stock, (ii) modifying, in any manner
that may adversely affect the Common Stock, the Common Stock Protection Feature
or other protections described

28
<PAGE> 32

below, or (iii) decreasing the aggregate number of authorized shares of Common
Stock below the number of shares of Common Stock then outstanding.

Dividends and Other Distributions

The Company's Articles of Incorporation permit the payment of a cash
dividend on the Common Stock without paying any dividend on the Class A Common
Stock or the payment of a cash dividend on the Common Stock that is higher than
any dividend paid on the Class A Common Stock. Cash dividends cannot be paid on
the Class A Common Stock unless equal or higher dividends are paid on the Common
Stock.

Any dividends or other distributions payable to the holders of either class
of common stock in any class of capital stock of the Company must be paid in
like form and equal amounts on both classes of common stock, except that
dividends or other distributions payable on the common stock in shares of common
stock may be made only as follows: (i) in shares of Common Stock to the holders
of both Class A Common Stock and Common Stock, (ii) in shares of Class A Common
Stock to the holders of Class A Common Stock, and in shares of Common Stock to
the holders of Common Stock, or (iii) in any other authorized class or series of
capital stock to the holders of both classes of common stock.

The Class A Common Stock and Common Stock share equally with respect to
distributions in cash, stock or property in connection with any recapitalization
of the Company and upon liquidation or dissolution of the Company. Neither the
Class A Common Stock nor the Common Stock may be split, subdivided or combined
unless the other is proportionately split, subdivided or combined.

Mergers, Consolidations and Share Exchanges

Each holder of Common Stock is entitled to receive the same amount and form
of consideration per share as the per share consideration, if any, received by
any holder of the Class A Common Stock in a merger or consolidation of the
Company or statutory share exchange involving the Company's common stock.

The Common Stock Protection Feature

Voting rights disproportionate to equity ownership may be acquired through
acquisitions of Class A Common Stock without corresponding purchases of Common
Stock. The Common Stock Protection Feature is intended to make it more difficult
for a buyer who has not acquired a proportionate share of the Common Stock to
acquire a significant block (20% or more) of the Class A Common Stock. Although
the Common Stock Protection Feature might make the Company a less attractive
target for a takeover bid, the Common Stock Protection Feature is intended to
help reduce or eliminate any disparity in the prices at which the two classes of
common stock might trade and to give holders of the Common Stock the opportunity
to participate in any premium that might be paid for such a significant block of
the Class A Common Stock.

If, after October 31, 1992, any person or group acquires (other than upon
issuance by the Company, by operation of law, by will or the laws of descent and
distribution, by charitable contribution or gift, or by foreclosure of a bona
fide loan) beneficial ownership of 20% or more of the Class A Common Stock (a
"Significant Shareholder"), and such person or group does not immediately after
such acquisition beneficially own an equal or greater percentage of Common
Stock, the Common Stock Protection Feature requires that such Significant
Shareholder, within a 90-day period beginning the day after becoming a
Significant Shareholder, commence a public tender offer to acquire additional
shares of Common Stock to cause the Significant Shareholder to acquire a
corresponding percentage of the Common Stock (a "Protection Transaction").

If a Significant Shareholder fails to undertake a Protection Transaction,
the voting rights of the shares of Class A Common Stock beneficially owned by
such Significant Shareholder that exceeded such holder's comparable percentage
of Common Stock would be suspended until completion of a Protection Transaction
or until divestiture of the shares of Class A Common Stock that triggered such
requirement. Neither the Protection Transaction requirement nor the related
penalty applies to any increase in percentage ownership of Class A Common Stock
resulting solely from a change in the total amount of Class A Common Stock

29
<PAGE> 33

outstanding. A Protection Transaction is also required each time a Significant
Shareholder acquires (other than upon issuance by the Company, by operation of
law, by will or the laws of descent and distribution, by charitable contribution
or gift, or by foreclosure of a bona fide loan) an additional 5% of the Class A
Common Stock after the last acquisition which triggered the requirement for a
Protection Transaction, if such Significant Shareholder does not immediately
after such acquisition beneficially own an equal or greater percentage of Common
Stock.

Since the definition of Significant Shareholder is based on the beneficial
ownership percentage of Class A Common Stock acquired after October 31, 1992, a
person or group who is a shareholder of the Company on that date will not become
a Significant Shareholder unless such person or group acquires beneficial
ownership of an additional 20% of the then issued and outstanding Class A Common
Stock, regardless of the percentage of Common Stock beneficially owned by such
person or group immediately prior to October 31, 1992.

The Common Stock Protection Feature does not prevent any person or group
from acquiring a significant or controlling interest in the Company, provided
such person or group acquires a proportionate percentage of the Common Stock,
undertakes a Protection Transaction or suffers suspension of the voting rights
of certain shares of Class A Common Stock as provided by the Common Stock
Protection Feature. If a Protection Transaction is required, the purchase price
to be paid in such offer may be higher than the price at which a Significant
Shareholder might otherwise be able to acquire an identical amount of Common
Stock. Such requirement, therefore, could make an acquisition of a significant
or controlling interest in the Company more expensive and, if a Protection
Transaction is required, time consuming, than if such requirement did not exist.
Consequently, a person or group might be deterred from acquiring a significant
or controlling interest in the Company as a result of such requirement.
Moreover, by restricting the ability of an acquiror to acquire a significant
interest in the Class A Common Stock by paying a "control premium" for such
stock without acquiring, or paying a similar premium for, Common Stock, the
Common Stock Protection Feature should help to reduce any discount on either
class of common stock.

Convertibility

Neither the Class A Common Stock nor the Common Stock is convertible into
another class of common stock or any other security of the Company, except that
the Common Stock could be converted into Class A Common Stock on a
share-for-share basis by resolution of the Board of Directors if, as a result of
the existence of the Common Stock, either class of the common stock is excluded
from listing on the New York Stock Exchange (or any national securities exchange
on which the Common Stock is then listed). In addition, if the outstanding
shares of Class A Common Stock fall below 10% of the aggregate outstanding
shares of Class A Common Stock and Common Stock, then, immediately upon the
occurrence of such event, all the outstanding Common Stock will be automatically
converted into Class A Common Stock, on a share-for-share basis. Upon any such
conversion, the voting interest of the holders of Class A Common Stock would be
diluted, and to the extent that the market price of one class exceeds the other
immediately prior to such conversion, the market price of the higher priced
class may be decreased.

Preemptive Rights

The holders of the Class A Common Stock and Common Stock do not have
preemptive rights enabling them to subscribe for or receive shares of any class
of stock of the Company or any other securities convertible into shares of any
class of stock of the Company.

PREFERRED STOCK

The Board of Directors of the Company may, without approval of the
Company's shareholders, from time to time authorize the issuance of Preferred
Stock in one or more series for such consideration and, within certain limits,
with such relative rights, powers, preferences and limitations as the Board of
Directors may determine. Because the Board of Directors has the power to
establish the preferences, powers and rights of each series of Preferred Stock,
it may afford to the holders of any such series preferences, powers and rights,
voting or otherwise, senior to the rights of holders of either class of the
Company's common stock. Although

30
<PAGE> 34

the Board of Directors has no intention at the present time of doing so, it
could cause the issuance of Preferred Stock that could discourage an acquisition
attempt or other transaction that some, or a majority, of the shareholders might
believe to be in their best interest or in which the shareholders might receive
a premium for their stock over the market price of such stock.

LIMITATION OF DIRECTORS' LIABILITY

The Company's Articles of Incorporation eliminate, subject to exceptions
provided by Georgia law, the liability of directors to the Company or its
shareholders or any other person for breach of any duty as a director, whether
as a fiduciary or otherwise. Georgia law provides that no provision in articles
of incorporation or by-laws shall eliminate or limit the liability of a director
for (i) any appropriation, in violation of the director's duties, of any
business opportunity of the Company, (ii) acts or omissions which involve
intentional misconduct or a knowing violation of law, (iii) unlawful corporate
distributions or (iv) any transaction from which the director received an
improper benefit. Liability for monetary damages would remain unaffected by the
Articles of Incorporation if liability is based on any of these grounds.
Liability for monetary damages for violations of federal securities laws also
remains unaffected. This provision of the Articles of Incorporation will limit
the remedies available to a shareholder dissatisfied with a Board decision which
is protected by this provision, and a shareholder's only remedy in such a
circumstance may be to bring a suit to prevent the Board's action. In many
situations, this remedy may not be effective, for example, when shareholders are
not aware of a transaction or an event until it is too late to prevent it. In
these cases, the shareholders and the Company could be injured by a Board
decision and have no effective remedy.

TRANSFER AGENT

The transfer agent and registrar for the Company's Common Stock and Class A
Common Stock is SunTrust Bank (Atlanta).

31
<PAGE> 35

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement among the
Company, the Selling Shareholder and Wheat First Union, a division of Wheat
First Securities, Inc., Interstate/Johnson Lane Corporation and SunTrust
Equitable Securities Corporation, as representatives of the Underwriters (the
"Representatives"), the Underwriters have severally agreed to purchase from the
Company and the Selling Shareholder, and the Company and the Selling Shareholder
have agreed to sell to each of the Underwriters, the respective number of shares
of Common Stock set forth opposite their names below:

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Wheat First Securities, Inc.................................
Interstate/Johnson Lane Corporation.........................
SunTrust Equitable Securities Corporation...................
---------
Total............................................. 2,500,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all the
above shares of Common Stock if any are purchased.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus and to selected dealers at such price less a concession not in excess
of $ per share of Common Stock. The Underwriters may allow, and such
selected dealers may reallow, a concession not in excess of $ per share
of Common Stock to certain brokers and dealers. After the initial offering to
the public, the price to public, concessions and reallowances to dealers may be
changed by the Representatives.

The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
additional 375,000 shares of Common Stock to cover over-allotments, if any, at
the public offering price, less the underwriting discount, as set forth on the
cover page of this Prospectus. To the extent that the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with the offering.

The Company and its executive officers and directors have agreed not to
offer, sell or contract to sell or otherwise dispose of, directly or indirectly,
or announce an offering of, any shares of equity securities of the Company, with
certain exceptions, for a period of 120 days after the date hereof without the
written consent of the Representatives.

The Company and the Selling Shareholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may overallot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover overallotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transaction, or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.

Affiliates of SunTrust Equitable Securities Corporation and Wheat First
Securities, Inc. are lenders under the Company's revolving credit facility.
Because more than 10% of the net proceeds from this offering

32
<PAGE> 36

may be deemed, under the NASD Conduct Rules, to be paid to these affiliates
because of repayments by the Company of amounts outstanding under the revolving
credit facility, this offering is being made in compliance with Rule 2710(c)(8)
of the NASD Conduct Rules, which provides for an exception to
conflicts-of-interest prohibitions for offerings of securities that are subject
to bona fide independent markets.

LEGAL MATTERS

The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Kilpatrick Stockton LLP, Atlanta, Georgia. Certain legal
matters related to the offering will be passed upon for the Underwriters by
Hunton & Williams, Richmond, Virginia.

EXPERTS

The consolidated financial statements of the Company at December 31, 1997
and 1996, and for the years ended December 31, 1997 and 1996, and the nine month
period ended December 31, 1995, appearing in this Prospectus and Registration
Statement have been audited by Ernst & Young, LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company with the Commission pursuant to the information
requirements of the Exchange Act may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: New York Regional Office, 7 World Trade Center, 13th Floor, New
York, New York 10007; and Chicago Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of that Web site is http://www.sec.gov. The Common Stock
is traded on the New York Stock Exchange. Reports, proxy statements and other
information concerning the Company may be inspected at the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.

The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information, reference is made to the
Registration Statement and the exhibits filed as a part thereof. Statements
contained in this Prospectus regarding the contents of any contract, agreement
or other document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract, agreement or document filed as
an exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits thereto, may be inspected without charge at the principal office of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or
any part thereof may be obtained from such office upon payment of the prescribed
fees.

33
<PAGE> 37

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents heretofore filed by the Company with the Commission
are hereby incorporated by reference: (i) the Company's Annual Report on Form
10-K for the year ended December 31, 1997; and (ii) the description of the
Company's Capital Stock contained in the Company's registration of securities on
Form 8-A filed pursuant to the Exchange Act on March 10, 1998.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14, or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Shares covered by this Prospectus shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, on the written or oral request of such
person, a copy of any document incorporated by reference in this Prospectus
(other than exhibits to such document unless such exhibits are specifically
incorporated by reference into the document that this Prospectus incorporates).
Written or oral requests for such copies should be directed to: Corporate
Secretary, Aaron Rents, Inc., 309 E. Paces Ferry Road, Atlanta, Georgia
30305-2377, telephone number (404) 231-0011.

34
<PAGE> 38

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets -- December 31, 1997 and 1996... F-3
Consolidated Statements of Earnings -- Years ended December
31, 1997 and 1996 and Nine Months ended December 31,
1995...................................................... F-4
Consolidated Statements of Shareholders' Equity -- Years
ended December 31, 1997 and 1996 and Nine Months ended
December 31, 1995......................................... F-5
Consolidated Statements of Cash Flows -- Years ended
December 31, 1997 and 1996 and Nine Months ended December
31, 1995.................................................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE> 39

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Aaron Rents, Inc.:

We have audited the accompanying consolidated balance sheets of Aaron
Rents, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of earnings, shareholders' equity and cash flows for the
years ended December 31, 1997 and 1996, and the nine months ended December 31,
1995. 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 conducted our audits 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 audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Aaron Rents,
Inc. and Subsidiaries as of December 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1997 and 1996, and the nine months ended December 31, 1995, in conformity
with generally accepted accounting principles.

As discussed in Note 1 to the Consolidated Financial Statements, in 1996,
the Company changed its method of accounting for depreciation of rental purchase
merchandise.

/s/ ERNST & YOUNG LLP

Atlanta, Georgia
March 23, 1998

F-2
<PAGE> 40

AARON RENTS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
ASSETS
Cash........................................................ $ 96 $ 84
Accounts Receivable......................................... 11,794 10,491
Rental Merchandise.......................................... 246,498 210,516
Less: Accumulated Depreciation.............................. (69,530) (60,532)
-------- --------
176,968 149,984
Property, Plant & Equipment, Net............................ 39,757 33,267
Prepaid Expenses & Other Assets............................. 10,767 4,277
-------- --------
Total Assets...................................... $239,382 $198,103
======== ========
LIABILITIES & SHAREHOLDERS' EQUITY
Accounts Payable & Accrued Expenses......................... $ 31,071 $ 24,999
Dividends Payable........................................... 379 382
Deferred Income Taxes Payable............................... 6,687 2,882
Customer Deposits & Advance Payments........................ 8,304 7,140
Bank Debt................................................... 75,904 55,125
Other Debt.................................................. 582 240
-------- --------
Total Liabilities................................. 122,927 90,768
Commitments & Contingencies
Shareholders' Equity
Common Stock, Par Value $.50 Per Share; Authorized:
25,000,000 Shares; Shares Issued: 16,170,987........... 8,085 8,085
Common Stock, Class A, Par Value $.50 Per Share;
Authorized: 25,000,000 Shares; Shares Issued:
5,361,761.............................................. 2,681 2,681
Additional Paid-In Capital................................ 15,484 15,445
Retained Earnings......................................... 113,864 96,226
-------- --------
140,114 122,437
Less: Treasury Shares at Cost, Common Stock, 1,058,041
Shares at December 31, 1997 and 415,941 Shares at December
31, 1996.................................................. (9,523) (2,315)
Class A Common Stock, 1,525,255 Shares at December 31,
1997 and 1,418,855 Shares at December 31, 1996......... (14,136) (12,787)
-------- --------
Total Shareholders' Equity........................ 116,455 107,335
-------- --------
Total Liabilities & Shareholders' Equity.......... $239,382 $198,103
======== ========
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-3
<PAGE> 41

AARON RENTS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C>
REVENUES
Rentals and Fees.......................................... $231,207 $208,463 $137,098
Retail Sales.............................................. 58,602 52,757 35,537
Non-Retail Sales.......................................... 14,621 8,770 3,681
Other..................................................... 6,321 4,255 1,908
-------- -------- --------
310,751 274,245 178,224
COSTS & EXPENSES
Retail Cost of Sales...................................... 42,264 37,848 24,983
Non-Retail Cost of Sales.................................. 13,650 8,320 3,367
Operating Expenses........................................ 149,728 135,012 90,027
Depreciation of Rental Merchandise........................ 71,151 64,437 41,612
Interest.................................................. 3,721 3,449 2,323
-------- -------- --------
280,514 249,066 162,312
-------- -------- --------
Earnings Before Income Taxes.............................. 30,237 25,179 15,912
Income Taxes.............................................. 11,841 9,786 6,032
-------- -------- --------
Net Earnings.............................................. $ 18,396 $ 15,393 $ 9,880
======== ======== ========
Earnings Per Share........................................ $ .96 $ .81 $ .51
Earnings Per Share Assuming Dilution...................... .94 .77 .49
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-4
<PAGE> 42

AARON RENTS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
TREASURY STOCK COMMON STOCK ADDITIONAL
----------------- ---------------- PAID-IN RETAINED
SHARES AMOUNT COMMON CLASS A CAPITAL EARNINGS
------ -------- ------ ------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1995................. (2,179) $(13,578) $3,318 $2,681 $15,314 $ 77,216
Reacquired Shares..................... (194) (3,134)
Dividends............................. (732)
Reissued Shares....................... 13 72 56 1
Net Earnings.......................... 9,880
------ -------- ------ ------ ------- --------
BALANCE, DECEMBER 31, 1995.............. (2,360) (16,640) 3,318 2,681 15,370 86,365
Stock Dividend........................ 4,767 (4,767)
Reacquired Shares..................... (164) (2,889)
Dividends............................. (765)
Reissued Shares....................... 689 4,427 75
Net Earnings.......................... 15,393
------ -------- ------ ------ ------- --------
BALANCE, DECEMBER 31, 1996.............. (1,835) (15,102) 8,085 2,681 15,445 96,226
Reacquired Shares..................... (795) (8,918)
Dividends............................. (758)
Reissued Shares....................... 47 361 39
Net Earnings.......................... 18,396
------ -------- ------ ------ ------- --------
BALANCE, DECEMBER 31, 1997.............. (2,583) $(23,659) $8,085 $2,681 $15,484 $113,864
====== ======== ====== ====== ======= ========
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-5
<PAGE> 43

AARON RENTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE
YEAR ENDED YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Earnings............................................. $ 18,396 $ 15,393 $ 9,880
Depreciation & Amortization.............................. 77,487 70,693 45,798
Deferred Income Taxes.................................... 3,805 (899) (345)
Change in Accounts Payable & Accrued Expenses............ 5,103 5,695 242
Change in Accounts Receivable............................ (1,083) (2,339) 255
Other Changes, Net....................................... 1,587 982 (711)
--------- --------- --------
Cash Provided by Operating Activities.................... 105,295 89,525 55,119
INVESTING ACTIVITIES
Additions to Property, Plant & Equipment................. (15,165) (17,534) (5,476)
Book Value of Property Retired or Sold................... 6,531 1,823 1,979
Additions to Rental Merchandise.......................... (145,262) (137,023) (72,926)
Book Value of Rental Merchandise Sold.................... 58,436 48,352 30,892
Contracts & Other Assets Acquired........................ (21,665) (3,891) (533)
--------- --------- --------
Cash Used by Investing Activities........................ (117,125) (108,273) (46,064)
FINANCING ACTIVITIES
Proceeds from Revolving Credit Agreement................. 118,545 85,299 51,933
Repayments on Revolving Credit Agreement................. (97,766) (67,434) (56,845)
Increase (Decrease) in Other Debt........................ 342 21 (768)
Dividends Paid........................................... (761) (765) (367)
Acquisition of Treasury Stock............................ (8,918) (2,889) (3,134)
Issuance of Stock Under Stock Option Plan................ 400 4,502 129
--------- --------- --------
Cash Provided (Used) by Financing Activities............. 11,842 18,734 (9,052)
Increase (Decrease) in Cash.............................. 12 (14) 3
Cash at Beginning of Year................................ 84 98 95
--------- --------- --------
Cash at End of Year...................................... $ 96 $ 84 $ 98
========= ========= ========
Cash Paid During the Year:
Interest............................................... $ 3,713 $ 3,384 $ 2,642
Income Taxes........................................... 6,989 7,531 7,677
</TABLE>

The accompanying notes are an integral part of the Consolidated Financial
Statements.

F-6
<PAGE> 44

AARON RENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 1997 and 1996, and for the Years Ended December 31, 1997
and 1996, and the Nine Months Ended December 31, 1995.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of Aaron Rents, Inc. and its wholly-owned subsidiary, Aaron
Investment Company (the "Company"). All significant intercompany accounts and
transactions have been eliminated. The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual results
could differ from those estimates.

LINE OF BUSINESS -- The Company is engaged in the business of renting and
selling residential and office furniture and other merchandise throughout the
U.S. The Company manufactures furniture principally for its rental and sales
operations.

RENTAL MERCHANDISE consists primarily of residential and office furniture,
consumer electronics and other merchandise and is recorded at cost. Prior to
January 1, 1996, depreciation was provided using the straight-line method over
the estimated useful life of the merchandise, principally from 1 to 5 years,
after allowing for a salvage value of 5% to 60%. Effective January 1, 1996, the
Company prospectively changed its depreciation method on merchandise in the
rental purchase division acquired after December 31, 1995, from generally 14
months straight-line with a 5% salvage value to a method that depreciates the
merchandise over the agreement period, generally 12 months, when on rent, and 36
months, when not on rent, to a 0% salvage value. This new method is similar to a
method referred to as the income forecasting method in the rental purchase
industry. The Company adopted the new method because management believes that it
provides a more systematic and rational allocation of the cost of rental
purchase merchandise over its useful life. The effect for the year ended
December 31, 1996 of the change in the depreciation method on merchandise
purchased after December 31, 1995 was to decrease net income by approximately
$850,000 ($.04 per share). In addition, based on an analysis of the average
composite life of the division's rental purchase merchandise on rent or on hand
at December 31, 1995, the Company extended the depreciable lives of that
merchandise from generally 14 months to 18 months, and made other refinements to
depreciation rates on rental and rental purchase merchandise. The effect of such
change in depreciable lives and other refinements was to increase net income for
the year ended December 31, 1996 by approximately $709,000 ($.04 per share). The
Company recognizes rental revenues over the rental period and recognizes all
costs of servicing and maintaining merchandise on rent as incurred.

PROPERTY, PLANT AND EQUIPMENT are recorded at cost. Depreciation and
amortization are computed on a straight-line basis over the estimated useful
lives of the respective assets, which are from 8 to 27 years for buildings and
improvements and from 2 to 5 years for other depreciable property and equipment.
Gains and losses related to dispositions and retirements are included in income.
Maintenance and repairs are charged to income as incurred; renewals and
betterments are capitalized. The Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (SFAS 121), in the first
quarter of 1996. The effect of the adoption was not material.

DEFERRED INCOME TAXES are provided for temporary differences between the
amounts of assets and liabilities for financial and tax reporting purposes. Such
temporary differences arise principally from the use of accelerated depreciation
methods on rental merchandise for tax purposes.

COST OF SALES includes the depreciated cost of rental return residential
and office merchandise sold and the cost of new residential and office
merchandise sold. It is not practicable to allocate operating expenses between
selling and rental operations.

F-7
<PAGE> 45
AARON RENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ADVERTISING -- The Company expenses advertising costs as incurred. Such
costs aggregated $9,530,000 in 1997, $10,422,000 in 1996, and $6,258,000 for the
nine months ended December 31, 1995.

STOCK BASED COMPENSATION -- The Company has elected to follow Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"(APB
25) and related Interpretations in accounting for its employee stock options and
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation" (FAS 123). The
Company grants stock options for a fixed number of shares to employees with an
exercise price equal to the fair value of the shares at the date of grant and,
accordingly, recognizes no compensation expense for the stock option grants.

EXCESS COSTS OVER NET ASSETS ACQUIRED -- Goodwill is amortized on a
straight-line basis over a period of twenty years. Long-lived assets, including
goodwill, are periodically reviewed for impairment based on an assessment of
future operations. The Company records impairment losses on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD -- In June 1997, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (FAS 131), which is effective for 1998. FAS 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires that those companies report
selected information about operating segments in interim financial reports. It
also establishes standards for related disclosures about products and services,
geographic areas, and major customers. The Company will adopt the new
requirements in its annual financial statements in 1998. Management has not
completed its analysis of the effect of FAS 131 on its reported segments.

2. CHANGE IN FISCAL YEAR END

During 1995, the Company changed its fiscal year end from March 31 to
December 31, which resulted in a nine month fiscal period ended December 31,
1995. The decision to change the fiscal year end was made for more convenience
in both internal and external reporting.

Results of operations (condensed) for the nine-month periods ended December
31, 1995 and December 31, 1994 are shown below:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Revenues.................................................... $178,224 $169,341
Cost of Sales............................................... 28,350 28,772
Operating And Other Expenses................................ 92,350 87,649
Depreciation of Rental Merchandise.......................... 41,612 39,912
-------- --------
Earnings Before Income Taxes................................ 15,912 13,008
Income Taxes................................................ 6,032 5,021
-------- --------
Net Earnings................................................ $ 9,880 $ 7,987
======== ========
Earnings Per Share.......................................... $ .51 $ .42
Earnings Per Share Assuming Dilution........................ .49 .40
</TABLE>

F-8
<PAGE> 46
AARON RENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. EARNINGS PER SHARE

During 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings per Share", (FAS 128). FAS 128 replaced the
calculation of primary and fully diluted earnings per share with earnings per
share and earnings per share assuming dilution. Earnings per share is computed
by dividing net income by the weighted average number of common shares
outstanding during the year which were 19,165,000 shares in 1997, 19,099,000
shares in 1996, and 19,461,000 shares in the nine months ended December 31,
1995. The computation of earnings per share assuming dilution includes the
dilutive effect of stock options. Such stock options had the effect of
increasing the weighted average shares outstanding assuming dilution by 497,000
and 885,000 in 1997 and 1996, respectively, and 576,000 shares in the nine
months ended December 31, 1995.

4. PROPERTY, PLANT & EQUIPMENT

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 4,643 $ 3,662
Buildings & Improvements.................................... 17,698 15,787
Leasehold Improvements & Signs.............................. 19,243 16,068
Fixtures & Equipment........................................ 19,402 15,738
Construction in Progress.................................... 3,380 2,726
-------- --------
64,366 53,981
Less: Accumulated Depreciation & Amortization............... (24,609) (20,714)
-------- --------
$ 39,757 $ 33,267
======== ========
</TABLE>

5. DEBT

BANK DEBT -- The Company has a revolving credit agreement with four banks
providing for unsecured borrowings up to $90,000,000, which includes a
$6,000,000 credit line to fund daily working capital requirements. Amounts
borrowed bear interest at the lower of the lender's prime rate, LIBOR plus .50%,
or the rate at which certificates of deposit are offered in the secondary market
plus .625%. The pricing under the working capital line is based upon overnight
bank borrowing rates. At December 31, 1997 and 1996, an aggregate of $75,904,000
(bearing interest at 6.57%) and $55,125,000, respectively, was outstanding under
this agreement. The Company pays a .22% commitment fee on unused balances. The
weighted average interest rate on borrowings under the revolving credit
agreement (before giving effect to interest rate swaps) was 6.29% in 1997, 6.17%
in 1996 and 6.99% for the nine months ended December 31, 1995. The effect of
interest rate swaps on the weighted average interest rate was not material.

The Company has entered into interest rate swap agreements that effectively
fix the interest rate on $20,000,000 of borrowings under the revolving credit
agreement at an average rate of 7.0% until November 2003 and an additional
$20,000,000 at an average rate of 6.85% until June 2005. These swap agreements
involve the receipt of amounts when the floating rates exceed the fixed rates
and the payment of amounts when the fixed rates exceed the floating rates in
such agreements over the life of the agreements. The differential to be paid or
received is accrued as interest rates change and is recognized as an adjustment
to the floating rate interest expense related to the debt. The related amount
payable to or receivable from counterparties is included in accrued liabilities
or other assets. Unrealized losses under the swap agreements aggregated $926,000
at December 31, 1997. The fair value of the Company's bank debt approximates its
carrying value.

F-9
<PAGE> 47
AARON RENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The revolving credit agreement may be terminated on ninety days' notice by
the Company or six months' notice by the lenders. The debt is payable in 60
monthly installments following the termination date if terminated by the
lenders.

The agreement requires that the Company not permit its consolidated net
worth as of the last day of any fiscal quarter to be less than the sum of (a)
$105,000,000 plus (b) 50% of the Company's consolidated net income (but not
loss) for the period beginning July 1, 1997 and ending on the last day of such
fiscal quarter. It also places other restrictions on additional borrowings and
requires the maintenance of certain financial ratios. At December 31, 1997, $6.7
million of retained earnings was available for dividend payments and stock
repurchases under the debt restrictions.

OTHER DEBT -- Other debt of $582,000 at December 31, 1997 and $240,000 at
December 31, 1996 primarily represents an insurance premium financing agreement
bearing interest at 6.22%. Other debt matures in 1998.

6. INCOME TAXES

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current Income Tax Expense:
Federal..................................... $ 7,375 $ 9,503 $5,577
State....................................... 661 1,182 800
------- ------- ------
8,036 10,685 6,377
Deferred Income
Tax Expense (Benefit):
Federal..................................... 3,287 (889) (302)
State....................................... 518 (10) (43)
------- ------- ------
3,805 (899) (345)
------- ------- ------
$11,841 $ 9,786 $6,032
======= ======= ======
</TABLE>

Significant components of the Company's deferred income tax liabilities and
assets are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Liabilities:
Rental Merchandise and Property, Plant & Equipment...... $ 9,265 $5,486
Other, Net.............................................. 1,244 1,141
------- ------
Total Deferred Tax Liabilities.................. 10,509 6,627
Deferred Tax Assets:
Accrued Liabilities..................................... 1,015 892
Advance Payments........................................ 2,276 2,150
Other, Net.............................................. 531 703
------- ------
Total Deferred Tax Assets....................... 3,822 3,745
------- ------
Net Deferred Tax Liabilities.................... $ 6,687 $2,882
======= ======
</TABLE>

F-10
<PAGE> 48
AARON RENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's effective tax rate differs from the federal income tax
statutory rate as follows:

<TABLE>
<CAPTION>
NINE
MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Statutory Rate.............................. 35.0% 35.0% 35.0%
Increases in Taxes Resulting From State
Income Taxes, Net of Federal Income Tax
Benefit................................... 2.5 3.0 3.2
Other, Net.................................. 1.7 .9 (.3)
---- ---- ----
Effective Tax Rate.......................... 39.2% 38.9% 37.9%
==== ==== ====
</TABLE>

7. COMMITMENTS

The Company leases warehouse and retail store space for substantially all
of its operations under operating leases expiring at various times through 2007.
Most of the leases contain renewal options for additional periods ranging from 1
to 15 years or provide for options to purchase the related property at
predetermined purchase prices which do not represent bargain purchase options.
The Company also leases transportation equipment under operating leases expiring
during the next 3 years. Management expects that most leases will be renewed or
replaced by other leases in the normal course of business.

Future minimum rental payments, including guaranteed residual values,
required under operating leases that have initial or remaining non-cancelable
terms in excess of one year as of December 31, 1997, are as follows: $20,838,000
in 1998; $16,819,000 in 1999; $12,444,000 in 2000; $19,319,000 in 2001;
$4,164,000 in 2002; and $4,457,000 thereafter.

Rental expense was $22,146,000 in 1997, $17,886,000 in 1996 and $11,513,000
for the nine months ended December 31, 1995.

The Company leases five buildings from certain officers of the Company
under leases expiring through 1998 for annual rentals aggregating $383,000.

The Company maintains a 401(k) savings plan for all full-time employees
with at least one year of service with the Company and who meet certain
eligibility requirements. The plan allows employees to contribute up to 10% of
their annual compensation with 50% matching by the Company on the first 4% of
compensation. The Company's expense related to the plan was $357,000 in 1997,
$308,000 in 1996 and $162,000 for the nine months ended December 31, 1995.

8. SHAREHOLDERS' EQUITY

During 1996, the Company declared a 100% stock dividend on its Common Stock
and Class A Common Stock. Each stockholder received one share of Common Stock
for each share of Common Stock and Class A Common Stock held. All share and per
share amounts have been restated to reflect the 100% stock dividend. Common
stock is non-voting.

At December 31, 1997, the Company held a total of 2,583,296 common shares
in its treasury, and is authorized by the Board of Directors to acquire up to an
additional 208,090 shares.

The Company has 1,000,000 shares of preferred stock authorized. The shares
are issuable in series with terms for each series fixed by the Board and such
issuance is subject to approval by the Board of Directors. No preferred shares
have been issued.

F-11
<PAGE> 49
AARON RENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. STOCK OPTIONS

The Company has stock option plans under which options to purchase shares
of the Company's Common Stock are granted to certain key employees. Under the
plans, options granted become exercisable after a period of two or three years
and unexercised options lapse five or ten years after the date of the grant.
Options are subject to forfeiture upon termination of service. Under the plans,
2,000,500 of the Company shares are reserved for issuance at December 31, 1997.
The weighted-average fair value of options granted was $8.58 in 1997 and $4.99
in 1996.

Pro forma information regarding net earnings and earnings per share is
required by FAS 123, and has been determined as if the Company has accounted for
its employee stock options granted in 1997 and 1996 under the fair value method
of that Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1997 and 1996, respectively: risk-free interest
rates of 5.88% and 6.72%; a dividend yield of .25% and .4%; volatility factor of
the expected market price of the Company's common stock of .39 and .335; and a
weighted-average expected life of the option of 8 years.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands except for earnings per share
information):

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Pro forma net earnings............................... $17,508 $14,825
Pro forma earnings per share......................... .91 .78
Pro forma earnings per share assuming dilution....... .89 .74
</TABLE>

Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until future
years.

F-12
<PAGE> 50
AARON RENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The table below summarizes option activity for the periods indicated in the
Company's stock option plans.

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
OPTIONS PRICE
-------- ---------
(IN THOUSANDS, EXCEPT
PRICE PER SHARE)
<S> <C> <C>
Outstanding at April 1, 1995................................ 1,294 $ 4.54
Exercised................................................. (24) 3.00
Forfeited................................................. (22) 6.68
----- ------
Outstanding at December 31, 1995............................ 1,248 4.54
Granted................................................... 780 9.88
Exercised................................................. (701) 3.00
Forfeited................................................. (8) 9.68
----- ------
Outstanding at December 31, 1996............................ 1,319 8.48
Granted................................................... 322 15.95
Exercised................................................. (47) 5.28
Forfeited................................................. (9) 10.83
----- ------
Outstanding at December 31, 1997............................ 1,585 $10.07
===== ======
Exercisable at December 31, 1997............................ 501 $ 6.62
===== ======
</TABLE>

Exercise prices for options outstanding as of December 31, 1997 ranged from
$4.88 to $16.50. The weighted-average remaining contractual life of those
options is 6.58 years.

10. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE)
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997
Revenues.................................................. $76,480 $77,465 $76,238 $80,568
Gross Profit.............................................. 43,574 44,236 43,996 45,559
Earnings Before Taxes..................................... 7,080 7,608 7,883 7,666
Net Earnings.............................................. 4,312 4,633 4,805 4,646
Earnings Per Share........................................ $ .22 $ .24 $ .25 $ .25
Earnings Per Share Assuming Dilution...................... .22 .24 .25 .24
YEAR ENDED DECEMBER 31, 1996
Revenues.................................................. $64,693 $67,610 $71,224 $70,718
Gross Profit.............................................. 38,873 39,980 41,273 39,259
Earnings Before Taxes..................................... 6,791 6,375 6,198 5,815
Net Earnings.............................................. 4,159 3,914 3,787 3,533
Earnings Per Share........................................ $ .22 $ .21 $ .20 $ .18
Earnings Per Share Assuming Dilution...................... .21 .20 .19 .18
</TABLE>

11. FRANCHISING OF AARON'S RENTAL PURCHASE STORES

The Company franchises Aaron's Rental Purchase stores. As of December 31,
1997 and December 31, 1996, 186 and 155 franchises had been awarded,
respectively. Franchisees pay a non-refundable initial franchise fee of $35,000
and an ongoing royalty of 5% of cash receipts. The Company recognizes this
income

F-13
<PAGE> 51
AARON RENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

as earned and includes it in Other Revenues in the Consolidated Statements of
Earnings. The Company has guaranteed certain lease and debt obligations
(primarily extending through 1999) of some of the franchisees amounting to
$127,000 and $8,131,000, respectively, at December 31, 1997. The Company
receives a guarantee and servicing fee based on such franchisees outstanding
debt obligations which it recognizes as income over the guaranty and servicing
period. The Company has recourse rights to the leased property and to the assets
securing the debt obligations. As a result, the Company does not expect to incur
any significant losses under these guarantees.

12. ACQUISITIONS

In December 1997, the Company acquired substantially all of the assets of
RentMart Rent-To-Own, Inc., a wholly-owned subsidiary of the Associates Capital
Corporation, for $18,012,000 in cash. The excess cost over the fair market value
of tangible assets acquired was approximately $4,300,000.

In December 1997, the Company acquired substantially all of the assets of
Blackhawk Convention Services, Inc. for $3,500,000 in cash. The excess cost over
the fair market value of tangible assets acquired was approximately $2,700,000.

Both acquisitions were accounted for under the purchase method and,
accordingly, the results of operations of the acquired businesses are included
in the Company's results of operations from their dates of acquisition. The
effect of these acquisitions on the 1997 consolidated financial statements was
not significant.

13. PROPOSED STOCK OFFERING

On or about March 31, 1998, the Company intends to file a registration
statement for the sale by the Company of 2,100,000 shares of Common Stock. The
proceeds of the offering, if consummated, would be used to reduce indebtedness
and for general business purposes, including opening additional rent-to-rent and
rental purchase stores and expansion of manufacturing and distribution capacity.

F-14
<PAGE> 52

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER TO SELL OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Use of Proceeds....................... 5
Capitalization........................ 6
Price Range of Common Stock and
Dividends........................... 7
Selected Consolidated Financial
Data................................ 8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 9
Business.............................. 13
Management............................ 25
Selling Shareholder................... 27
Description of Capital Stock.......... 28
Underwriting.......................... 32
Legal Matters......................... 33
Experts............................... 33
Available Information................. 33
Incorporation of Certain Information
by Reference........................ 33
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

2,500,000 SHARES

AARON RENTS, INC.

COMMON STOCK

---------------

PROSPECTUS
---------------
WHEAT FIRST UNION

INTERSTATE/JOHNSON LANE
CORPORATION

SUNTRUST EQUITABLE
SECURITIES

, 1998
<PAGE> 53

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND REGISTRATION

The following sets forth the various expenses and costs (other than
underwriting discounts) expected to be incurred in connection with the sale and
distribution of the securities being registered. All of the amounts shown are
estimated except for the registration fees of the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc.:

<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 19,879
NASD Filing Fee............................................. 7,238
Blue Sky Fees and Expenses.................................. 1,000
Printing and Engraving Expenses............................. 45,000
Legal Fees and Expenses..................................... 100,000
Accounting Fees and Expenses................................ 47,000
Transfer Agent Fees and Expenses............................ 3,000
Miscellaneous............................................... 1,883
--------
Total............................................. $225,000
========
</TABLE>

The Selling Shareholder will pay his pro-rata share of the registration and
filing fees, and the Company will pay all other expenses.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

As permitted under Georgia law, the Company's Amended and Restated Articles
of Incorporation provide that a director shall not be personally liable to the
Company or its share-holders for monetary damages for breach of duty of care or
any other duty owed to the Company as a director, except that such provision
shall not eliminate or limit the liability of a director (i) for any
appropriation, in violation of his duties, of any business opportunity of the
Company, (ii) for acts or omissions which involve intentional misconduct or a
knowing violation of law, (iii) for unlawful corporate distributions or (iv) for
any transaction from which the director received an improper benefit.

Article VII of the Bylaws of the Company authorize indemnification of the
Company's officers and directors for any liability and expense incurred by them
in connection with or resulting from any threatened, pending or completed legal
action or other proceeding or investigation by reason of his being or having
been an officer or director. An officer or director may only be indemnified if
he acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Company, and, with respect to a criminal
matter, he did not have reasonable cause to believe that his conduct was
unlawful. No officer or director who has been adjudged liable for negligence or
misconduct in the performance of his corporate duties is entitled to
indemnification, unless and except to the extent that the court reaching such a
determination of liability, in view of all the relevant circumstances, shall
also determine that despite such liability such person is fairly and reasonably
entitled to indemnification.

Any officer or director who has been wholly successful on the merits or
otherwise in an action or proceeding in his official capacity is entitled to
indemnification by the Company as of right. All other determinations in respect
of indemnification shall be made by either: (i) a majority vote of a quorum of
disinterested directors; (ii) independent legal counsel selected in accordance
with the Bylaws and at the request of the Board; or (iii) the holders of a
majority of the Company's stock who at such time are entitled to vote for the
election of directors.

In the event any payments are made to an officer or director by way of
indemnity, other than by court order, action of the shareholders or by an
insurance carrier, the Company must notify its shareholders of such payment and
all relevant details in a timely manner and in no event later than 15 months
after the date of such payment.

II-1
<PAGE> 54

The provisions of the Company's Bylaws on indemnification are consistent in
all material respects with the laws of the State of Georgia, which authorize
indemnification of corporate officers and directors.

The Company's directors and officers are insured against losses arising
from any claim against them as such for wrongful acts or omissions, subject to
certain limitations.

The Underwriting Agreement (filed as Exhibit 1 hereto) also contains
certain provisions pursuant to which certain officers, directors and controlling
persons of the Company may be entitled to be indemnified by the underwriters
named therein.

ITEM 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement*
4(a) -- Amended and Restated Articles of Incorporation of the
Company, filed as Exhibit 3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996,
which exhibit is by this reference incorporated herein.
4(b) -- Amended and Restated By-Laws of the Company, filed as
Exhibit 3(b) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, which exhibit is by this
reference incorporated herein.
5 -- Opinion of Kilpatrick Stockton LLP.
23(a) -- Consent of Ernst & Young LLP.
23(b) -- Consent of Kilpatrick Stockton LLP (included in Exhibit 5).
24 -- Power of Attorney (set forth on signature page).
</TABLE>

- ---------------

* To be filed by amendment.

ITEM 17. UNDERTAKINGS

The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The Company hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.

II-2
<PAGE> 55

(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

II-3
<PAGE> 56

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on March 31, 1998.

AARON RENTS, INC.

By:/s/ R. CHARLES LOUDERMILK, SR.
------------------------------------
R. Charles Loudermilk, Sr.
Chief Executive Officer and
Chairman of the Board

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints R. Charles Loudermilk, Sr. and Keith C. Groen,
jointly and severally, his attorneys-in-fact, each with power of substitution
for him in any and all capacities, to sign any amendments to this Registration
Statement, and to file the same, with the exhibits thereto, and other documents
in connection therewith, with the Commission hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 31st day of March, 1998.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ R. CHARLES LOUDERMILK, SR. Chief Executive Officer and Chairman of the
- ----------------------------------------------------- Board of Directors(Principal Executive
R. Charles Loudermilk, Sr. Officer)

/s/ ROBERT C. LOUDERMILK, JR. President, Chief Operating Officer and
- ----------------------------------------------------- Director
Robert C. Loudermilk, Jr.

/s/ GILBERT L. DANIELSON Vice President, Finance and Director
- ----------------------------------------------------- (Principal Financial Officer)
Gilbert L. Danielson

/s/ ROBERT P. SINCLAIR, JR. Controller
- ----------------------------------------------------- (Principal Accounting Officer)
Robert P. Sinclair, Jr.

Director
- -----------------------------------------------------
Ronald W. Allen

Director
- -----------------------------------------------------
Leo Benatar

/s/ EARL DOLIVE Director
- -----------------------------------------------------
Earl Dolive

Director
- -----------------------------------------------------
J. Rex Fuqua
</TABLE>

II-4
<PAGE> 57

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ KEITH C. GROEN Vice President, Legal and Director
- -----------------------------------------------------
Keith C. Groen

Director
- -----------------------------------------------------
Ingrid Saunders Jones

/s/ LTG M. COLLIER ROSS Director
- -----------------------------------------------------
LTG M. Collier Ross

Director
- -----------------------------------------------------
R.K. Sehgal
</TABLE>

II-5
<PAGE> 58

EXHIBIT LIST

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
- ------- ---------------------- ----
<C> <C> <S> <C>
1 -- Form of Underwriting Agreement*.............................
4(a) -- Amended and Restated Articles of Incorporation of the
Company, filed as Exhibit 3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996
which exhibit is by this reference incorporated herein......
4(b) -- Amended and Restated By-Laws of the Company, filed as
Exhibit 3(b) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, which exhibit is by this
reference incorporated herein...............................
5 -- Opinion of Kilpatrick Stockton LLP..........................
23(a) -- Consent of Ernst & Young LLP................................
23(b) -- Consent of Kilpatrick Stockton LLP (included in Exhibit
5)..........................................................
24 -- Power of Attorney (set forth on signature page).............
</TABLE>

- ---------------

* To be filed by amendment.

II-6

<PAGE> 1
EXHIBIT 5

ATTORNEYS AT LAW
Suite 2800
1100 Peachtree Street
Atlanta, Georgia 30309-4530
Telephone: 404.815.6500
Facsimile: 404.815.6555

March 31, 1998 E-MAIL: [email protected]
DIRECT DIAL: 404.815.6500

Aaron Rents, Inc.
1100 Aaron Building
309 E. Paces Ferry Rd.
Atlanta, Georgia 30305-2377

Re: Registration Statement on Form S-3

Gentlemen:

At your request, we have examined the Registration Statement
to be filed by Aaron Rents, Inc. (the "Company"), a Georgia corporation, with
the Securities and Exchange Commission on March 31, 1998 with respect to the
registration under the Securities Act of 1933, as amended, of 2,875,000 shares
of Common Stock, $0.50 par value per share, of the Company (the "Common Stock"),
including 2,100,000 shares to be sold by the Company and 400,000 shares to be
sold by a selling shareholder named in the Registration Statement (the "Selling
Shareholder") to the underwriters named in the Registration Statement (the
"Underwriters"), for resale by them to the public, together with an additional
375,000 shares of Common Stock subject to an over-allotment option granted to
the Underwriters by the Company.

As your counsel, and in connection with the preparation of the
Registration Statement, we have examined the originals or copies of such
documents, corporate records, certificates of public officials, officers of the
Company and other instruments relating to the authorization and issuance of the
Common Stock as we deemed relevant or necessary for the opinions herein
expressed. Upon the basis of the foregoing, it is our opinion that:

1. The shares of Common Stock to be sold by the Selling
Shareholder as described in the Registration Statement are legally issued, fully
paid and nonassessable.

2. The shares of Common Stock to be issued and sold by the
Company to the Underwriters will be, upon issuance, sale and delivery in the
manner and under the terms

<PAGE> 2

March 31, 1998
Page 2

and conditions described in the Registration Statement, legally issued, fully
paid and nonassessable.

3. Upon exercise by the Underwriters of their option to
purchase up to an aggregate of 375,000 additional shares of Common Stock from
the Company to cover over-allotments, and upon issuance, sale and delivery of
such shares in the manner and under the terms and conditions described in the
Registration Statement, such shares will be legally issued, fully paid and
nonassessable.

We hereby consent to the use of this opinion as an exhibit to
the Registration Statement and further consent to the use of our name wherever
appearing in the Registration Statement, including the Prospectus constituting a
part thereof, and any amendments thereto.

Yours truly,

KILPATRICK STOCKTON LLP

By: /s/ Michael H. Trotter
------------------------------------
Michael H. Trotter, a Partner

<PAGE> 1

EXHIBIT 23A -- CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated March 23, 1998, in the Registration Statement on
Form S-3 and related Prospectus of Aaron Rents, Inc. dated March 31, 1998.

/s/ ERNST & YOUNG LLP

Atlanta, Georgia
March 31, 1998