HERTZ CORP, S-1/A, 1997-04-10

HERTZ CORP
S-1/A, 1997-04-10
AUTO RENTAL & LEASING (NO DRIVERS)

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 10, 1997

REGISTRATION NO. 333-22517
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------

AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------

THE HERTZ CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE
(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION)
7514
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
13-1938568
(I.R.S. EMPLOYER
IDENTIFICATION NO.)

225 BRAE BOULEVARD
PARK RIDGE, NEW JERSEY 07656-0713
(201) 307-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

WILLIAM SIDER
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
225 BRAE BOULEVARD
PARK RIDGE, NEW JERSEY 07656-0713
(201) 307-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)

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

COPIES TO:

<TABLE>
<S> <C>
DAVID J. SORKIN, ESQ. ARBIE R. THALACKER, ESQ.
SIMPSON THACHER & BARTLETT SHEARMAN & STERLING
425 LEXINGTON AVENUE 599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017-3954 NEW YORK, NEW YORK 10022-6069
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.

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, as amended (the "Securities Act"), 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, please 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. [ ]

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 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.

PROSPECTUS
Subject to Completion

Dated April 10, 1997

17,400,000 Shares

HERTZ LOGO
THE HERTZ CORPORATION
Class A Common Stock
(par value $0.01 per share)

All of the Class A Common Stock offered hereby is being offered by The Hertz
Corporation (the "Company"), which is a wholly-owned subsidiary of Ford Motor
Company ("Ford"). Upon completion of the Offerings, Ford will beneficially own
55.4% of the outstanding Class A Common Stock (51.9% if the Underwriters'
over-allotment options are exercised in full) and 100% of the outstanding shares
of Class B Common Stock of the Company (which has five votes per share), a class
of common stock separate from the Class A Common Stock (which has one vote per
share). Following the Offerings, the outstanding shares of Class A Common Stock
to be offered in the Offerings will represent 4.7% of the combined voting power
of all classes of voting stock and 16.6% of the economic interest (or rights of
holders of common equity to participate in distributions in respect of the
common equity) in the Company (5.4% and 18.6%, respectively, if the
Underwriters' over-allotment options are exercised in full). The remainder of
the voting power and economic interest in the Company will be beneficially held
by Ford. See "Risk Factors -- Control by and Relationship with Ford" and
"Description of Capital Stock".

Of the 17,400,000 shares of Class A Common Stock offered hereby, 15,660,000
shares are being offered initially in the United States and Canada by the U.S.
Underwriters (the "U.S. Underwriters") and 1,740,000 shares are being offered
initially outside the United States and Canada in a concurrent offering by the
International Managers (the "International Managers" and, together with the U.S.
Underwriters, the "Underwriters"). See "Underwriting".

Prior to the Offerings, there has been no public market for the Class A Common
Stock. It is currently anticipated that the initial public offering price will
be between $21.00 and $24.00 per share. See "Underwriting" for information
relating to the factors to be considered in determining the initial public
offering price of the Class A Common Stock. The Class A Common Stock has been
approved for listing on the New York Stock Exchange, upon notice of issuance,
under the symbol "HRZ".

Shares of Class A Common Stock are being reserved for sale to certain employees
of the Company and its affiliates at the initial public offering price. See
"Underwriting". Such employees are expected to purchase, in the aggregate, not
more than 10% of the Class A Common Stock offered in the Offerings.

SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR CERTAIN INFORMATION 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>
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- --------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- --------------------------------------------------------------------------------------------------------------------
Total (3) $ $ $
- --------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and Ford have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended. See "Underwriting".
(2) Before deducting expenses of the Offerings payable by the Company estimated
at $ , net of expenses of $ to be reimbursed by the Underwriters.
(3) The Company has granted the Underwriters options to purchase up to an
additional 2,610,000 shares of Class A Common Stock, on the same terms as set
forth above, solely to cover over-allotments, if any. If such options are
exercised in full, the total Price to Public, Underwriting Discount and Proceeds
to Company will be $ , $ and $ , respectively. See
"Underwriting".
GLOBAL COORDINATOR

J.P. MORGAN & CO.

The shares of Class A Common Stock being offered by this Prospectus are being
offered by the U.S. Underwriters, subject to prior sale, when, as and if
delivered to and accepted by the U.S. Underwriters, and subject to approval of
certain legal matters by Shearman & Sterling, counsel for the Underwriters. It
is expected that delivery of the shares of Class A Common Stock will be made
against payment therefor on or about , 1997 at the offices of
J.P. Morgan Securities Inc., 60 Wall Street, New York, New York.

J.P. MORGAN & CO. GOLDMAN, SACHS & CO.
LEHMAN BROTHERS SALOMON BROTHERS INC SMITH BARNEY INC.

, 1997
<PAGE> 3

CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERINGS,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE CLASS A COMMON STOCK IN THE OPEN
MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".

No person has been authorized to give any information or make any
representations not contained in this Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company or any Underwriter. This Prospectus does not constitute an offer
to sell, or a solicitation of an offer to buy, the Class A Common Stock in any
jurisdiction 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 there has
been no change in the affairs of the Company subsequent to the date hereof.

No action has been or will be taken in any jurisdiction by the Company or any
Underwriter that would permit a public offering of the Class A Common Stock or
possession or distribution of this Prospectus in any jurisdiction where action
for that purpose is required, other than in the United States. Persons into
whose possession this Prospectus comes are required by the Company and the
Underwriters to inform themselves about and to observe any restrictions as to
the offering of the Class A Common Stock and the distribution of this
Prospectus.

TABLE OF CONTENTS

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Page
<S> <C>
Prospectus Summary.................. 4
Recent Developments................. 12
Risk Factors........................ 13
Special Note Regarding
Forward-Looking Statements........ 19
The Company......................... 20
Use of Proceeds..................... 22
Dividend Policy..................... 22
Capitalization...................... 23
Selected Consolidated Financial Data
of the Company.................... 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 26
</TABLE>

<TABLE>
<CAPTION>
Page
<S> <C>
Business............................ 34
Relationship with Ford.............. 58
Management.......................... 63
Ownership of Common Stock........... 74
Description of Capital Stock........ 74
Shares Available for Future Sale.... 79
Description of Certain
Indebtedness...................... 81
Certain United States Tax
Consequences to Non-United States
Holders........................... 83
Underwriting........................ 85
Legal Matters....................... 88
Experts............................. 88
Available Information............... 88
Index to Financial Statements....... F-1
</TABLE>

"Hertz", Hertz Logo, "HERC", "The Source", "H.I.R.E.", "Hertz #1 Club Gold",
"The Hertz #1 Club", and "Hertz NeverLost" are trademarks or service marks of
the Company. All other trademarks, service marks or brand names appearing in
this Prospectus are the property of their respective holders.

The Company intends to furnish its stockholders with annual reports containing
consolidated financial statements certified by an independent public accounting
firm.

3
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Unless the context otherwise requires,
(i) the "Company" means The Hertz Corporation and its consolidated subsidiaries,
(ii) "Ford" means Ford Motor Company and its consolidated subsidiaries (other
than the Company), (iii) "cars" mean cars and light trucks and (iv) the
information contained in this Prospectus assumes that the Class A Common Stock
offered hereby will be sold in the Offerings at $22.50 per share (the midpoint
of the range set forth on the cover of this Prospectus) and that the
Underwriters' over-allotment options are not exercised. Unless otherwise defined
herein, capitalized terms used in this summary have the respective meanings
ascribed to them elsewhere in this Prospectus.

THE COMPANY

The Company and its affiliates and independent licensees operate what the
Company believes is the largest car rental business in the world based upon
revenues and volume of rental transactions and the largest industrial and
construction equipment rental business in the United States based upon revenues.
The Company's "Hertz" brand name is recognized worldwide as a leader in quality
rental and leasing services and products. The Company, together with its
affiliates and independent licensees, rents and leases cars, rents industrial
and construction equipment and operates its other businesses from approximately
5,500 locations throughout the United States and in approximately 140 foreign
countries and jurisdictions. For the year ended December 31, 1996, the Company
generated record revenues, income before taxes and net income of $3.7 billion,
$256.5 million and $158.6 million, respectively. The Company and its
predecessors have been profitable in every year since 1952, when one of the
Company's predecessors first became a public company.

Car Rental

The Company believes it maintains the largest network of company-owned,
on-airport car rental locations both in the United States and worldwide,
enabling the Company to provide consistent quality, pricing and service
worldwide. The Company derives approximately 77% of its car rental revenues from
on-airport locations. According to information disclosed by the largest 153 U.S.
airports, the Company maintained the leading on-airport car rental market share
at such airports during 1996 of over 30% in terms of revenues and has maintained
market share at approximately this level during each of the last five years.
This market has grown at a compounded annual rate of approximately 11% since
1992 to over $6 billion in revenues in 1996, based on information provided by
such airports. The Company also believes it maintained the leading on-airport
car rental market share in Europe during 1996 of approximately 30% in terms of
revenues. The Company has recently begun to provide replacement car rental
services from off-airport locations under the H.I.R.E. brand name ("Hertz
Insurance Replacement Entity"). The Company estimates that total 1996 revenues
for the car rental industry in the United States were in excess of $14 billion,
and that total 1995 revenues for the car rental industry in Europe were in
excess of $5 billion.

During 1996, approximately 51% of the Company's worldwide car rental revenues
were generated from business travelers and approximately 49% from leisure
travelers. The Company has a worldwide marketing and sales organization of over
800 people focused on both commercial accounts/group sales and the travel
industry, including travel agents, as well as a comprehensive program of retail
and trade advertising, direct mail and other targeted marketing. At December 31,
1996, the Company's business customers included 357 of the Fortune 500
companies. The Company was named a primary supplier to 149 of the 347 Fortune
500 companies who named a primary/secondary supplier. The Company has received
numerous awards and designations around the world for its car rental business
from independent third parties.

rental transactions in 1996. Through its many travel industry relationships with
airlines and hotels, the Company has targeted the most frequent travelers to
become Hertz #1 Club Gold members.

The Company's worldwide car rental operations and certain other activities
generated $3.3 billion in revenue and $165.5 million in income before taxes
during 1996.

Industrial and Construction Equipment Rental

The Company, through its wholly-owned subsidiary, Hertz Equipment Rental
Corporation ("HERC"), believes that it maintains the leading market share in the
U.S. industrial and construction equipment rental market. HERC rents a broad
range of earth moving equipment, materials handling equipment, aerial and
electrical equipment, air compressors, compaction equipment and
construction-related trucks through a network of 120 branch locations. The
Company estimates that 1995 annual revenues for the U.S. equipment rental market
were $15 billion. This market is fragmented with over 7,000 participants and
12,000 locations. According to the Rental Equipment Register, an industry
publication, only 23 of the top 100 equipment rental companies in the United
States had rental revenues in excess of $25 million in 1995.

HERC maintains an established national accounts program with over 1,700
customers who generated 43% of HERC's revenues in 1996. The Company believes
that HERC's fleet is the largest and most modern of its kind in the United
States. As of December 31, 1996, HERC maintained a fleet with an original
investment cost of approximately $908 million and a weighted average age of 19.7
months. HERC generated $392.3 million in revenue and $91.0 million in income
before taxes during 1996.

Strategic Information Systems

Centralized control of major business processes, achieved through the use of the
Company's strategic systems technology, provides the disciplined environment
which enables the Company to deliver consistent quality services at its car
rental and equipment rental operations. The Company maintains real-time
communications with its many locations by means of what it believes is the
largest private data network in the industry. Key components of the Company's
strategic systems include: (i) a global reservations system, which operates
through real-time, on-line centers on five continents, (ii) a yield management
system, which is designed to optimize revenue through controlling,
simultaneously, the availability of various rates as well as the availability of
cars, (iii) a competitive rate detection system, which monitors rate changes and
provides "scouting" routines to identify future rates and (iv) a cost allocation
model, which provides contribution data by location, business segment, car and
equipment category and customer account.

Other

Other activities of the Company include self-insurance operations for both its
car rental and industrial and construction equipment rental businesses, car
leasing operations in certain international markets, the sales of its used cars
and equipment, third party claim management services and telecommunications
services in the United States.
5
<PAGE> 6

BUSINESS STRATEGY

The Company believes that it is well positioned to capitalize upon the growth
opportunities available in both the global car rental and industrial and
construction equipment rental markets. The Company's strategy for continued
growth is to:

Capitalize on the opportunities presented by the changing ownership in the
domestic car rental industry

For the past several years, the car rental industry has experienced an
environment characterized by low price increases that have not kept pace with
rising fleet costs, resulting in significant operating losses for many
competitors in the industry. Management believes that there will be an increase
in industry profitability, in part as a consequence of the recent change in
ownership of many domestic car rental companies. Management intends to
capitalize on this favorable industry environment by selectively increasing
prices and continuing to improve its low cost structure relative to its
competitors.

Leverage the "Hertz" brand name, recognized worldwide, in existing and new
business ventures

The Company believes that the "Hertz" brand name provides an ideal platform to
expand into new ventures. For example, the Company has re-entered the retail
used car sales market. Once the largest retailer of used cars in the United
States, the Company intends to use its recognized brand name and reputation to
offer quality used cars. Key elements of the Company's retail used car sales
strategy include free initial warranty, no-haggle pricing and providing a
complete maintenance history for each car. The Company has 41 used car sales
locations from coast to coast, substantially all of which were profitable in
1996, with a substantial expansion underway for 1997. In 1997, the Company will
pilot a new retail used car sales concept under the "Hertz" brand name offering
a larger selection of used cars.

The Company has also entered the estimated $3.5 billion replacement/local car
rental segment in the United States under the H.I.R.E. brand name and in Europe
under the "Hertz" brand name. The H.I.R.E. business unit currently operates at
50 locations in six states with expansion underway. The Company expects that
H.I.R.E. generally will hold its cars for 18 to 24 months, compared with 5 to 12
months for the Company's domestic car rental business, resulting in lower
monthly holding costs. In Europe, the Company currently operates in the
replacement/local car rental market through its existing suburban car rental
locations. In addition, the Company intends to expand its operations in the
local truck rental market and car leasing business.

Improve operating efficiency and enhance customer service through the continued
use and refinement of strategic information systems

The Company has invested over $600 million during the past five years in
strategic systems and intends to continue to invest in advanced technology. The
Company estimates that this investment has resulted in a reduction in cost
(excluding depreciation of rental cars and related interest expense) per car
rental transaction of approximately 11.3% since 1991. The Company's centralized
reservations system is integrated with its fleet management information systems,
resulting in improved vehicle utilization. This system is being upgraded to a
state of the art, client-server based reservations system. In addition, the
Company's yield management system employs techniques to optimize,
simultaneously, rental rates and car availability. The Company is in the process
of consolidating various European reservations centers into a single facility in
Ireland, resulting in anticipated cost savings while providing uniformly high
quality service. In its industrial and construction equipment rental business,
the use of its strategic information systems enables the Company to monitor
carefully the utilization of equipment by specific operation. Through continued
investments in these systems, the Company believes it will expand its market
share, increase its profitability and sustain its leadership position with
respect to the quality and breadth of services provided to its customers.

6
<PAGE> 7

Maintain consistent quality, pricing and service worldwide through continued
ownership of locations

The Company believes it maintains the largest network of company-owned car
rental locations both in the United States and in Europe. Because of its
extensive ownership base, the Company is capable of capitalizing worldwide on
business from global tourist and travel organizations and multinational
corporations. The Company believes that its extensive worldwide ownership of its
operations contributes to the consistency of its high-quality service, strict
cost control, fleet utilization, yield management, competitive pricing and
ability to offer one-way rentals through its Rent It Here-Leave It There
program. Under appropriate circumstances, the Company also intends to expand
through joint ventures in emerging markets.

Expand the industrial and construction equipment rental business both in the
United States and abroad

The Company believes that HERC, as the largest nationwide provider of industrial
and construction equipment rental services in the United States, is well
positioned to expand through continued growth of its fleet and the opening and
acquisition of new locations. HERC intends to continue to emphasize profitable
expansion through: (i) continuing to focus on low equipment costs through its
status as one of the largest purchasers of new equipment in the United States,
(ii) improving productivity through use of the Company's strategic information
systems, (iii) expanding its used equipment sales operations available for
buyers seeking to purchase well-maintained, late model equipment at competitive
prices, (iv) diversifying its customer base across industry sectors and (v)
capitalizing on the trend of equipment users toward outsourcing to a single
nationwide provider. In addition, HERC intends to expand in international
markets over the long term by applying its successful U.S. operating philosophy.

Achieve superior performance by direct linkage of management compensation to
operating unit performance

All worldwide car rental and equipment rental operating units are managed under
an individual "profit center" philosophy, whereby profit and loss statements are
generated monthly by city. Management incentives are based primarily upon the
financial results of the specific operation managed. Additional consideration is
given for total operating unit and consolidated corporate financial performance.
This "profit center" management is supported and monitored by division and
corporate level management equipped with sophisticated management information

systems which allow detailed review of each operation and business discipline.

7
<PAGE> 8

THE OFFERINGS

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CLASS A COMMON STOCK OFFERED(1):
United States Offering.................................... 15,660,000 shares
International Offering.................................... 1,740,000 shares
Total Offerings........................................ 17,400,000 shares
COMMON STOCK OUTSTANDING AFTER THE OFFERINGS(1)(2):
Class A Common Stock...................................... 39,000,000 shares
Class B Common Stock...................................... 65,956,000 shares
Total Common Stock Outstanding......................... 104,956,000 shares
</TABLE>

USE OF PROCEEDS................. The proceeds to the Company from the offering
of the Class A Common Stock in the United
States and Canada (the "U.S. Offering") and
the concurrent offering outside the United
States and Canada (the "International
Offering" and, together with the U.S.
Offering, the "Offerings"), after the
deduction of underwriting discounts and
expenses payable by the Company, are
estimated to be $370 million ($425 million if
the Underwriters' over-allotment options are
exercised in full), substantially all of
which is expected to be used to reduce
short-term indebtedness of the Company. See
"Use of Proceeds".

DIVIDENDS; VOTING RIGHTS;
CONVERSION...................... The holders of Class A Common Stock and Class
B Common Stock (collectively, "Common Stock")
share ratably on a per share basis in all
dividends and other distributions declared by
the Board of Directors; however, the holders
of Class A Common Stock are entitled to one
vote per share and the holders of Class B
Common Stock are entitled to five votes per
share. See "Description of Capital Stock --
Common Stock -- Voting Rights". Under certain
circumstances, shares of Class B Common Stock
convert or are convertible into an equivalent
number of shares of Class A Common Stock. See
"Relationship with Ford" and "Description of
Capital Stock -- Common Stock -- Conversion".

Certain debt instruments to which the Company
is a party restrict the Company's ability to
pay dividends. See "Dividend Policy".

CONTROLLING STOCKHOLDER......... For information regarding the Company's
controlling stockholder, see "Relationship
with Ford" below.

RISK FACTORS.................... For a discussion of certain considerations
relevant to an investment in the Class A
Common Stock, see "Risk Factors".

NYSE SYMBOL FOR CLASS A COMMON
STOCK......................... HRZ
- -------------------------
(1) Excludes up to 2,349,000 shares and 261,000 shares subject to over-allotment
options granted by the Company to the U.S. Underwriters and the International
Underwriters, respectively. See "Underwriting".

(2) Excludes 747,845 shares of Class A Common Stock reserved for issuance
pursuant to an employee benefit plan. See "Management -- Long-Term Equity
Compensation Plan".

8
<PAGE> 9

DIVIDEND POLICY

The Company's Board of Directors currently intends to declare quarterly
dividends on both the Class A Common Stock and Class B Common Stock. It is
expected that the first quarterly dividend payment will be $0.05 per share (a
rate of $0.20 annually), with the initial dividend to be declared and paid in
the third quarter of 1997. The declaration and payment of dividends by the
Company are subject to the discretion of its Board of Directors. Any
determination as to the payment of dividends will depend upon, among other
things, general business conditions, the Company's financial results,
contractual, legal and regulatory restrictions regarding the payment of
dividends by the Company's subsidiaries, the credit ratings of the Company and
such other factors as the Board of Directors may consider to be relevant.
Certain debt instruments to which the Company is a party restrict the Company's
ability to pay dividends. See "Dividend Policy".

The Company paid no cash dividends to Ford during 1994 and 1996 and paid a cash
dividend on its common stock to Ford of $25 million in 1995. On February 27,
1997, the Company paid a dividend of $460 million on its common stock to Ford in
the form of an intercompany note, which was fully repaid by March 10, 1997. The
dividends historically paid by the Company are not indicative of its future
dividend policy.

RELATIONSHIP WITH FORD

Immediately prior to the Offerings, Ford and a Ford subsidiary will be the only
stockholders of the Company. Upon completion of the Offerings, Ford will
beneficially own 55.4% of the outstanding Class A Common Stock (51.9% if the
Underwriters' over-allotment options are exercised in full) and 100% of the
outstanding Class B Common Stock of the Company (which Class B Common Stock is
entitled to five votes per share on any matter submitted to a vote of the
Company's stockholders). Upon completion of the Offerings, the common stock
beneficially owned by Ford will represent in the aggregate 95.3% of the combined
voting power of all of the Company's outstanding common stock (or 94.6% if the
Underwriters' over-allotment options are exercised in full). Accordingly, Ford
will be able to direct the election of all of the members of the Company's Board
of Directors and exercise a controlling influence over the business and affairs
of the Company. Ford has advised the Company that its current intent is to
continue to hold all of the Common Stock beneficially owned by it following the
Offerings. However, Ford is not subject to any contractual obligation to retain
its controlling interest, except that the Company and Ford have agreed, subject
to certain exceptions, not to sell or otherwise dispose of any shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of J.P. Morgan Securities Inc. See "Risk Factors --
Control by and Relationship with Ford", "-- Possible Future Sales of Common
Stock by Ford", "Relationship with Ford" and "Underwriting". From time to time
the Company and Ford have entered into, and can be expected to continue to enter
into, certain agreements and business transactions in the ordinary course of
their respective businesses, and the Company's Restated Certificate of
Incorporation includes certain provisions relating to the Company's relationship
with Ford. See "Relationship with Ford" and "Description of Capital Stock --
Certain Certificate of Incorporation and By-law Provisions -- Corporate
Opportunities".
9
<PAGE> 10

SUMMARY CONSOLIDATED FINANCIAL DATA OF THE COMPANY

The summary consolidated income statement data for each of the years in the
three-year period ended December 31, 1996, and consolidated balance sheet data
as of December 31, 1996 and 1995 presented below were derived from the audited
consolidated financial statements of the Company and the related notes thereto
included in this Prospectus. The summary consolidated income statement data for
each of the years in the two-year period ended December 31, 1993 and
consolidated balance sheet data as of December 31, 1994, 1993 and 1992 presented
below were derived from audited consolidated financial statements of the Company
and the related notes thereto not included in this Prospectus. The financial
data presented below and the related notes thereto should be read in conjunction
with the consolidated financial statements of the Company and the related notes
thereto included in this Prospectus.

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YEARS ENDED DECEMBER 31
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Dollars in millions, except per share data
INCOME STATEMENT DATA
Revenues
Car rental.................................................. $3,161.6 $2,911.7 $2,581.2 $2,177.5 $2,124.1
Industrial and construction equipment rental................ 392.3 332.3 263.1 215.8 208.8
Car leasing................................................. 35.4 35.6 231.4 209.3 241.0
Other (a)................................................... 79.0 121.0 218.7 252.2 242.3
-------- -------- -------- -------- --------
Total revenues.......................................... 3,668.3 3,400.6 3,294.4 2,854.8 2,816.2
-------- -------- -------- -------- --------
Expenses
Direct operating............................................ 1,795.1 1,724.8 1,766.2 1,647.1 1,627.5
Depreciation of revenue earning equipment (b)............... 892.7 803.9 702.7 523.9 496.8
Selling, general and administrative......................... 425.2 392.5 385.5 336.0 353.3
Interest, net of interest income of $10.4, $16.8, $7.2,
$11.3 and $3.6............................................ 298.8 307.1 277.2 245.4 306.9
-------- -------- -------- -------- --------
Total expenses.......................................... 3,411.8 3,228.3 3,131.6 2,752.4 2,784.5
-------- -------- -------- -------- --------
Income before income taxes.................................. 256.5 172.3 162.8 102.4 31.7
Provision for taxes on income (c)........................... 97.9 67.1 71.7 49.0 21.7
-------- -------- -------- -------- --------
Income before cumulative effect of change in accounting
principle................................................. 158.6 105.2 91.1 53.4 10.0
Cumulative effect on prior years of change in method of
accounting for postretirement benefits (d)................ -- -- -- -- (4.3)
-------- -------- -------- -------- --------
Net income.................................................. $ 158.6 $ 105.2 $ 91.1 $ 53.4 $ 5.7
======== ======== ======== ======== ========
Pro forma net income per share (e).......................... $ 1.51
========
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------
AT DECEMBER 31
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Dollars in millions
BALANCE SHEET DATA
Revenue earning equipment
Cars.................................................. $4,318.3 $3,627.2 $3,854.4 $2,417.0 $1,871.2
Other equipment....................................... 717.4 543.0 406.0 285.5 251.4
Total assets............................................ 7,649.2 6,656.6 6,520.8 4,688.5 4,222.0
Total debt.............................................. 5,091.8 4,297.5 4,413.9 2,940.5 2,549.9
Stockholders' equity.................................... 989.4 836.3 735.9 616.7 579.5
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------
YEARS ENDED OR AT DECEMBER 31
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA
Car rental and other operations:
Number of owned and licensee locations................ 5,435 5,480 5,498 5,594 5,687
Number of owned locations............................. 2,208 2,171 2,254 2,369 2,487
Peak number of owned and licensee cars operated during
period.............................................. 389,000 376,800 378,700 332,500 323,700
Average number of owned cars operated during period... 283,900 263,600 276,100 236,500 230,300
Number of transactions of owned car rental operations
during period (in thousands)........................ 20,110 18,799 17,811 15,623 14,887
Average revenue per transaction of owned car rental
operations during period (in whole dollars)......... $ 157 $ 155 $ 145 $ 139 $ 143
Equipment rental operations:
Number of locations................................... 120 104 95 85 89
Average cost of rental equipment operated during
period (in millions)................................ $ 822.9 $ 650.4 $ 504.1 $ 428.3 $ 423.2
</TABLE>

10
<PAGE> 11

- -------------------------
(a) Includes fees from licensees (other than expense reimbursement from
licensees), revenue from claim management and telecommunications services and,
prior to 1995, revenues from a car dealership operation in Europe.

(b) For 1996, 1995, 1994, 1993 and 1992 includes net credits of $23.2 million,
$6.4 million, $23.0 million, $28.1 million and $16.9 million, respectively,
primarily from net proceeds received in excess of book value on the disposal of
revenue earning equipment. Effective July 1, 1994, certain estimated useful
lives being used to compute the provision for depreciation of revenue earning
equipment used in the industrial and construction equipment rental business were
increased to reflect changes in the estimated residual values to be realized
upon disposal of the equipment. As a result of this change, depreciation of
revenue earning equipment for the year 1995 and the year 1994 decreased by $12.0
million and $9.6 million, respectively.

(c) Includes credits of $13.9 million, $2.0 million and $9.8 million for the
years 1996, 1993 and 1992, respectively, resulting from adjustments made to tax
accruals in connection with tax audit evaluations and the effects of prior
years' tax-sharing arrangements between the Company and its former parent
companies, UAL Corporation ("UAL") and RCA Corporation ("RCA"). For the year
1995, includes $6.5 million of credits relating to foreign taxes which were
offset against U.S. income tax liabilities. For the year 1993, includes a $1.1
million charge relating to the increase in net deferred tax liabilities as of
January 1, 1993 due to changes in the tax laws enacted in August 1993.

(d) Effective January 1, 1992, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions, which requires that postretirement
health care and other non-pension benefits be accrued during the years the
employee renders the necessary service.

(e) Based on 104,956,000 shares outstanding after the Offerings, which excludes
shares subject to over-allotment options granted by the Company to the
Underwriters and shares reserved for issuance pursuant to an employee benefit
plan. Due to the changes in the Company's capital structure, historical share
and per share data will not be comparable to, or meaningful in the context of,
future periods. See "Capitalization".
11
<PAGE> 12

RECENT DEVELOPMENTS

Set forth below are unaudited selected consolidated income statement data of the
Company for the three months ended March 31, 1997 and 1996. This information
should be read in conjunction with the consolidated financial statements of the
Company and the related notes thereto included in this Prospectus. This data is
not necessarily indicative of operating results that may be expected for the
full year.

<TABLE>
<CAPTION>
------------------
Three Months Ended
March 31
1997 1996
Dollars in millions, except per share data ------- -------
<S> <C> <C>
INCOME STATEMENT DATA
REVENUES
Car rental.................................................. $758.5 $690.7
Industrial and construction equipment rental................ 90.4 77.1
Car leasing................................................. 11.7 8.7
Other(a).................................................... 17.8 26.6
------ ------
Total revenues......................................... $878.4 $803.1
====== ======
INCOME BEFORE INCOME TAXES.................................. $ 33.9 $ 15.2
====== ======
NET INCOME.................................................. $ 19.7 $ 8.8
====== ======
PRO FORMA NET INCOME PER SHARE(B)........................... $ .19
======
</TABLE>

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

(a) Includes fees from licensees (other than expense reimbursement from
licensees) and revenue from claim management and telecommunications services.

(b) Based on 104,956,000 shares outstanding after the Offerings, which excludes
shares subject to over-allotment options granted by the Company to the
Underwriters and shares reserved for issuance pursuant to an employee benefit
plan. Due to the changes in the Company's capital structure, historical share
and per share data will not be comparable to, or meaningful in the context of,
future periods. See "Capitalization".

The Company achieved record revenues of $878.4 million in the first quarter of
1997, which increased by 9.4% from $803.1 million in the first quarter of 1996.

Revenues from car rental operations of $758.5 million in the first quarter of
1997 increased by 9.8% from $690.7 million in the first quarter of 1996. This
increase resulted primarily from an increase in the number of transactions and
revenue per transaction principally in the United States.

Revenues from industrial and construction equipment rental of $90.4 million in
the first quarter of 1997 increased by 17.3% from $77.1 million in the first
quarter of 1996, primarily due to an increase in volume resulting from the
opening of new locations and increased activity in industrial related markets.

Revenues from all other sources of $29.5 million in the first quarter of 1997
decreased by 16.4% from $35.3 million in the first quarter of 1996, primarily
due to lower revenues in claim administration service operations, a large part
of which was sold as of February 29, 1996. This decrease was partly offset by
increased revenues from car leasing operations, primarily due to an acquisition
made in June 1996 of a foreign licensee operation.

The Company achieved record net income of $19.7 million in the first quarter of
1997 representing an increase of 123.9% from $8.8 million in the first quarter
of 1996. This increase was primarily due to higher revenues in the U.S. car
rental operations and a $1.5 million ($0.014 per share) decrease in depreciation
expense, net of taxes, for the industrial and construction equipment rental
business for changes made effective January 1, 1997 to the estimated useful
lives being used to compute depreciation of revenue earning equipment (see Note
7 to the Notes to the Company's consolidated financial statements included in
this Prospectus). This increase in net income was partly offset by (i) a charge
of $0.8 million ($0.008 per share) for the interest expense incurred, net of
taxes, relating to funding the $460 million dividend paid by the Company on its
common stock to Ford in the first quarter of 1997 and other items relating to
the Offerings, (ii) increased costs in the industrial and construction equipment
rental business relating to the additional depreciation for equipment purchased
and other expenses incurred to service new industrial customers and (iii) losses
incurred in a foreign car rental and leasing operation which was acquired from a
licensee in June 1996.

12
<PAGE> 13

RISK FACTORS

The following factors should be carefully considered, together with the
information provided elsewhere in this Prospectus, in evaluating an investment
in the Class A Common Stock offered hereby.

RISK OF ECONOMIC DOWNTURN

The Company's results of operations are affected by certain economic factors,
including the level of economic activity in the markets in which the Company
operates. A decline in economic activity either in the United States or in
international markets may adversely affect the Company. In the car rental
business, a decline in economic activity typically results in a decline in both
business and leisure travel, and accordingly a decline in the volume of car
rental transactions. In the equipment rental business, a decline in economic
activity typically results in a decline in activity in construction and other
businesses in which the Company's rental equipment customers operate, and
accordingly a decline in the volume of equipment rental transactions. In the
case of a decline in car and equipment rental activity, the Company may reduce
rental rates to meet competitive pressures, which could adversely affect the
Company's results of operations. A decline in economic activity also may have an
adverse effect on residual values realized on the disposition of the Company's
inventory of cars and equipment. At December 31, 1996, the Company was subject
to residual risk with respect to 17% of all cars in its worldwide car rental and
leasing operations and 100% of the equipment in its industrial and construction
equipment rental operations. In the United States, the Company expects the
percentage of its cars which will be subject to residual risk to increase. See
"Business -- Worldwide Car Rental -- Car Acquisition" and "-- Risks Related to
Decreased Acquisition or Disposition of Cars Through Repurchase Programs".

COMPETITION

The markets in which the Company operates are highly competitive. In addition,
recent changes in ownership of a number of domestic car rental companies could
further intensify competition. The Company believes that price is one of the
primary competitive factors in the car and industrial and construction equipment
rental markets. Although the Company believes that the recent ownership changes
in the industry could improve profitability, competitors of the Company, many of
which have access to substantial capital, may seek to compete aggressively on
the basis of pricing. To the extent that the Company matches competitors'
downward pricing, it could have an adverse impact on the Company's results of
operations. To the extent that the Company is not willing to match competitors'
pricing, it could also have an adverse impact on the Company's results of
operations as the Company may lose market share and major corporate accounts.

DEPENDENCE ON AIR TRAVEL INDUSTRY

The Company estimates that approximately 77% of its worldwide car rental
revenues in 1996 were generated at its airport facilities. Significant airfare
increases (e.g., due to an increase in fuel costs) could result in reduced air
travel and have a material adverse effect on the Company's results of
operations. In addition, any event that disrupts or reduces air travel patterns
for a continued period of time could have an adverse effect on the Company's
results of operations. These events could include work stoppages, airline
bankruptcies, military conflicts or terrorist incidents.

LIMITATIONS UPON LIQUIDITY, CAPITAL RAISING AND DIVIDENDS; INTEREST RATE RISK

Potential Restraints upon Liquidity

The Company satisfies its funding requirements principally through sales of
commercial paper, other short-term borrowings primarily from banks, and the
issuance of long-term debt. At December 31, 1996, commercial paper borrowings
and other short-term indebtedness were $2.5 billion. On February 5, 1997,
Standard & Poor's Ratings Group ("S&P") affirmed the Company's short-term

13
<PAGE> 14

credit rating at A-1 and reduced its long-term credit rating from A to A-. On
February 28, 1997, Moody's Investors Service ("Moody's") confirmed the Company's
short-term and long-term credit ratings at P1 and A3, respectively. A further
downgrade of the Company's credit ratings would likely result in an increase in
the Company's funding costs and could, under certain circumstances, have an
adverse impact on the Company's access to the commercial paper and other debt
markets. In the event that the Company is unable to access the commercial paper
markets or otherwise finance its borrowing needs in the public or private
markets upon acceptable terms, it would seek to satisfy its liquidity
requirements through borrowings under its credit facilities or through financing
secured by the Company's revenue earning equipment. At all times during 1996,
the Company had committed credit facilities representing credit support for 100%
of the Company's commercial paper outstanding. At December 31, 1996, the Company
had the capacity to borrow $2.4 billion under these facilities. The Company
intends to continue to maintain committed credit facilities in an amount equal
to 100% of its anticipated commercial paper outstanding from time to time.
However, there can be no assurance that these committed lines would provide
sufficient liquidity to the Company under all conditions. In such circumstances,
the Company may seek to issue equity securities, although, as discussed below,
the Company may be constrained in its ability to do so.

Impact of Relationship with Ford on Capital Raising

Because Ford may choose to maintain its ownership percentage of the Company, the
Company may be constrained in its ability to raise common or preferred equity
capital in the future. In addition, Ford may not be willing to make capital
contributions to the Company in the future. See "Relationship with Ford".

In addition, there can be no assurance that any future downgrading of Ford's
credit ratings would not have an adverse impact on the Company's credit ratings.
Therefore, for so long as Ford maintains a significant interest in the Company,
a deterioration in the financial condition of Ford could have the effect of
increasing the Company's borrowing costs and/or impairing its access to the
capital markets. To the extent the Company does not pass on its increased
borrowing costs to its customers, the Company's profitability, and potentially
its ability to raise capital, could be adversely affected. Also, while no such
agreements or policies are presently contemplated, Ford will have the ability in
the future to enter into agreements or adopt policies which limit the Company's
ability to incur debt. See "Relationship with Ford".

Limitations on Dividends and Other Activities

Certain debt instruments to which the Company is a party restrict the Company's
ability to pay dividends and engage in certain other activities. See "Dividend
Policy" and "Description of Certain Indebtedness".

Interest Rate Risk

While the Company has developed an interest rate management policy, including a
target mix for average fixed rate and floating rate indebtedness on a
consolidated basis, an increase in interest rates may have an adverse impact on
the Company's profitability. In addition, an increase in interest rates may
result in a decline in activity in construction and other businesses in which
the Company's equipment rental customers operate, and accordingly a decline in
the volume of industrial and construction equipment rental transactions. The
Company's total outstanding debt of $5.1 billion at December 31, 1996 included
interest rate sensitive debt of $2.1 billion, which had a weighted average
interest rate of 5.34%, and non-interest rate sensitive debt of $3.0 billion
(either by its original terms or through the use of interest rate derivatives)
which had a weighted average fixed interest rate of 7.35%. During the Company's
seasonal borrowing peak in 1996, outstanding interest rate sensitive debt
totalled $2.6 billion, with a weighted average interest rate of 5.21%. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

14
<PAGE> 15

INCREASED COST OF CARS

In recent years, the average price of new cars has increased. From time to time,
the automobile manufacturers have sponsored sales incentive programs which have
tended to lower the average cost of cars for fleet purchasers such as the
Company. The Company anticipates that new car prices will continue to increase,
and there can be no assurance that sales incentive programs will remain
available, that the Company will be able to effectively control the average cost
of its fleet by purchasing a mix of less expensive cars or, that because of
competitive pressures, the Company will be able to pass on the increased cost of
cars to its rental customers.

RISK OF LIMITED SUPPLY OF COMPETITIVELY PRICED CARS

The Company historically has purchased most of its cars used in its car rental
operations from Ford, and expects to continue to do so in the future. Under a
ten-year car supply agreement, commencing September 1, 1997, Ford is obligated
to strive to offer car fleet programs to the Company on terms and conditions
that are competitive with terms and conditions for the supply of cars then being
offered by other automobile manufacturers to the Company and other daily car
rental companies. See "Relationship with Ford -- Car Supply Agreement". If,
however, Ford is not able to offer competitive terms and conditions and the
Company is not able to purchase sufficient quantities of cars from other
automobile manufacturers on competitive terms and conditions, then the Company
may be forced to purchase cars at higher prices or on otherwise less competitive
terms, compared with cars purchased by its competitors. Such a situation could
adversely affect the Company's results of operations through increased car
acquisition and depreciation costs if it is unable to pass on these costs to its
customers through higher pricing.

RISK OF LOSS OF FORD ADVERTISING REIMBURSEMENT

If the Company does not purchase a fixed minimum percentage of its U.S. car
rental fleet from Ford, the Company would not be entitled to reimbursement by
Ford of certain of its advertising costs under an advertising agreement with
Ford. The level of these payments by Ford is substantial, and the loss or
interruption of these payments could adversely affect the Company's results of
operations. See "Business -- Worldwide Car Rental -- Marketing, Sales and
Advertising" and "Relationship with Ford -- Joint Advertising Agreement".

RISKS RELATED TO DECREASED ACQUISITION OR DISPOSITION OF CARS THROUGH REPURCHASE
PROGRAMS

At December 31, 1996, 83% of the cars in the Company's car rental fleet were
subject to repurchase by automobile manufacturers under guaranteed repurchase
programs. Under these programs, automobile manufacturers agree to repurchase
cars at a specified price during established repurchase periods, subject to
certain car condition and mileage requirements. These repurchase programs limit
the risk to the Company that the market value of a car at the time of its
disposition will be less than its estimated residual value at such time
("residual risk"). For this reason, cars purchased by car rental companies under
repurchase programs are sometimes referred to by industry participants as
"non-risk" cars. Conversely, those cars not purchased under repurchase programs
for which the car rental company is exposed to residual risk are sometimes
referred to as "at risk" cars. Repurchase programs enable the Company to
determine its depreciation expense in advance. Depreciation is a significant
cost factor in the Company's operations. The Company expects the percentage of
its car rental fleet subject to repurchase programs to decrease due primarily to
anticipated changes in the terms to be offered by automobile manufacturers under
repurchase programs. The Company believes such terms will encourage the Company
to purchase a larger proportion of cars not subject to repurchase programs.
Accordingly, the Company expects to bear increased risk relating to the residual
market value of its car rental fleet and car depreciation. In addition,
repurchase programs generally provide the Company with flexibility to reduce the
size of its fleet by returning cars sooner and without loss in the event of an
economic downturn. This flexibility will be reduced to the extent the percentage
of non-risk cars in the

15
<PAGE> 16

Company's car rental fleet decreases. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- General" and "Business --
Worldwide Car Rental -- Car Acquisition".

Automobile manufacturers also could modify or eliminate their repurchase
programs or change their return policies (which include condition and mileage
requirements for returned cars) to make it disadvantageous to return certain
cars. Any such modification or elimination would expose the Company to the risks
described in the preceding paragraph.

CONTROL BY AND RELATIONSHIP WITH FORD

Ford is currently the beneficial owner of all of the common stock and preferred
stock of the Company. Upon completion of the Offerings, Ford will beneficially
own 55.4% of the outstanding Class A Common Stock (51.9% if the Underwriters'
over-allotment options are exercised in full) and 100% of the outstanding Class
B Common Stock which will, in the aggregate, represent approximately 95.3% of
the combined voting power of all the outstanding Common Stock (or approximately
94.6% if the Underwriters' over-allotment options are exercised in full). For as
long as Ford continues to beneficially own shares of Common Stock representing
more than 50% of the combined voting power of the Common Stock, Ford will be
able to direct the election of all of the members of the Company's Board of
Directors and exercise a controlling influence over the business and affairs of
the Company, including any determinations with respect to mergers or other
business combinations involving the Company, the acquisition or disposition of
assets by the Company, the incurrence of indebtedness by the Company, the
issuance of any additional Common Stock or other equity securities of the
Company, the repurchase or redemption of common stock or preferred stock of the
Company and the payment of dividends with respect to the Common Stock. See "--
Limitations Upon Liquidity and Capital Raising -- Potential Restraints Upon
Liquidity". Similarly, Ford will have the power to determine matters submitted
to a vote of the Company's stockholders without the consent of the Company's
other stockholders, will have the power to prevent or cause a change in control
of the Company and could take other actions that might be favorable to Ford. In
the foregoing situations or otherwise, various conflicts of interest between the
Company and Ford could arise. Ownership interests of directors or officers of
the Company in common stock of Ford, if any, or service as a director or officer
of both the Company and Ford could create or appear to create potential
conflicts of interest when directors and officers are faced with decisions that
could have different implications for the Company and Ford. The Company's
Restated Certificate of Incorporation will include certain provisions relating
to the allocation of business opportunities that may be suitable for both the
Company and Ford. In addition, under Delaware corporate law, officers and
directors of the Company have fiduciary duties to the Company's stockholders.
See "Relationship with Ford" and "Description of Capital Stock -- Certain
Certificate of Incorporation and By-law Provisions -- Corporate Opportunities".

Beneficial ownership of at least 80% of the total voting power and value of the
outstanding Common Stock is required in order for Ford to continue to include
the Company in its consolidated group for federal income tax purposes, and
beneficial ownership of at least 80% of the total voting power and 80% of each
class of nonvoting capital stock is required in order for Ford to effect a
tax-free spin-off (as defined under "Description of Capital Stock -- Common
Stock -- Conversion") of the Company or certain other tax-free transactions.
Each member of a consolidated group for federal income tax purposes is jointly
and severally liable for the federal income tax liability of each other member
of the consolidated group. Each member of the Ford controlled group, which
includes Ford, the Company and Ford's other subsidiaries, is also jointly and
severally liable for pension and benefit funding and termination liabilities of
other group members, as well as certain benefit plan taxes. Accordingly, the
Company could be liable under such provisions in the event any such liability is
incurred, and not discharged, by any other member of the Ford consolidated or
controlled group. If the Company were no longer to be included in Ford's
consolidated group for federal tax purposes, there is no assurance that the
Company's tax position would not be less favorable than it is at present. See
"Relationship with Ford".

16
<PAGE> 17

In addition, by virtue of its controlling beneficial ownership and the terms of
a tax-sharing agreement between the Company and Ford, Ford effectively controls
all of the Company's tax decisions. Under the tax-sharing agreement, Ford has
sole authority to respond to and conduct all tax proceedings (including tax
audits) relating to the Company's federal and combined state returns, to file
all such returns on behalf of the Company and to determine the amount of the
Company's liability to (or entitlement to payment from) Ford under the
tax-sharing agreement. See "Relationship with Ford -- Tax-Sharing Agreement".
This arrangement may result in conflicts of interests between the Company and
Ford. For example, under the tax-sharing agreement, Ford may choose to contest,
compromise or settle any adjustment or deficiency proposed by the relevant
taxing authority in a manner that may be beneficial to Ford and detrimental to
the Company.

Certain of the Company's airport concession agreements require the consent of
the airport authority in connection with transfers of various percentages of the
Company's common stock. Those consents which are required in connection with the
Offerings have been obtained, other than certain consents the lack of which the
Company does not believe will have a material adverse effect on the Company's
consolidated financial position or results of operations. In the event that Ford
seeks to sell any of its Common Stock following the Offerings, additional
consents will be required.

Certain intercompany agreements and arrangements exist between the Company and
Ford. See "Relationship with Ford". There can be no assurance that the products,
services and other benefits Ford provides to or purchases from the Company under
such agreements will continue to be provided or purchased, and if not, whether,
or on what terms, such products, services or other benefits provided to the
Company could be replicated and sales thereof to Ford replaced. See "-- Risk of
Limited Supply of Competitively Priced Cars" and "-- Risk of Loss of Ford
Advertising Reimbursement".

LIABILITY AND INSURANCE

The Company's businesses expose it to claims for personal injury, death and
property damage resulting from the use of the cars and equipment rented or sold
by the Company and for workers' compensation claims and other employment-related
claims by the Company's employees. The Company generally self-insures up to $5
million per occurrence in the United States, up to $1.5 million per occurrence
in Europe and lower amounts in certain other foreign countries, and maintains
insurance with unaffiliated carriers in excess of such levels up to $450 million
per occurrence or, in the case of Europe, without limits. There can be no
assurance that the Company will not be exposed to uninsured liability at levels
in excess of historical levels resulting from multiple payouts or otherwise,
that liabilities in respect of existing or future claims will not exceed the
level of the Company's insurance, that the Company will have sufficient capital
available to pay any uninsured claims or that insurance with unaffiliated
carriers will continue to be available to the Company on economically reasonable
terms. See "Business -- Self Insurance" and "-- Legal Proceedings".

SEASONALITY

In the Company's businesses, the second and third quarters of the year have
historically been the strongest quarters of the year. In 1996, these quarters
accounted for approximately 53.7% of overall revenue and 80.9% of income before
income taxes. As a result, any occurrence that disrupts rental activity during
the second or third quarters could have an adverse effect on the Company's
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources".

ENVIRONMENTAL RISKS

The Company is regulated by federal, state, local and foreign environmental laws
and regulations in connection with its operations, including, among other
things, with respect to the ownership and operation of tanks for the storage of
petroleum products, such as gasoline, diesel fuel and motor and waste oils. A
significant percentage of these tanks are located underground. The Company has

17
<PAGE> 18

established a compliance program for its tanks to ensure that (i) the tanks are
properly registered with the state in which the tanks are located; and (ii) the
tanks have been either upgraded or replaced to meet federal and state leak
detection and spill, overfill and corrosion protection requirements. However,
there can be no assurance that these tank systems will at all times remain free
from leaks or that the use of these tanks will not result in spills.

The Company has made, and will continue to make, expenditures to comply with
environmental laws and regulations, including, among others, expenditures for
the cleanup of contamination at its owned and leased properties, as well as
contamination at other locations at which the Company's wastes have reportedly
been identified. There can be no assurance that compliance with existing or
future environmental legislation and regulations will not require material
expenditures by the Company or otherwise have an adverse effect on the Company's
operations. See "Business -- Governmental Regulation and Environmental Matters".

FUEL SHORTAGE

The Company's operations, as well as those of its competitors, could be affected
by any limitation in the fuel supply or by any imposition of mandatory
allocation or rationing regulations. In the event of a severe disruption of fuel
supplies resulting from OPEC supply changes, political unrest, war or otherwise,
the operations of all car and equipment rental and leasing companies could be
adversely affected.

POSSIBLE FUTURE SALES OF COMMON STOCK BY FORD

Subject to applicable federal securities laws and the restrictions set forth
below, after completion of the Offerings, Ford may sell any or all of the shares
of the Common Stock beneficially owned by it or distribute any or all of such
shares of Common Stock to its stockholders. Sales or distributions by Ford of
substantial amounts of Common Stock in the public market or to its stockholders,
or the perception that such sales or distribution could occur, could adversely
affect prevailing market prices for the Class A Common Stock. Ford has advised
the Company that its current intent is to continue to hold all of the Common
Stock beneficially owned by it following the Offerings. However, Ford is not
subject to any contractual obligation to retain its controlling interest, except
that Ford and the Company have agreed, subject to certain exceptions, not to
sell or otherwise dispose of any shares of Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of J.P.
Morgan Securities Inc. See "Underwriting". As a result, there can be no
assurance concerning the period of time during which Ford will maintain its
beneficial ownership of Common Stock owned by it following the Offerings. Ford
will have registration rights with respect to the shares of the Common Stock
owned by it following the Offerings, which would facilitate any future
disposition. See "-- Control by and Relationship with Ford" above, "Relationship
with Ford -- Corporate Agreement" and "Shares Available for Future Sale".

ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Restated Certificate of Incorporation and
By-laws may render more difficult, or have the effect of discouraging,
unsolicited takeover bids from third parties or the removal of incumbent
management of the Company. See "Description of Capital Stock -- Certain
Certificate of Incorporation and By-law Provisions". Although such provisions do
not have a substantial practical significance to investors while Ford controls
the Company, such provisions could have the effect of depriving stockholders of
an opportunity to sell their shares at a premium over prevailing market prices
should Ford's combined voting power decrease to less than 50%.

18
<PAGE> 19

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained herein under "Prospectus Summary", "Risk Factors",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" including, without limitation, those concerning (i)
the Company's strategy, (ii) the Company's expansion plans for its various
businesses, (iii) the Company's liquidity and capital expenditures, (iv) the
percentage of cars expected to be acquired from Ford in the future, (v) the
terms upon which cars will be acquired, (vi) the development of the Company's
strategic information systems and (vii) the effects on the Company of certain
legal proceedings, contain certain forward-looking statements concerning the
Company's operations, economic performance and financial condition. Because such
statements involve risks and uncertainties, actual results may differ materially
from those expressed or implied by such forward-looking statements. Factors that
could cause such differences include, but are not limited to, those discussed
under "Risk Factors".

19
<PAGE> 20

THE COMPANY

GENERAL

Car Rental

The Company believes it maintains the largest network of company-owned,
on-airport car rental locations both in the United States and worldwide,
enabling the Company to provide consistent quality, pricing and service
worldwide. The Company derives approximately 77% of its car rental revenues from
on-airport locations. According to information disclosed by the largest 153 U.S.
airports, the Company maintained the leading on-airport car rental market share
at such airports during 1996 of over 30% in terms of revenues and has maintained
market share at approximately this level during each of the last five years.
This market has grown at a compounded annual rate of approximately 11% since
1992 to over $6 billion in revenues in 1996, based on information provided by
such airports. The Company also believes it maintained the leading on-airport
car rental market share in Europe during 1996 of approximately 30% in terms of
revenues. The Company has recently begun to provide replacement car rental
services from off-airport locations under the H.I.R.E. brand name. The Company
estimates that total 1996 revenues for the car rental industry in the United
States were in excess of $14 billion, and that total 1995 revenues for the car
rental industry in Europe were in excess of $5 billion.

The Company's Hertz #1 Club Gold service provides an expedited rental service to
members at approximately 650 locations worldwide. At December 31, 1996, there
were approximately two million active Hertz #1 Club Gold members who accounted
for approximately 35% of the Company's U.S. car rental transactions in 1996.
Through its many travel industry relationships with airlines and hotels, the
Company has targeted the most frequent travelers to become Hertz #1 Club Gold
members.

The Company's worldwide car rental operations and certain other activities
generated $3.3 billion in revenue and $165.5 million in income before taxes
during 1996.

Industrial and Construction Equipment Rental

The Company, through its wholly-owned subsidiary, HERC, believes that it
maintains the leading market share in the U.S. industrial and construction
equipment rental market. HERC rents a broad range of earth moving equipment,
materials handling equipment, aerial and electrical equipment, air

20
<PAGE> 21

compressors, compaction equipment and construction-related trucks through a
network of 120 branch locations. The Company estimates that 1995 annual revenues
for the U.S. equipment rental market were $15 billion. This market is fragmented
with over 7,000 participants and 12,000 locations. According to the Rental
Equipment Register, an industry publication, only 23 of the top 100 equipment
rental companies in the United States had rental revenues in excess of $25
million in 1995.

Strategic Information Systems

Other

The Company, which was incorporated in Delaware in 1967, is a successor to
corporations that have been engaged in the automobile and truck leasing and
rental business since 1918. As a result of a series of transactions in 1993 and
1994, the Company became a wholly-owned subsidiary of Ford. Prior to that time
and until 1987, when Ford first acquired an ownership interest in the Company,
the Company had been a subsidiary of UAL Corporation (formerly Allegis
Corporation) ("UAL"), which had acquired the Company's outstanding capital stock
from RCA Corporation ("RCA") in 1985. See Notes 1, 5 and 7 of the Notes to the
Company's consolidated financial statements included in this Prospectus.

The Company's principal executive offices are located at 225 Brae Boulevard,
Park Ridge, New Jersey 07656, and its telephone number is (201) 307-2000.

21
<PAGE> 22

USE OF PROCEEDS

The proceeds to the Company from the Offerings, after the deduction of
underwriting discounts and expenses payable by the Company, are estimated to be
$370 million ($425 million if the Underwriters' over-allotment options are
exercised in full), substantially all of which is expected to be used to reduce
short-term indebtedness (commercial paper) of the Company. Such indebtedness has
original stated maturities ranging from April 15, 1997 to April 29, 1997 and has
an average interest rate of 5.34%. The Company intends to sell additional
commercial paper to repay the portion of such indebtedness maturing prior to the
closing of the Offerings. The indebtedness to be repaid was incurred to repay an
intercompany note issued by the Company to Ford in the amount of $460 million.
See "Dividend Policy".

DIVIDEND POLICY

Certain debt instruments under which the Company has issued debt securities
restrict the Company's ability to pay dividends. Such restrictions generally
provide that the Company may not pay dividends, invest in its own shares or
permit investments by certain subsidiaries of the Company ("Restricted
Subsidiaries") in the Company's shares subsequent to a specified date if,
together with total investments by the Company and its Restricted Subsidiaries
in subsidiaries that are not Restricted Subsidiaries made subsequent to such
specified date, the aggregate of any such dividends or investments exceeds the
sum of (i) a specified dollar amount, (ii) the aggregate net income of the
Company and its Restricted Subsidiaries earned subsequent to such specified date
and (iii) net proceeds received from capital stock issued subsequent to such
specified date. Immediately following the Offerings, the Company will be
permitted to pay $ in dividends under the most restrictive of such covenants.
See "Use of Proceeds" and "Capitalization". The last to mature of the
outstanding securities of the Company containing restrictions on the Company's
ability to pay dividends has a final maturity of November 1, 2009.

22
<PAGE> 23

CAPITALIZATION

The following table sets forth the capitalization of the Company as of December
31, 1996 (i) on an actual basis (first column), (ii) as adjusted (second column)
to give effect to (a) the payment by the Company of a dividend of $460 million
on its common stock to Ford in the form of an intercompany note, (b) the
borrowing of $460 million to repay the intercompany note to Ford and (c) the
issuance to Ford on February 29, 1997 of 1,290 shares of the Company's 5.11%
Cumulative Series C Preferred Stock, $.01 par value per share, for $129 million
and (iii) as adjusted (third column) to give effect to the items set forth in
clause (ii) above and (a) the reclassification of 741 shares of common stock,
par value $1.00 per share, owned by Ford into 65,956,000 shares of Class B
Common Stock, (b) the issuance and sale by the Company of 17,400,000 shares of
Class A Common Stock in the Offerings, (c) the reclassification of all of the
Company's outstanding Preferred Stock, Series A and Preferred Stock, Series B
beneficially owned by Ford into 21,600,000 shares of Class A Common Stock, (d)
the receipt of net proceeds of $370 million from the sale by the Company of
17,400,000 shares of Class A Common Stock in the Offerings and the application
of such proceeds as set forth under "Use of Proceeds" and (e) the redemption by
the Company of 1,290 shares of its 5.11% Cumulative Series C Preferred Stock for
$129 million. The information set forth below assumes that the Class A Common
Stock offered hereby will be sold in the Offerings at $22.50 per share (the
midpoint of the range set forth on the cover of this Prospectus). This table
should be read in conjunction with the financial statements and the related
notes thereto contained in the Company's consolidated financial statements
included in this Prospectus.

<TABLE>
<CAPTION>
---------------------------------------------
AS OF DECEMBER 31, 1996
AS ADJUSTED AS ADJUSTED
ACTUAL PRE-OFFERINGS POST-OFFERINGS
---------- ------------- --------------
<S> <C> <C> <C>
Dollars in thousands

The Company's Debt:
Promissory notes, debentures, etc. ................. $3,517,254 $3,977,254 $
Subordinated promissory notes
Senior........................................... 149,828 149,828
Junior........................................... 399,756 399,756
Debt of the Company's subsidiaries.................... 1,025,006 1,025,006
---------- ---------- ----------
Total debt.......................................... 5,091,844 5,551,844
---------- ---------- ----------
Stockholders' Equity:
Common Stock, par value $1.00 per share, shares
issued -- 200 Class A, 51 Class B and 490 Class
C................................................ 1 1
Common Stock, par value $0.01 per share, shares
issued -- 39,000,000 Class A and 65,956,000 Class
B (a)............................................ -- --
Preferred Stock --
Series A, 10% cumulative......................... 236,000 236,000
Series B, various rates cumulative............... 249,900 249,900
Series C, 5.11% cumulative....................... -- (b)
Additional capital paid-in.......................... 59,008 163,360
Retained earnings................................... 435,352 --
Translation adjustment.............................. 9,129 9,129
Unrealized holding losses for available-for-sale
securities....................................... (25) (25)
---------- ---------- ----------
Total stockholders' equity.......................... 989,365 658,365
---------- ---------- ----------
Total capitalization................................ $6,081,209 $6,210,209 $
========== ========== ==========
</TABLE>

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

(a) Excludes 747,845 shares of Class A Common Stock reserved for issuance
pursuant to an employee benefit plan. See "Management -- Long-Term Equity
Compensation Plan".

(b) Less than $100.

23
<PAGE> 24

SELECTED CONSOLIDATED FINANCIAL DATA OF THE COMPANY

The selected consolidated income statement data for each of the years in the
three-year period ended December 31, 1996, and consolidated balance sheet data
as of December 31, 1996 and 1995 presented below were derived from the audited
consolidated financial statements of the Company and the related notes thereto
included in this Prospectus. The selected consolidated income statement data for
each of the years in the two-year period ended December 31, 1993, and
consolidated balance sheet data as of December 31, 1994, 1993 and 1992 presented
below were derived from audited consolidated financial statements of the Company
and the related notes thereto not included in this Prospectus. The financial
data presented below and the related notes thereto should be read in conjunction
with the consolidated financial statements of the Company and the related notes
thereto included in this Prospectus.

<TABLE>
<CAPTION>
----------------------------------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Dollars in millions, except per share data
INCOME STATEMENT DATA
Revenues
Car rental.................................................. $3,161.6 $2,911.7 $2,581.2 $2,177.5 $2,124.1
Industrial and construction equipment rental................ 392.3 332.3 263.1 215.8 208.8
Car leasing................................................. 35.4 35.6 231.4 209.3 241.0
Other (a)................................................... 79.0 121.0 218.7 252.2 242.3
-------- -------- -------- -------- --------
Total revenues.......................................... 3,668.3 3,400.6 3,294.4 2,854.8 2,816.2
-------- -------- -------- -------- --------
Expenses
Direct operating............................................ 1,795.1 1,724.8 1,766.2 1,647.1 1,627.5
Depreciation of revenue earning equipment (b)............... 892.7 803.9 702.7 523.9 496.8
Selling, general and administrative......................... 425.2 392.5 385.5 336.0 353.3
Interest, net of interest income of $10.4, $16.8, $7.2,
$11.3
and $3.6.................................................. 298.8 307.1 277.2 245.4 306.9
-------- -------- -------- -------- --------
Total expenses.......................................... 3,411.8 3,228.3 3,131.6 2,752.4 2,784.5
-------- -------- -------- -------- --------
Income before income taxes.................................. 256.5 172.3 162.8 102.4 31.7
Provision for taxes on income (c)........................... 97.9 67.1 71.7 49.0 21.7
-------- -------- -------- -------- --------
Income before cumulative effect of change in accounting
principle................................................. 158.6 105.2 91.1 53.4 10.0
Cumulative effect on prior years of change in method of
accounting for postretirement benefits (d)................ -- -- -- -- (4.3)
-------- -------- -------- -------- --------
Net income.................................................. $ 158.6 $ 105.2 $ 91.1 $ 53.4 $ 5.7
======== ======== ======== ======== ========
Pro forma net income per share (e).......................... $ 1.51
========
</TABLE>

<TABLE>
<CAPTION>
----------------------------------------------------
YEARS ENDED OR AT DECEMBER 31
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SELECTED OPERATING DATA
Car rental and other operations:
Number of owned and licensee locations.................... 5,435 5,480 5,498 5,594 5,687
Number of owned locations................................. 2,208 2,171 2,254 2,369 2,487
Peak number of owned and licensee cars operated during
period.................................................. 389,000 376,800 378,700 332,500 323,700
Average number of owned cars operated during period....... 283,900 263,600 276,100 236,500 230,300
Number of transactions of owned car rental operations
during period (in thousands)............................ 20,110 18,799 17,811 15,623 14,887
Average revenue per transaction of owned car rental
operations during period (in whole dollars)............. $ 157 $ 155 $ 145 $ 139 $ 143
Equipment rental operations:
Number of locations....................................... 120 104 95 85 89
Average cost of rental equipment operated during period
(in millions)........................................... $ 822.9 $ 650.4 $ 504.1 $ 428.3 $ 423.2
</TABLE>

24
<PAGE> 25

25
<PAGE> 26

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

GENERAL

The Company is engaged principally in the business of renting and leasing cars
and renting industrial and construction equipment. The Company's revenues
principally are derived from rental and related charges. Revenues consist of:

- Car rental revenues (revenues from all owned car operations,
including loss or collision damage waivers, liability insurance and
other products)

- Industrial and construction equipment rental revenues

- Car leasing revenues

- Other revenues (fees from the Company's licensees, revenues from the
Company's claim management and telecommunications services and,
prior to 1995, a car dealership operation in Europe)

The Company's expenses consist of:

- Direct operating expenses (primarily wages and related benefits;
concessions and commissions paid to airport authorities, travel
agents and others; and other costs relating to the operation and
rental of the revenue earning equipment, such as maintenance and
reservations)

- Depreciation expense relating to revenue earning equipment
(including net gains or losses on the disposal of such equipment).
Revenue earning equipment includes cars and industrial and
construction equipment.

- Selling, general and administrative expenses (including advertising)

- Interest expense relating primarily to the funding of the
acquisition of revenue earning equipment

The Company's profitability is primarily a function of the volume and pricing of
rental transactions and the utilization of cars and equipment. Significant
changes in the purchase price of cars and equipment or interest rates can also
have a significant effect on the Company's profitability, depending on the
ability of the Company to adjust pricing for these changes. The Company's
business requires significant expenditures for cars and equipment, and the
Company consequently requires substantial liquidity to finance such
expenditures.

At December 31, 1996, 83% of the cars in the Company's car rental fleet were
subject to repurchase by automobile manufacturers under guaranteed repurchase
programs pursuant to which automobile manufacturers agree to repurchase cars,
subject to certain car conditions and mileage requirements, at a specified price
after a minimum period of service. In the United States, the Company expects the
percentage of its car rental fleet subject to repurchase programs to decrease.
See "Risk Factors -- Risk of Economic Downturn" and "-- Risks Related to
Decreased Acquisition of Cars Through Repurchase Programs" and "Business --
Worldwide Car Rental -- Car Acquisition". The Company's industrial and
construction equipment rental fleet is not subject to such guaranteed repurchase
programs.

The following discussion and analysis provides information that management
believes to be relevant to understanding the Company's consolidated financial
condition and results of operations. This discussion should be read in
conjunction with the financial statements and the related notes thereto
contained in the Company's consolidated financial statements included in this
Prospectus.

26
<PAGE> 27

RESULTS OF OPERATIONS

The following table sets forth, for each of the years indicated, the percentage
of operating revenues represented by certain items in the Company's consolidated
statement of income:

<TABLE>
<CAPTION>
---------------------------
PERCENTAGE OF REVENUES
YEARS ENDED DECEMBER 31
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Revenues:
Car rental................................................ 86.2% 85.6% 78.4%
Industrial and construction equipment rental.............. 10.7 9.8 8.0
Car leasing............................................... .9 1.0 7.0
Other..................................................... 2.2 3.6 6.6
----- ----- -----
100.0 100.0 100.0
----- ----- -----
Expenses:
Direct operating.......................................... 48.9 50.7 53.6
Depreciation of revenue earning equipment................. 24.3 23.6 21.3
Selling, general and administrative....................... 11.6 11.6 11.7
Interest, net of interest income.......................... 8.2 9.0 8.4
----- ----- -----
93.0 94.9 95.0
----- ----- -----
Income before income taxes.................................. 7.0 5.1 5.0
Provision for taxes on income............................... 2.7 2.0 2.2
----- ----- -----
Net income.................................................. 4.3% 3.1% 2.8%
===== ===== =====
</TABLE>

YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995

Revenues

The Company achieved record revenues of $3,668.3 million in 1996, which
increased by 7.9% from $3,400.6 million in 1995.

Revenues from car rental operations of $3,161.6 million in 1996 increased by
8.6% from $2,911.7 million in 1995. Of this $249.9 million increase,
approximately $210 million resulted from an increase in the number of
transactions both in the United States and international operations and
approximately $40 million resulted from an increase in revenue per transaction
primarily in the United States (revenue per transaction remained substantially
unchanged for the Company's international operations). These increases are net
of a decrease in revenues due to changes in foreign exchange rates.

Revenues from industrial and construction equipment rental of $392.3 million in
1996 increased by 18.1% from $332.3 million in 1995. Of this $60.0 million
increase, approximately $34 million was due to an increase in volume resulting
from the opening of new locations and an acquisition in 1996 and approximately
$26 million was due to increased activity in industrial related markets, both
from new and existing customers.

Revenues from all other sources of $114.4 million in 1996 decreased by 26.9%
from $156.6 million in 1995, primarily due to lower revenues in the Company's
claim administration service operations, a large part of which was sold as of
February 29, 1996.

Expenses

Total expenses of $3,411.8 million in 1996 increased by 5.7% from $3,228.3
million in 1995, although total expenses as a percentage of revenues decreased
to 93.0% in 1996 from 94.9% in 1995.

Direct operating expenses of $1,795.1 million in 1996 increased by 4.1% from
$1,724.8 million in 1995, but were lower in 1996 as a percentage of revenues due
to more efficient fixed cost coverage. Wages and related benefits and
concessions and commissions decreased as a percentage of revenues,

27
<PAGE> 28

partly offset by increased expenses related to the development of the Company's
global reservations and strategic information systems.

Depreciation of revenue earning equipment for the car rental and car leasing
operations of $814.8 million in 1996 increased by 9.2% from $745.9 million in
1995, primarily due to an increase in the number of cars operated and an
increase in the cost of cars acquired in both the United States and
international operations. These increases were partly offset by an improvement
in the net proceeds received in 1996 in excess of book value on the disposal of
the cars (which resulted in a gain of $2.5 million in 1996 as compared to a loss
of $7.5 million in 1995) due to improved market conditions for the sale of used
vehicles.

Depreciation of revenue earning equipment for the industrial and construction
equipment rental operations of $77.9 million in 1996 increased by 34.3% from
$58.0 million in 1995, primarily due to an increase in both the volume and cost
of equipment operated. This increase was partly offset by an improvement in the
net proceeds received in 1996 in excess of book value on the disposal of the
equipment to $20.7 million in 1996 from $13.8 million in 1995 due to an increase
in the volume of equipment sold and improved market conditions for the sale of
used equipment.

In view of the favorable market environment in 1996 and 1995 for the sale of
used equipment in the industrial and construction equipment rental business,
effective January 1, 1997, certain estimated useful lives being used to compute
the provision for depreciation will be increased to reflect the anticipated
changes in the estimated residual values to be realized when the equipment is
sold. This should result in lower annual depreciation charges and lower gains on
the disposal of the used equipment than has been the case in 1996 and 1995.

Selling, general and administrative expenses of $425.2 million in 1996 increased
by 8.3% from $392.5 million in 1995, but remained at 11.6% of revenue. The
increase in 1996 resulted from increases in advertising costs, sales expenses
and general and administrative costs.

Interest expense of $298.8 million in 1996 decreased 2.7% from $307.1 million in
1995, primarily due to lower interest rates in 1996, partially offset by higher
debt levels (which were required to finance growth and increases in the cost of
cars and industrial and construction equipment), and lower interest income
received in 1996 as compared to 1995. See Note 2 to the Notes to the Company's
consolidated financial statements included in this Prospectus.

The tax provision of $97.9 million in 1996 increased 45.9% from $67.1 million in
1995. The effective tax rate in 1996 was 38.2% as compared to 38.9% in 1995.
This change was primarily due to the higher income before income taxes in 1996,
partly offset by a one-time credit of $13.9 million included in 1996. This
credit resulted from adjustments made to tax accruals in connection with tax
audit evaluations and the effects of prior years' tax sharing arrangements
between the Company and its former parent companies. The tax provision in 1995
included $6.5 million of credits relating to foreign taxes paid which were
offset against U.S. income tax liabilities. Reported tax provisions for each of
the years 1996 and 1995 also include a required tax provision of $5.8 million
resulting from the amortization of intangible assets that is not deductible for
tax purposes. See Notes 1, 8 and 12 of the Notes to the Company's consolidated
financial statements included in this Prospectus.

Net Income

The Company achieved record net income of $158.6 million in 1996 representing an
increase of 50.8% from $105.2 million in 1995. This increase was primarily due
to higher revenues in the U.S. car and industrial and construction equipment
rental operations, the tax credit of $13.9 million included in 1996 referred to
above, decreased expenditures in 1996 as a percentage of revenues particularly
in the U.S. car rental operations, partly offset by increased expenditures in
1996 as a percentage of revenues in the international car rental operations.

28
<PAGE> 29

YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994

Revenues

The Company achieved record revenues of $3,400.6 million in 1995, which
increased by 3.2% from $3,294.4 million in 1994.

Revenues from car rental operations of $2,911.7 million in 1995 increased by
12.8% from $2,581.2 million in 1994. Of this $330.5 million increase,
approximately $142 million resulted from an increase in the volume of
transactions and $188 million resulted from an increase in revenue per
transaction, both amounts reflecting favorable changes in foreign exchange
rates.

Revenues from industrial and construction equipment rental of $332.3 million in
1995 increased by 26.3% from $263.1 million in 1994. Of this $69.2 million
increase, approximately $22 million was due to an increase in volume resulting
from the opening of new locations and approximately $47 million was due to
increased activity in industrial related markets both from new and existing
customers.

Revenues from all other sources of $156.6 million in 1995 decreased by 65.2%
from $450.1 million in 1994, primarily due to the sale of the Company's car
leasing and car dealership operations in Europe effective January 1, 1995. See
Note 5 to the Notes to the Company's consolidated financial statements included
in this Prospectus.

Expenses

Total expenses of $3,228.3 million in 1995 increased by 3.1% from $3,131.6
million in 1994. As a percent of revenues total expenses remained substantially
unchanged in 1995 as compared to 1994.

Direct operating expenses of $1,724.8 million in 1995 decreased by 2.3% from
$1,766.2 million in 1994, and as a percentage of revenues to 50.7% in 1995 from
53.6% in 1994. This improvement was principally due to the sale of the Company's
European car leasing and car dealership operations in 1995 and lower costs in
the U.S. car rental operations for public liability and property damage claims,
partly offset by an increase in all other operating costs resulting from the
increase in the volume of business.

Depreciation of revenue earning equipment for the car rental and car leasing
operations of $745.9 million in 1995 increased by 12.5% from $662.9 million in
1994, primarily due to an increase in the cost of cars and lower net proceeds
received in 1995 in excess of book value on the disposal of the cars (which
resulted in a loss of $7.5 million in 1995 as compared to a gain of $9.8 million
in 1994) due to a weak U.S. market for the sale of used cars in 1995. These
increases were partly offset by lower depreciation due to the sale of the
European car leasing operation in 1995.

Depreciation of revenue earning equipment for the industrial and construction
equipment rental operations of $58.0 million in 1995 increased by 45.7% from
$39.8 million in 1994, primarily due to increases in the volume of equipment
operated and the cost of equipment. These increases were partly offset by a
reduction in depreciation of $12.0 million in 1995 due to changes made effective
July 1, 1994 increasing certain useful lives being used to compute the provision
for depreciation to reflect changes in the estimated residual values to be
realized upon disposal of equipment. Gains on the sale of equipment of $13.8
million in 1995 were substantially unchanged from 1994.

Selling, general and administrative expenses of $392.5 million in 1995 increased
by 1.8% from $385.5 million in 1994, remaining substantially the same as a
percentage of revenues. The increase in 1995 resulted from increases in sales
expense, general and administrative costs and advertising expense. These
increases were also partly caused by changes in foreign exchange rates.

Interest expense of $307.1 million in 1995 increased by 10.8% from $277.2
million in 1994, primarily due to higher interest rates and debt levels which
were required to finance growth and increases in the cost of cars and industrial
and construction equipment, partly offset by higher interest income in 1995

29
<PAGE> 30

compared to 1994. See Note 2 to the Notes to the Company's consolidated
financial statements included in this Prospectus.

The tax provision of $67.1 million in 1995 decreased by 6.4% from $71.7 million
in 1994. The effective tax rate in 1995 was 38.9% as compared to 44.0% in 1994.
These decreases were primarily due to $6.5 million of credits in 1995 relating
to foreign taxes paid which were offset against U.S. income tax liabilities,
partly offset by the provision required in 1995 due to higher income before
income taxes. Reported tax provisions for each of the years 1995 and 1994 also
include a required tax provision of $5.8 million resulting from the amortization
of intangible assets that is not deductible for tax purposes. See Notes 1, 8 and
12 of the Notes to the Company's consolidated financial statements included in
this Prospectus.

Net Income

The Company achieved record net income of $105.2 million in 1995 representing an
increase of 15.5% from $91.1 million in 1994. This increase was primarily due to
lower expenses in 1995 as a percentage of revenues in the international car
rental operations principally as a result of the sale of the Company's European
car leasing and car dealership operations in 1995, and higher revenues in the
U.S. industrial and construction equipment rental operations.

LIQUIDITY AND CAPITAL RESOURCES

The Company's domestic and foreign operations are funded by cash provided by
operating activities, and by extensive financing arrangements maintained by the
Company in the United States, Europe, Australia, New Zealand, Canada and Brazil.
The Company's investment grade credit ratings provide it with access to global
capital markets to meet its borrowing needs. On February 5, 1997, S&P affirmed
the Company's short-term credit rating at A-1 and reduced its long-term credit
rating from A to A-. S&P reported that its reduction of the Company's long-term
credit rating reflected the January 1997 announcement by Ford that it was
reviewing strategic options for its investment in the Company, including a
potential partial sale. The Company does not believe that the reduced rating
will have a material adverse effect on the Company's liquidity or consolidated
financial position. On February 28, 1997, Moody's confirmed the Company's
short-term and long-term credit ratings at P1 and A3, respectively. The
Company's primary use of funds is for the acquisition of revenue earning
equipment which consists mainly of cars and industrial and construction
equipment. For the year ended December 31, 1996, the Company's expenditures for
revenue earning equipment were $8,204 million (partially offset by proceeds from
the sale of such equipment of $6,445 million). For 1997, the Company expects its
expenditures for revenue earning equipment (net of proceeds from the sale of
such equipment) to be higher than they were in 1996. These assets are purchased
by the Company in accordance with the terms of programs negotiated with
automobile and equipment manufacturers. Particularly for rental cars, financing
requirements are highly seasonal, typically reaching an annual peak during the
second and third calendar quarters as fleet levels build up in response to
increased rental demand during that period. The typical low point for cash needs
occurs during the fourth quarter, coinciding with lower levels of fleet and
rental demand. There are well developed methods of disposing of the Company's
used cars and equipment which are capable of accommodating the Company's short
fleet rotation requirements. See "Business -- Worldwide Car Rental -- Used Car
Sales" and "-- Car Acquisition". The Company also makes capital investments for
property and non-revenue earning equipment, although the amount of these
expenditures ($180 million in 1996, and an estimate of up to $250 million in
1997) are substantially lower than the expenditures for revenue earning
equipment. The Company's customer receivables are also liquid with approximately
30 days of total annual sales outstanding.

To finance its domestic requirements, the Company maintains an active commercial
paper program. In July 1996, the seasonal borrowing peak in the 1996 business
cycle, the Company had outstanding $1.9

30
<PAGE> 31

billion of commercial paper. In January 1996, the seasonal borrowing trough, the
outstanding amount was approximately $900 million.

The Company is active in the U.S. domestic medium-term and long-term debt
markets. In recent years, the Company has issued approximately $300 million to
$400 million annually in investment grade medium-term and long-term debt with
various maturities. The proceeds are used for general corporate purposes and to
reduce short-term borrowings. From time to time, the Company files with the
Securities and Exchange Commission shelf registration statements relating to
debt securities to allow for the issuance of unsecured senior, senior
subordinated and junior subordinated debt securities on terms to be determined
at the time the securities are offered for sale. At December 31, 1996, the
Company had available $400 million for issuance under an effective registration
statement. The total amount of medium-term and long-term debt outstanding as of
December 31, 1996 was $2.6 billion with maturities ranging from 1997 to 2009.
This includes $269 million in term loans from Ford, of which $250 million
matures on November 15, 1999 and $19 million matures on July 1, 1997. See Note 2
to the Notes to the Company's consolidated financial statements included in this
Prospectus.

Borrowing for the Company's international operations consists mainly of loans
obtained from local and international banks. All borrowings by international
operations either are in the international operation's local currency or, if in
non-local currency, are fully hedged to minimize foreign exchange exposure. The
Company guarantees only the borrowings of its subsidiaries in Australia and
Canada, which consist principally of commercial paper denominated in local
currency. At December 31, 1996, the total debt for the foreign operations was
$1,025 million, of which $981 million was short-term (original maturity of less
than one year) and $44 million was long-term. At December 31, 1996, the total
amounts outstanding (in millions of U.S. dollars) under the Australian and
Canadian commercial paper programs were $123 and $19, respectively.

At December 31, 1996, the Company had committed bank credit facilities totaling
$2.3 billion. Of this amount, $2.1 billion are represented by a combination of
5-year and 364-day global committed credit facilities provided by 31
relationship banks. In addition to direct borrowings by the Company, these
agreements allow any subsidiary of the Company to borrow under the facilities on
the basis of a guarantee by the Company. The 5-year agreements, totalling $1,185
million, currently expire on June 30, 2001, and the 364-day agreements,
totalling $895 million, expire on June 25, 1997. The 5-year agreements have an
evergreen feature which provides for the automatic extension of the expiration
date one year forward unless timely notice is provided by the bank. The 364-day
agreements permit the Company to convert any amount outstanding prior to
expiration into a two-year term loan. The Company's committed bank credit
facilities provide that if Ford ceases to own, directly or indirectly, capital
stock of the Company having at least 51% of the total voting power of all
capital stock of the Company outstanding, then: (i) certain borrowing rates and,
in respect of certain of the credit facilities, the facility fees will be
determined by a pricing matrix based on the Company's credit ratings, (ii) if
the Company's long-term credit rating declines below A- by S&P and A3 by
Moody's, then the Company will be required to maintain a minimum consolidated
net worth of $500 million and (iii) if the Company's credit rating declines
below BBB+ by S&P and Baa1 by Moody's, then the Company cannot allow its
consolidated senior debt-to-equity ratio to exceed 8.5 to 1.

In addition to these bank credit facilities, in February 1997 Ford extended to
the Company a line of credit of $500 million, expiring June 30, 1999, and the
revolving loan agreement between the Company and Ford dated June 8, 1994 was
terminated. This line of credit has an evergreen feature that provides on an
annual basis for automatic one-year extensions of the expiration date, unless
timely notice is provided by Ford at least one year prior to the then scheduled
expiration date. Following the Offerings, Ford may not be willing to extend
additional credit to the Company, may change or terminate existing credit
facilities it provides to the Company in accordance with their terms or may
limit the ability of the Company to raise additional equity capital. See "Risk
Factors -- Limitations Upon Liquidity, Capital Raising and Dividends; Interest
Rate Risk -- Impact of Relationship with Ford on Capital Raising".

31
<PAGE> 32

The Company intends to continue to maintain committed credit facilities in an
amount equal to 100% of its anticipated commercial paper outstanding from time
to time.

The Company has developed an interest rate risk management policy to protect
itself from fluctuations in interest rates on its short-term debt portfolio and
on its leasing portfolios. The policy is specific as to transaction purpose,
acceptable hedging instruments, approval levels required, counterparty
eligibility and exposure, effectiveness monitoring and documentation standards.
In the United States and Canada, derivatives are used to provide interest rate
protection while accessing short-term funding in the commercial paper markets.
In Australia and New Zealand, where the Company also has leasing businesses,
derivatives are used to effectively match-fund car leases, which have terms from
one to five years, with funding of the same term. As the value of the car on
lease depreciates, the funding supporting the car also decreases. See "Risk
Factors -- Limitations upon Liquidity, Capital Raising and Dividends; Interest
Rate Risk -- Interest Rate Risk".

Interest rate hedges provide the Company with an effective means of minimizing
interest rate risk. The Company has entered into arrangements to manage its
exposure to fluctuations in interest rates. These arrangements consist of
interest-rate swap agreements ("swaps") and forward rate agreements ("FRAs").
The differential paid or received on these agreements is recognized as an
adjustment to interest expense. The purpose and effect of these agreements are
to make the Company less susceptible to changes in interest rates by effectively
converting certain variable rate debt to fixed rate debt. Because of the
relationship of current market rates to historical fixed rates, the effect at
December 31, 1996 of the swap and FRA agreements is to give the Company an
overall effective weighted-average rate on debt of 6.53%, with 41% of debt
effectively subject to variable interest rates, compared to a weighted-average
interest rate on debt of 6.48%, with 49% of debt subject to variable interest
rates when not considering the swap and FRA agreements.

At December 31, 1996, the notional amount of these agreements aggregated $368.4
million of swaps. These notional amounts, however, are not reflective of the
Company's obligations under these agreements because the Company is only
obligated to pay the net amount of the interest rate differential between the
fixed and variable rates specified in the contracts. The Company's exposure to
any credit loss in the event of non-performance by the counterparties is further
mitigated by the fact that all of these financial instruments are with financial
institutions that are rated "A" or better by the major credit rating agencies.
Exposure to individual counterparties is monitored to ensure diversification of
risk. At December 31, 1996, the fair value of all outstanding contracts, which
is representative of the Company's obligations under these contracts, assuming
the contracts were terminated at that date, was approximately a net payable of
$4.0 million. The $368.4 million notional principal matures as follows (in
millions): 1997, $240.7; 1998, $73.3; 1999, $43.4; 2000, $10.7; 2001, $0.2; and
2002, $0.1.

The Company and its subsidiaries have entered into arrangements to manage
exposure to fluctuations in foreign exchange rates for certain foreign currency
loans and selected marketing programs. These arrangements consist of foreign
exchange forward contracts and the purchase of foreign exchange options where
the Company has no risk. At December 31, 1996 the total notional amount of these
instruments was $23.5 million and the fair value of all outstanding contracts,
which is representative of the Company's obligations under these contracts,
assuming the contracts were terminated at that date, was approximately a net
payable of $.1 million.

The Company's decision to withdraw earnings or investments from foreign
countries is, in some cases, influenced by exchange controls and the utilization
of foreign tax credits and may also be affected by fluctuations in exchange
rates for foreign currencies and by revaluation of such currencies in relation
to the U.S. dollar by the governments involved. Foreign operations have been
financed to a substantial extent through loans from local lending sources in the
currency of the countries in which such operations are conducted. Car rental
operations in foreign countries are, from time to time, subject to governmental
regulations imposing varying degrees of currency restrictions. Currency
restrictions and other regulations historically have not had a material impact
on the Company's operations as a whole.

32
<PAGE> 33

In 1997, the Company will commence implementing in all of its strategic
information systems a year 2000 date conversion project to address all necessary
code changes, testing and implementation. Project completion is planned for the
middle of 1999 at an estimated total cost of approximately $15 million.

Car rental is a seasonal business, with decreased travel in both the business
and leisure segments in the winter months and heightened activity during the
spring and summer. To accommodate increased demand, the Company increases its
available fleet and staff during the second and third quarters. As business
demand declines, fleet and staff are decreased as well. However, certain
operating expenses, including rent, insurance, and administrative overhead,
remain fixed and cannot be adjusted for seasonal demand. In certain geographic
markets, the impact of seasonality has been reduced by emphasizing leisure or
business travel in the off-seasons.

The table below shows capital expenditures (net of proceeds received from the
sale of revenue earning equipment) and financial results by quarter for 1996 and
1995.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------
CAPITAL OPERATING
EXPENDITURES INCOME INCOME (LOSS)
(NET OF SALE (PRE-TAX INCOME BEFORE NET
PROCEEDS BEFORE NET INCOME INCOME
RECEIVED) REVENUES INTEREST EXPENSE) TAXES (LOSS)
------------ -------- ----------------- ------------- ------
<S> <C> <C> <C> <C> <C>
Dollars in millions
1996
First Quarter.................. $1,028.1 $ 803.1 $ 82.5 $ 15.2 $ 8.8
Second Quarter................. 1,000.1 911.4 144.3 69.3 39.5
Third Quarter.................. 67.1 1,060.0 219.9 138.2 74.2
Fourth Quarter................. (201.6) 893.8 108.7 33.9 36.1
-------- -------- ------ ------ ------
Total Year................ $1,893.7 $3,668.3 $555.4 $256.6 $158.6
======== ======== ====== ====== ======
1995
First Quarter.................. $ 819.1 $ 735.7 $ 69.7 $ (.7) $ (.3)
Second Quarter................. 1,083.1 858.5 115.1 34.5 19.6
Third Quarter.................. (261.1) 989.8 194.1 109.6 65.1
Fourth Quarter................. (405.2) 816.6 100.5 28.9 20.8
-------- -------- ------ ------ ------
Total Year................ $1,235.9 $3,400.6 $479.4 $172.3 $105.2
======== ======== ====== ====== ======
</TABLE>

NEW ACCOUNTING STANDARD

In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("FAS 128"), "Earnings Per Share", which
specifies changes in computing and reporting earnings per share. The adoption of
FAS 128 by the Company in 1997 will not affect the Company's 1996 pro forma net
income per share.

33
<PAGE> 34

BUSINESS

GENERAL

Car Rental

The Company believes it maintains the largest network of company-owned,
on-airport car rental locations both in the United States and worldwide,
enabling the Company to provide consistent quality, pricing and service
worldwide. The Company derives approximately 77% of its car rental revenues from
on-airport locations. According to information disclosed by the largest 153 U.S.
airports, the Company maintained the leading on-airport car rental market share
at such airports during 1996 of over 30% in terms of revenues and has maintained
market share at approximately this level during each of the last five years.
This market has grown at a compounded annual rate of approximately 11% since
1992 to over $6 billion in revenues in 1996, based on information provided by
such airports. The Company also believes it maintained the leading on-airport
car rental market share in Europe during 1996 of approximately 30% in terms of
revenues. The Company has recently begun to provide replacement car rental
services from off-airport locations under the H.I.R.E. brand name. The Company
estimates that total 1996 revenues for the car rental industry in the United
States were in excess of $14 billion, and that total 1995 revenues for the car
rental industry in Europe were in excess of $5 billion.

The Company's worldwide car rental operations and certain other activities
generated $3.3 billion in revenue and $165.5 million in income before taxes
during 1996.

Industrial and Construction Equipment Rental

34
<PAGE> 35

locations. The Company estimates that 1995 annual revenues for the U.S.
equipment rental market were $15 billion. This market is fragmented with over
7,000 participants and 12,000 locations. According to the Rental Equipment
Register, an industry publication, only 23 of the top 100 equipment rental
companies in the United States had rental revenues in excess of $25 million in
1995.

Strategic Information Systems

Other

BUSINESS STRATEGY

Capitalize on the opportunities presented by the changing ownership in the
domestic car rental industry

35
<PAGE> 36

Leverage the "Hertz" brand name, recognized worldwide, in existing and new
business ventures

The Company believes that the "Hertz" brand name provides an ideal platform to
expand into new ventures. For example, the Company has re-entered the retail
used car sales market. Once the largest retailer of used cars in the United
States, the Company intends to use its recognized brand name and reputation to
offer quality used cars. Key elements of the Company's retail used car sales
strategy include free initial warranty, no-haggle pricing and providing a
complete maintenance history for each car. The Company has 41 used car sales
locations from coast to coast, substantially all of which were profitable in
1996 with a substantial expansion underway for 1997. In 1997, the Company will
pilot a new retail used car sales concept under the "Hertz" brand name offering
a larger selection of used cars.

Improve operating efficiency and enhance customer service through the continued
use and refinement of strategic information systems

Maintain consistent quality, pricing and service worldwide through continued
ownership of locations

36
<PAGE> 37

Expand the industrial and construction equipment rental business both in the
United States and abroad

Achieve superior performance by direct linkage of management compensation to
operating unit performance

BUSINESS SEGMENTS

The Company's business consists of two significant segments, car rental and
certain other activities, and the rental of industrial and construction
equipment. Set forth below is certain information with respect to these segments
for the year ended December 31, 1996.

<TABLE>
<CAPTION>
------------------------------------------
YEAR ENDED DECEMBER 31, 1996
INDUSTRIAL
AND
CONSTRUCTION
CAR RENTAL AND EQUIPMENT
OTHER(A) RENTAL
--------------- ------------
AMOUNT % AMOUNT % TOTAL
------ - ------ - -----
<S> <C> <C> <C> <C> <C>
Dollars in millions

Revenues........................................... $ 3,276 89% $ 392 11% $ 3,668
Amortization of intangibles........................ 18 100 -- -- 18
Operating income (pre-tax income before
interest)........................................ 421 76 134 24 555
Income before income taxes......................... 166 65 91 35 257
Revenue earning equipment, net, at end of year..... 4,318 86 718 14 5,036
</TABLE>

- -------------------------
(a) Includes interest and goodwill relating to the acquisition of the Company by
UAL and Park Ridge Corporation.

37
<PAGE> 38

The Company, together with its affiliates and independent licensees, operates in
approximately 5,500 locations throughout the United States and in approximately
140 foreign countries and jurisdictions. Set forth below is certain information
with respect to the Company's U.S. and foreign operations for the year ended
December 31, 1996 (substantially all of the Company's foreign operations consist
of car rental and leasing operations).

<TABLE>
<CAPTION>
----------------------------------------
YEAR ENDED DECEMBER 31, 1996
U.S.(A) FOREIGN
------------- -------------
AMOUNT % AMOUNT % TOTAL
------ - ------ - -----
<S> <C> <C> <C> <C> <C>
Dollars in millions

Revenue............................................. $ 2,723 74% $ 945 26% $3,668
Amortization of intangibles......................... 17 94 1 6 18
Operating income (pre-tax income before interest)... 451 81 104 19 555
Income before income taxes.......................... 196 76 61 24 257
Revenue earning equipment, net, at end of year...... 3,997 79 1,039 21 5,036
</TABLE>

- -------------------------
(a) Includes interest and goodwill relating to the acquisition of the Company by
UAL and Park Ridge Corporation.

38
<PAGE> 39

WORLDWIDE CAR RENTAL

Industry Overview

The car rental industry provides car rentals to business and individual
customers worldwide. The car rental industry has been significantly influenced
by general economic conditions as well as developments in the travel industry,
particularly air carrier passenger traffic. Historically, the car rental
industry has been highly seasonal. A significant proportion of the industry's
annual profitability has come during the second and third quarters when leisure
and business travel are at their peak. The industry derives the majority of its
revenues from car rentals and ancillary products such as insurance, refueling
charges, inter-city drop-off charges and loss-damage waivers. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources".

United States. The Company believes that total annual U.S. revenues for the car
rental industry were in excess of $14 billion for 1996. The U.S. market includes
five major car rental companies serving primarily airport and near airport
locations (the Company, Avis, Inc. ("Avis"), Budget Rent a Car Corporation
("Budget"), National Car Rental System Inc. ("National") and Alamo Rent-A-Car,
Inc. ("Alamo")), one major company serving non-airport locations (Enterprise
Rent-A-Car Company ("Enterprise")) and numerous smaller companies that operate
predominantly in non-airport locations. The major companies operate to varying
degrees through wholly-owned operations, and most have some franchised
operations.

Set forth below are the on-airport market shares of the major car rental
companies at the largest 153 airports in the United States that report
concessionable revenues (i.e., revenues on which airport authorities assess fees
from car rental companies) for the periods indicated:

<TABLE>
<CAPTION>
------------------------------------------
ELEVEN
MONTHS
ENDED
NOVEMBER 30 YEAR ENDED DECEMBER 31
1996 1995 1994 1993
----------- ----- ----- -----
<S> <C> <C> <C> <C>
Hertz................................... 30.2% 30.4% 30.6% 29.1%
Avis.................................... 23.7 22.6 21.9 23.6
National................................ 16.2 15.3 13.8 13.5
Budget.................................. 11.2 12.6 13.9 14.3
Alamo................................... 10.8 11.1 11.0 9.3
Others.................................. 7.9 8.0 8.8 10.2
----- ----- ----- -----
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>

The Company believes that car rentals at airports account for the largest
portion of car rentals in the United States. According to information disclosed
by major U.S. airports, the U.S. on-airport car rental market for the largest
153 airports has grown at a compounded annual rate of approximately 11% since
1992 to over $6 billion in revenues in 1996. The Company believes that, while
rental patterns vary among individual airports, car renters at major U.S.
airports taken as a whole are generally evenly divided between business
travelers and leisure travelers seeking cars for ground travel to vacation
destinations and for weekend use. In addition, the Company believes that car
renters at non-airport locations are generally local residents requiring a
temporary replacement car for their own car while it is being repaired and, to a
lesser extent, local residents seeking the use of a car for leisure or other
purposes.

Since the late 1980s, car rental companies have acquired cars pursuant to
various fleet repurchase programs established by automobile manufacturers under
which the automobile manufacturers agree to repurchase cars at a specific price
during established repurchase periods, subject to certain vehicle condition and
mileage requirements. Repurchase prices under the repurchase programs are based
on either (i) a predetermined percentage of original car cost and the month in
which the car is returned or (ii) the original capitalization cost less a set
daily depreciation amount. These repurchase programs limit a car rental
company's residual risk with respect to cars purchased under the programs. This
enables car rental companies to determine depreciation expense in advance. The
Company believes that most

39
<PAGE> 40

cars in the fleets of U.S. car rental companies are these "non-risk" cars. See
"Risk Factors -- Risks Related to Decreased Acquisition or Disposition of Cars
Through Repurchase Programs".

The U.S. car rental industry is recovering from a difficult period, which has
been characterized by substantially rising fleet costs and significant pricing
pressure. In the early 1990s, car rental companies benefited from incentives to
purchase cars provided by automobile manufacturers that desired an additional
distribution outlet for their products. Automobile manufacturers pursued this
outlet as a result of overcapacity and decreased new car demand that prevailed
at the time. These incentives allowed car rental companies to expand
significantly the size of their fleets at relatively low cost and with high cash
incentives. However, an oversupply condition was created within the car rental
industry as a result of these increased fleet sizes. This acted to intensify
competition and depress industry-wide pricing. As general economic conditions in
the United States improved during the years 1992 through 1994, fleet costs
significantly increased. Continued competition inhibited corresponding increases
in average daily rental rates, which had an adverse effect on industry-wide
profitability.

The Company believes that, recently, the U.S. car rental industry has
experienced increases in profitability. Average daily rental rates have
increased as oversupply conditions have been reduced.

Significant changes in the ownership of participants in the domestic car rental
industry have occurred over the past year. HFS, Inc. purchased Avis, Republic
Industries acquired Alamo and National and Team Rental Group, Inc. has reached
an agreement to acquire Budget. The Company believes that these companies will
be increasingly focused on profitability, resulting in increased prices in the
United States.

International. The European market represents the majority of the car rental
industry's revenues outside the United States. The three largest European
markets are France, Germany and the United Kingdom. The Company estimates that
the total 1995 revenues for the car rental industry in Europe were in excess of
$5 billion. The European market consists of a number of worldwide and European
participants, including owned and franchised locations of some of the major U.S.
car rental companies and a number of European companies, including Sixt AG
(Budget), Europcar and EuroDollar. Similar to the U.S. market, the European car
rental industry is characterized by intense competition. Pricing pressure
continues to inhibit increases in average daily rental rates. The industry has
experienced significant growth in the leisure sector due to developing airline
deregulation in the Pan-European market. The Company believes that the leisure
market currently represents approximately 45% of the European market based on
revenues. European car rental companies purchase their fleets from a larger
number of automobile manufacturers than in the United States. These
manufacturers have substantial production capacity, resulting in intense
competition and favorable pricing of cars for car rental companies in recent
years.

Other significant international car rental markets in which the Company competes
include Australia, Canada, New Zealand, Puerto Rico and Brazil.

U.S. Operations

Car Rental. The Company provides car rental services throughout the United
States in or around all major U.S. cities and operates a nationwide, toll-free
reservations system. Car rental facilities are operated at all major airports
and in the central business districts and key suburban commercial centers in
major U.S. cities. The Company estimates that airport revenues accounted for
approximately 84% of its car rental revenues in the United States in 1996. The
Company also maintains arrangements with selected hotels and railroad terminals
to facilitate car rentals at such locations.

The Company uses a wide variety of makes and models of cars for daily rental
purposes, nearly all of which are current year or the previous year's models.
The Company rents cars on a daily, weekend, weekly or monthly basis, with rental
charges computed on a limited or unlimited mileage rate, or on a time rate plus
a mileage charge. The Company's rates vary at different locations depending on
local market, competitive and cost factors, and virtually all rentals are made
utilizing rate plans under which the customer is responsible for gasoline used
during the rental. In addition to car rentals and licensee

40
<PAGE> 41

fees, the Company generates revenues from providing customers with ancillary
products and services such as Hertz #1 Club Gold, the Company's Rent It
Here-Leave It There program, supplemental equipment (child seats, ski racks and
portable cellular phones), loss or collision damage waiver, liability insurance
and personal effects coverage, Hertz NeverLost and gasoline payment options.

For the year ended December 31, 1996, the Company conducted operations through
approximately 700 owned locations. Company-owned locations are those locations
through which the Company rents cars which it owns, as compared to licensee
locations through which licensees rent cars that they own. The Company believes
that its extensive worldwide ownership of its operations contributes to the
consistency of its high-quality service, strict cost control, fleet utilization,
yield management, competitive pricing and the Company's ability to offer one-way
rentals through its Rent It Here-Leave It There program. However, in certain
smaller domestic markets, the Company has found it more efficient to operate
through licensees. Domestic licensee locations numbered approximately 400 at
December 31, 1996. Together with its licensees, the Company operated a peak
domestic fleet of more than 242,000 cars in 1996. At December 31, 1996, the
Company owned 94% of all the cars in the combined company-owned and licensee
fleet.

The Company has concession agreements at over 200 airports in the United States.
These agreements are entered into with airport authorities, either through
negotiation or a bidding process, for a fixed number of car rental counter
positions. The agreements typically provide for concession payments based upon a
specified percentage of revenue generated at the airport, subject to a minimum
annual fee, and sometimes include fixed rent for terminal counters or other
leased properties and facilities.

The Company maintains automobile maintenance centers at certain airports and in
certain urban and suburban areas, providing maintenance facilities for the
Company's rental fleet. Many of these facilities, which include sophisticated
car diagnostic and repair equipment, are accepted by automobile manufacturers as
eligible to perform and receive reimbursement for warranty work. Collision
damage and major repairs are generally performed by independent contractors.

The Company believes its U.S. operations are supported by competitively superior
information systems and product delivery. The Company's global reservations
system operates through real-time, on-line centers on five continents. Among
other advantages, this advanced reservations system allows customers throughout
the world to book reservations for rentals at any location worldwide. See "--
Strategic Information Systems". An example of the Company's differentiated
product delivery is its Hertz #1 Club Gold canopied service operated at 38
airports in the United States. This service permits members to bypass the rental
counter and proceed directly to a weather-protected canopied area. In addition,
there are over 200 locations with expedited Gold counter service. See "--
Services Provided -- Hertz #1 Club Gold".

H.I.R.E. -- Insurance Replacement. The Company, under the H.I.R.E. brand name,
provides replacement car rental services primarily to local customers in the
United States whose automobiles are out of service, generally due to an
accident, theft or mechanical problem. A high percentage of these rentals are
referrals from insurance companies, which generally pay for all or a significant
portion of the cost of such rentals.

The Company believes that the insurance replacement business, particularly
because of its lower cost base (resulting from the longer average vehicle
holding periods and other factors) and longer average rental transaction
lengths, represents a significant opportunity for the Company without diluting
penetration in its traditional customer base. By leveraging the Company's brand
name and systems, H.I.R.E. is well positioned for expansion. H.I.R.E. commenced
rental operations in July 1995 and currently operates 50 rental locations in six
states, utilizing a total fleet of approximately 2,600 cars. By December 31,
1997, the Company expects that H.I.R.E. will operate through more than 80
locations with approximately 6,000 cars. The Company intends to capitalize on
agreements with major insurance carriers which are in the process of being
negotiated, and its own sales, technology and marketing expertise to increase
its market share.

41
<PAGE> 42

H.I.R.E. rents cars on a daily, weekend, weekly or monthly basis and derives
additional revenues from the sale of loss or collision damage waivers and
gasoline payment options. Rates vary at different locations depending on local
market conditions and competitive factors. H.I.R.E.'s operations are subject to
seasonal fluctuation, with greater activity occurring during the summer months
because of heavier driving activity and the winter months because of hazardous
driving conditions. H.I.R.E. generally will hold its cars for 18 to 24 months,
compared with 5 to 12 months for the Company's domestic car rental business,
resulting in lower monthly holding costs. H.I.R.E. operates a fleet of
predominantly "at risk" cars and disposes of these cars through the Company's
retail sales operations and auctions. See "-- Used Car Sales".

International Operations

At December 31, 1996 the Company, together with its affiliates and licensees,
operated in approximately 140 foreign countries and jurisdictions. Outside the
United States, and primarily in Europe, the Company operates through
approximately 1,450 locations owned by the Company and 2,410 licensee locations,
and during 1996, operated a combined peak fleet of approximately 147,000 cars.
In general, international operations are conducted similarly to those of the
Company in the United States. Although the Company has found it more efficient
to conduct a greater proportion of its international operations through
licensees as compared to the Company's U.S. operations, it continues to conduct
its operations primarily through Company-owned locations in the major European
markets. The international car rental operations of the Company that generated
the highest volumes of business in 1996 were those conducted in France, Germany,
the United Kingdom, Italy, Canada, Spain, Australia and Switzerland. In
addition, the Company owns operations in Puerto Rico, St. Thomas, New Zealand,
Brazil, Belgium, Denmark, Luxembourg, The Netherlands, Norway and Portugal. The
Company believes that, as in the United States, it maintains the leading airport
car rental market share in Europe with a 1996 market share of approximately 30%
in terms of revenues.

As in the United States, the Company offers Hertz #1 Club Gold service at most
major airport locations within Europe, Canada, Australia and New Zealand. The
Company's global reservations system allows customers worldwide to book
reservations in any of the Company's worldwide markets. Additionally, a local or
toll-free telephone number is offered in all major foreign countries which
provides access to the Company's global reservations system.

Services Provided

The Company offers a wide array of services to its customers, subject to varying
conditions, that provide added value to its core service of renting cars. These
services include:

Hertz #1 Club Gold. The Company provides an expedited rental service that
permits members of this service to bypass the rental counter, board the
Company's bus and proceed directly to a weather-protected Hertz #1 Club Gold
canopied area at 38 U.S. airports and Heathrow International Airport in the
United Kingdom. Once at the canopied area the member's name appears in lights on
an electronic sign board which directs the member to his or her car. At over 600
additional locations, expedited Gold counter service is available where canopied
service is not. Since its introduction, Hertz #1 Club Gold has grown to
approximately 650 locations in North America, Europe, Australia and New Zealand.
As a significant source of business, Hertz #1 Club Gold service provides product
differentiation and complements the Company's many other services. The Company
has spent approximately $175 million in developing its Hertz #1 Club Gold
Service. At December 31, 1996, there were approximately two million active Hertz
#1 Club Gold members who accounted for approximately 35% of the Company's U.S.
car rental transactions in 1996. Through its many travel industry relationships
with airlines and hotels, the Company has targeted the most frequent travelers
to become Hertz #1 Club Gold members.

The Hertz #1 Club. As a complimentary service, the Company maintains a
computerized profile of customer car rental preferences for its members. By
providing their personal Hertz #1 Club

42
<PAGE> 43

identification numbers at the time of reservation, customers can save valuable
time at the rental counter.

Global Reservations System. An advanced reservations system allows customers
throughout the world to book reservations worldwide where the Company, its
affiliates or its licensees maintain operations. In the United States and
certain foreign countries, this service is provided toll-free or as a local
call. This system permits travel agents and certain airline reservation agents
to book reservations directly through their systems. The Company's Internet
Website has recently become fully interactive allowing customers to book
reservations electronically on their own.

Instant Return. At over 110 of its airport locations in the United States,
Europe and Australia, the Company offers customers instant return service. At
the point where the car is returned, a Company representative meets the customer
at the car, and provides the customer with a final receipt from a hand-held
computer terminal.

Rent It Here-Leave It There. The Company and its licensees offer customers in
most parts of the world the convenience of leaving a rented car at a Company or
licensee location other than the one from which it was rented. Depending upon
rental location and distance driven, a drop-off charge or a special inter-city
rate may be imposed if the car is not returned to the same location from which
it was rented.

Supplemental Equipment. For an additional charge, the Company offers
supplemental equipment to complement the rental car. Available equipment
includes such items as child seats, ski racks and portable cellular phones. In
addition, the Company offers hand control-equipped cars for the physically
challenged at no extra charge.

Optional Services. At the time of rental, subject to applicable local law, the
Company offers renters the opportunity to purchase optional services such as
Loss Damage Waiver (LDW), Collision Damage Waiver (CDW), Liability Insurance
Supplement (LIS) and combined Personal Accident Insurance and Personal Effects
Coverage (PAI and PEC). These optional services, available for an additional
daily fee, provide additional financial protection for renters and their
passengers. LDW and CDW waive the renter's responsibility to the Company for
loss of or damage to the car while on rental. LIS provides primary liability
coverage from an insurance carrier for protection against third party claims, in
most cases, up to a $1 million combined single limit. PAI and PEC provide
coverage from an insurance carrier for loss of or damage to covered personal
effects as well as accidental injury or death benefits to covered persons.

Computerized Driving Directions. At many locations in North America and Europe,
state of the art counter terminals offer computerized driving directions to
hundreds of area destinations. The unit provides written directions in multiple
languages, and also provides a full color map display of the destination area
that includes local streets and address information. Currently, a point-to-point
enhancement is underway.

Hertz NeverLost. For an additional daily charge at select locations in the
United States, the Company offers a state of the art, in-car satellite
navigation system, known as "Hertz NeverLost". This on-board computer provides
real-time turn-by-turn route guidance that displays the exact location of the
car at all times and can calculate the best route to reach any of the thousands
of destinations within its database. Easy to read icons along with voice
instructions direct customers to their destination. Approximately 7,000 cars are
currently equipped with the system.

Emergency Roadside Assistance. The Company maintains a U.S.-based toll-free,
24-hour centralized emergency roadside assistance number staffed with trained
professionals whose primary goal is to get the customer back on the road with as
little inconvenience as possible. Similar services are offered in selected
foreign countries.

Charge Card. In the United States, the Company's charge cards are issued
predominantly to business accounts. The Company provides customers with
individual invoices for each rental or, if preferred, a monthly statement,
providing for payment on receipt. In Europe, the Company's charge cards are
issued

43
<PAGE> 44

to individuals and business accounts. Depending on the country, the Company's
cards may be in the form of a debit, credit or charge card, providing for
payment on receipt or upon extended terms at set interest rates. Currently,
there are over 3.7 million charge cards issued worldwide, charges on which
accounted for approximately 7% of 1996 sales.

Revenue Management

The Company uses a point-of-sale revenue management program through which
counter sales representatives sell car upgrades, supplemental equipment and
optional services. This program of identifying and satisfying additional
customer requirements enhances the Company's revenues and transaction yields.
The Company's counter agents receive additional compensation for sales of these
services and products.

Customers

To focus its marketing, sales and pricing functions, the Company divides its
customers into two groups, business and leisure. Business customers include
large commercial accounts, small business accounts and government authorities.
In 1996, business customers generated approximately 51% of the Company's U.S.
car rental revenue on 58% of the Company's U.S. car rental transactions. At
December 31, 1996, the Company's business customers included 357 of the Fortune
500 companies. The Company was designated as the exclusive supplier of rental
cars by 18 of the 40 Fortune 500 companies (or 45%) that named sole suppliers
and the primary supplier of rental cars by 149 of the 347 Fortune 500 companies
(or 43%) that named a primary/secondary supplier.

Leisure customers, including wholesale tour customers, represent the balance of
the Company's U.S. car rental revenues and transactions, or approximately 49% of
the Company's U.S. car rental revenue on 42% of the Company's U.S. car rental
transactions. Revenue per transaction is higher for leisure rentals as compared
to business rentals because leisure rentals are generally for longer periods.
The Company's success in the leisure market is the product of its quality of
service and the Company's competitive pricing. A significant number of leisure
customers are the same customers who rent from the Company on business. Over the
last several years, the relative proportion of the Company's revenues from
business and leisure customers has remained stable.

In 1996, the Company's business customers generated approximately 52% of the
Company's international car rental revenues on 60% of the Company's
international car rental transactions. In 1996, the Company's international
leisure customers generated approximately 48% of the Company's international car
rental revenues on 40% of the Company's international car rental transactions.

Marketing, Sales and Advertising

The Company has a worldwide marketing and sales organization of over 800 people
focused on both commercial accounts/group sales and the travel industry,
including travel agents as well as a comprehensive program of retail and trade
advertising, direct mail and other targeted marketing (such as special rental
packages for skiers, golfers, etc.).

The Company's commercial and group sales force has a staff of over 200
throughout the United States to support larger commercial accounts, smaller
corporate affiliations, government and group relationships (such as the American
Automobile Association, the American Association of Retired Persons, the
American Bar Association, the American Medical Association, etc.). In order to
provide targeted sales to the travel industry community, the Company has over 60
sales employees and over 100 independent contractors throughout the United
States, all of whom service travel agents, airlines, tour wholesalers and
related sources of rentals. As a result, the Company has relationships with more
than 35 domestic and international airlines and in excess of 500 tour operators.
In addition, the Company maintains a comprehensive commission program for travel
agents worldwide.

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<PAGE> 45

In the United States, the Company markets to leisure customers predominantly
through television and radio media advertising and through newspaper and
magazine print advertising. Print advertising is primarily rate-related,
highlighting leisure destination rates for weekly and weekend rentals.

The Company conducts an active national and international advertising program,
the cost of which is supported in part by contributions from the Company's
independent licensees. The Company is also a party to a cooperative advertising
agreement with Ford pursuant to which Ford shares some of the cost of certain of
the Company's advertising programs in the United States and abroad that feature
the Ford name or products. See "Relationship with Ford -- Joint Advertising
Agreement". The advertising programs also involve cooperative advertising
arrangements with airlines, hotels and others in the travel industry.

During the five-year period ended December 31, 1996, the Company's total
advertising and related expenditures (almost all of which were related to car
rental operations) and the sources contributing thereto were approximately as
follows:

<TABLE>
<CAPTION>
--------------------------------------------------------
DOLLARS IN THOUSANDS 1996 1995 1994 1993 1992
PAID BY -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
The Company and Subsidiaries.......... $148,034 $134,487 $133,600 $101,281 $104,757
Ford.................................. 45,459 44,112 41,994 40,259 35,692
Licensees............................. 8,454 8,740 8,800 8,154 7,285
-------- -------- -------- -------- --------
Total............................ $201,947 $187,339 $184,394 $149,694 $147,734
======== ======== ======== ======== ========
</TABLE>

In addition, licensees spend additional amounts for local advertising and sales
promotions that feature the "Hertz" name.

Quality Assurance

The Company believes that quality of service is of critical importance to
customer satisfaction and brand loyalty. Accordingly, the Company places a high
priority on monitoring and evaluating customer satisfaction through a series of
rating systems and management reporting. Customer feedback received through
comment cards, customer letters and telephone calls is reported, coded,
tabulated and evaluated. These reports highlight repetitive problem areas and
help to identify the underlying causes that ultimately result in corrective
actions being taken.

The Company's locations receive periodic, unannounced inspections by an internal
team of experienced service quality auditors. The results of these extensive
examinations are tabulated and quality ratings are assigned. These reports
receive significant management attention.

The Company screens and evaluates telephone calls at each of the Company's
toll-free numbers to monitor the quality of customer service. This information
is utilized to improve the quality at the Company's global reservations centers.
Periodic focus groups are also utilized to determine and track customer
perceptions toward the Company's services and pricing compared with its
competition.

The Company's procedures call for each rental car to undergo a quality control
check prior to each rental. These procedures ensure that customers receive
clean, quality cars that meet the Company's high safety and quality standards.

In independent research conducted for the Company, among U.S. car rental
customers over the last three years, the Company has been ranked best overall
car rental company by a significant margin. In addition, the Company has
received numerous awards and designations from independent third parties. Among
others, the Company received the following awards in each of the last three
years: Conde Nast Traveler -- "Readers' Choice Award"; TTG World Travel Awards
- -- "World's Leading Car Rental Company"; Business Traveler Award -- "Best Car
Rental Company"; TTG Europa Travel Award (International) -- "Top Car Rental
Company"; and Asia Pacific Award (awarded by TTG Asia and PTN Asia Pacific) --
"Best Car Rental Company in Asia Pacific".

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<PAGE> 46

Car Acquisition

The Company believes it is the largest single private purchaser of new cars in
the world, acquiring approximately 300,000 cars in the United States and a total
of 500,000 cars worldwide during the 1996 model year. Consequently, the
acquisition and disposition of cars are important activities for the Company and
have a significant impact on profitability. The Company acquires, subject to
availability, a majority of its cars pursuant to various fleet repurchase
programs established by automobile manufacturers. Under these programs,
automobile manufacturers agree to repurchase cars at a specified price during
established repurchase periods, subject to certain car condition and mileage
requirements. Repurchase prices under the repurchase programs are based on
either (i) a predetermined percentage of original car cost and the month in
which the car is returned or (ii) the original capitalization cost less a set
daily depreciation amount. These repurchase programs limit the Company's
residual risk with respect to cars purchased under the programs. For this
reason, cars purchased by car rental companies under repurchase programs are
sometimes referred to by industry participants as "non-risk" cars. Conversely,
those cars not purchased under repurchase programs for which the car rental
company is exposed to residual risk are sometimes referred to as "at risk" cars.
During 1996, non-risk cars as a percentage of all cars operated by the Company's
U.S. and international operations were approximately 91% and 85%, respectively.
The Company expects the percentage of "non-risk" cars in its rental fleet to
decrease due primarily to anticipated changes in the terms to be offered by
automobile manufacturers under repurchase programs. The Company believes such
terms will encourage the Company to purchase a larger proportion of "at risk"
cars. For a discussion of the risks associated with this trend, see "Risk
Factors -- Risks Related to Decreased Acquisition or Disposition of Cars Through
Repurchase Programs".

The holding period for the Company's rental cars ranges from 5 to 12 months. The
Company's flexibility to adjust the holding period for cars, particularly under
repurchase programs with automobile manufacturers, enables the Company to adjust
its fleet size up or down relatively quickly in response to changing market
conditions. At December 31, 1996, the average age of rental cars in the
Company's fleet was 7 months.

Over the five years ended December 31, 1996, on a weighted average basis,
approximately 68% of the cars acquired by the Company for its U.S. car rental
fleet, and approximately 34% of the cars acquired by the Company for its
international fleet, were manufactured by Ford. During 1996, approximately 64%
of the cars acquired by the Company domestically were manufactured by Ford, 5%
were manufactured by General Motors Corporation, 5% were manufactured by
Chrysler Corporation and the remainder were manufactured by various Japanese,
Korean and European manufacturers. The percentage of Ford cars acquired by the
Company for its U.S. car rental fleet is expected to remain at these or higher
levels in the future. See Note 7 to the Notes to the Company's consolidated
financial statements included in this Prospectus. In its foreign operations, the
Company utilizes cars manufactured abroad by subsidiaries of Ford and by other
manufacturers. In 1996, approximately 28% of the cars acquired by the Company
for its international fleet were manufactured by Ford, which represented the
largest percentage of any automobile manufacturer in that year. Negotiations
with automobile manufacturers include determination of the initial purchase
price of the car and establishment of the payment terms. New car repurchase
programs or residual value guarantees, approval for using the Company's
facilities for warranty repairs, as well as the establishment of cooperative
advertising and promotion programs also are negotiated with the manufacturers.
See "Relationship with Ford -- Car Supply Agreement".

Purchases of cars are financed through funds provided from operations and by
active and ongoing global borrowing programs. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources".

46
<PAGE> 47

Used Car Sales

The Company disposes of "at risk" cars as well as those "non-risk" cars that are
not returned to the manufacturer through auctions, 41 domestic retail car sales
locations and, in Europe, through wholesale operations. Upon the sale of a car,
the difference between the net proceeds from sale and the remaining book value
is recorded as an adjustment to depreciation in the period when sold. See Note 7
of the Notes to the Company's consolidated financial statements included in this
Prospectus.

In connection with its expectation that the percentage of "at risk" cars in its
rental fleet will increase, the Company expects to expand its domestic retail
network by approximately 44% (or 18 locations) during 1997. The Company also
plans to open up to three large-scale retail sales locations in the fourth
quarter of 1997, at each of which the Company expects to sell 2,500 to 3,500
units annually, compared with the current average individual location volume of
over 400 units per year.

In expanding its retail used car sales operations, the Company intends to
leverage the "Hertz" brand name and its reputation for innovation, customer
service and vehicle maintenance. Key elements of the Company's retail expansion
plan, which the Company has successfully employed in the past, include no-haggle
pricing and providing a complete maintenance history for each car. Specifically
tailored strategic information systems provide for timely and highly centralized
control of car inventories and pricing. Generally, cars sold by the Company
continue to be covered by the manufacturer's warranty. The Company provides a 12
month/12,000 mile powertrain warranty from time of sale for no additional charge
and various comprehensive warranties covering all major components for
additional charges.

Licensees

While the Company believes that its extensive worldwide ownership of its
operations provides an important competitive advantage, the Company has found it
more efficient to operate through licensees in certain markets. As of December
31, 1996, the Company's licensees operated from approximately 3,200 locations
worldwide. The Company believes that its licensee arrangements are important to
the Company's business because they enable the Company to offer expanded
national and international service and a broader Rent It Here-Leave It There
program. The Company's wholly-owned subsidiaries, Hertz System, Inc. ("System")
and Hertz International, Ltd. ("International"), issue licenses under franchise
arrangements to independent licensees and affiliates who are engaged in the car
renting business in the United States and in many foreign countries and
jurisdictions.

Licensees generally pay fees based on the number of cars they operate and/or on
revenues. The operations of all licensees, including the purchase and ownership
of vehicles, are financed independently by the licensee with the Company having
no investment interest in the licensee (except for two foreign licensees) or in
the licensee's fleet. Licensees also share in the cost of the Company's
advertising program, reservations system, sales force and certain other
services. In return, licensees are provided with the use of the "Hertz" brand
name, management and administrative assistance, training, the availability of
the Company's charge cards, The Hertz #1 Club, reservations service, the Rent It
Here-Leave It There program and other services. System, which owns the Company's
service marks and trademarks and certain proprietary know-how used by licensees,
establishes the uniform standards and procedures under which all such licensees
operate.

System licenses ordinarily are limited as to transferability without the
Company's consent and are terminable by the Company only for cause or after a
fixed term. Licensees may generally terminate for any reason on 90 days notice
to System. Initial license fees or the price for the sale to a licensee of a
corporate location may be payable over a term of several years. New licenses
continue to be issued, and, from time to time, licensee businesses are purchased
by the Company.

In 1988, the Company sold its 50% interest in Hertz Penske Truck Leasing, Inc.,
which has been succeeded by Penske Truck Leasing Co., L.P., ("Penske"), and
entered into a license agreement under which Penske has the right, as a licensee
of the Company, to conduct a one-way truck rental business

47
<PAGE> 48

(including trailers) using the "Hertz" name for a 10 year period ending in 1998.
With certain exclusions the license agreement covers the entire United States.

Car Leasing

Hertz owns 100% of its car leasing operations in Australia, New Zealand and
Brazil. Leases are generally closed-end where the Company is subject to risk
with respect to the market value of cars at the time of disposition.

Effective January 1, 1995, the Company sold its European car leasing and car
dealership operations to Hertz Leasing International, Inc., an indirect,
wholly-owned subsidiary of Ford ("HLI"), at an amount equal to its book value of
approximately $61 million. As part of the transaction and for additional
consideration payable over five years, Ford received the worldwide rights
(subject to certain existing license rights and excluding Australia, New Zealand
and Brazil) to use and sublicense others to use the Hertz name in the conduct of
car leasing businesses (i.e., rentals having terms of one year or longer). Prior
to completion of the Offerings, Ford will transfer back to the Company, subject
to a transition period of not less than one year, the right to use the "Hertz"
name in the conduct of the car leasing business, but will continue to make
payments in respect of its previous obligation. See Note 5 to the Notes to the
Company's consolidated financial statements included in this Prospectus.
Following such transfer, the Company intends to expand its car leasing business.

INDUSTRIAL AND CONSTRUCTION EQUIPMENT RENTAL OPERATIONS

Industry Overview

Through its wholly-owned subsidiary, HERC, the Company operates what it believes
to be the largest industrial and construction equipment rental business in the
United States. The equipment rental industry serves a wide variety of
industrial, construction and homeowner customers. The Company estimates that
1995 annual revenues for the U.S. equipment rental industry were $15 billion.

The equipment rental industry is highly fragmented and consists of a large
number of small, independent businesses serving local markets. The Company
believes that there are over 7,000 equipment rental operators in the United
States with approximately 12,000 locations. According to the Rental Equipment
Register, only 23 of the top 100 equipment rental firms in the United States had
rental revenues in excess of $25 million in 1995. Management believes the
equipment rental industry in the United States offers substantial consolidation
opportunities for large, well-capitalized companies such as HERC. Relative to
small regional competitors, large multi-regional operators such as the Company
benefit from several competitive advantages, including access to capital, the
ability to offer a broad range of modern equipment, purchasing power with
equipment suppliers, sophisticated management information systems, national
brand identity and the ability to service national accounts. In addition,
multi-regional operators are less sensitive to local economic downturns.

Renting has become a more attractive alternative for companies to meet their
equipment needs. Customers are replacing fixed costs inherent in purchasing
equipment with variable costs by renting and achieving greater operating
flexibility and improved productivity of capital. Because of the significant
capital investments required to purchase heavy equipment, the shift to renting
has been particularly pronounced in the heavy equipment categories in which HERC
specializes. Changes under the Tax Reform Act of 1986, such as repeal of the
investment tax credit and the requirement for longer depreciable lives for tax
purposes, have also made renting more attractive to customers.

Products and Services Offered

Industrial and construction equipment rental represents HERC's principal service
offered. HERC rents over 150 types of equipment, major categories of which
include earth moving equipment, materials handling equipment, aerial and
electrical equipment, air compressors, compaction equipment and
construction-related trucks. Earth moving, materials handling and aerial
equipment accounted for 72%

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<PAGE> 49

of HERC's net fleet investment at December 31, 1996. HERC's more than 33,000
pieces of rental equipment have a weighted average age of 19.7 months and an
original investment cost of approximately $908 million at December 31, 1996. The
Company believes that HERC's fleet is the largest, youngest and best maintained
in the industry.

HERC is one of the largest sellers of used industrial and construction equipment
in the United States. It has developed an extensive used equipment sales program
that disposed of equipment having an original cost of over $140 million in 1996.
HERC has a dedicated used equipment sales force and, in addition, has developed
an export market through its overseas contacts. Additionally, HERC has in the
past and may, from time to time in the future, employ a broker network in the
United States to dispose of its used equipment.

HERC's comprehensive line of equipment enables HERC to be a single source for
its customers' equipment needs. Certain customers are beginning, however, to
require a single source not only for equipment rental but also for supplies and
maintenance operations. In response to this trend, HERC anticipates entering the
market for supplies and maintenance operations in 1997 through selected
acquisitions or otherwise.

The Company believes that HERC's superior customer service differentiates it
from its competitors. HERC also offers the following additional services:

- National network of branches to meet local demand and timely
delivery

- Customer driven performance system to monitor customer service

- Customized management information system reports

- 24 hour service for industrial accounts

- Customer safety training programs

- In-house and field maintenance by factory trained mechanics

Facilities

HERC currently operates 120 equipment rental branches ("branches"), 115 of which
are located in the United States across 31 states, and five of which are located
in France and Spain.

The following table shows the number of HERC branches over the five years ended
December 31, 1996:

<TABLE>
<CAPTION>
------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Beginning locations......................................... 104 95 85 89 93
New openings................................................ 17 9 11 -- 2
Locations closed............................................ (1) -- (1) (4) (6)
--- --- -- -- --
Ending locations............................................ 120 104 95 85 89
=== === == == ==
</TABLE>

HERC's rental locations are generally situated in industrial or commercial
zones. The average location is two acres in size and includes a customer service
center, an equipment service area and storage facilities for equipment. The
branches are built or conformed to the specifications of the HERC prototype
branch which stresses efficiency, safety and environmental compliance. Each
branch has stand-alone maintenance and fueling facilities and showrooms. Of the
120 present locations, 89 are leased from third parties and 31 are owned.

Customers

HERC's customers consist predominantly of commercial accounts and represent a
wide variety of industries, such as railroad, automobile manufacturing,
petrochemicals, movie production, ship building and construction. Serving a
number of different industries enables HERC to reduce its dependence on a single
or limited number of customers in the same business. HERC has over 58,000
customers, and in

49
<PAGE> 50

1996 no single customer of HERC accounted for more than 3% of its revenues. HERC
primarily targets large customers in medium to large metropolitan markets.

HERC has sought over the past several years to diversify and stabilize its
revenue mix by reducing the portion of its revenues which are derived from
customers which operate in the more cyclical construction industry. The
following table shows the percentage of HERC revenues derived from different
types of customers in 1996 and 1990:

<TABLE>
<CAPTION>
------------
1996 1990
---- ----
<S> <C> <C>
Construction................................................ 46% 57%
Industrial.................................................. 34 27
Government.................................................. 4 5
Other....................................................... 16 11
--- ---
Total.................................................. 100% 100%
=== ===
</TABLE>

HERC operations in the United States are organized and managed in eight
geographic regions. During each of the five years ended December 31, 1996, no
single geographic region accounted for more than 20% of HERC's revenues. This
geographic diversification means HERC is better positioned to withstand a
regional recession than its local or regional competitors who, the Company
believes, are highly dependent on the economic condition of a single region.

The table below sets forth the percentage of HERC's revenues derived from each
of HERC's operating regions for the year ended December 31, 1996.

<TABLE>
<CAPTION>
----------
REGION PERCENTAGE
------ ----------
<S> <C>
Southeast................................................... 20%
Western..................................................... 14
Northeast................................................... 13
Northwest................................................... 13
Florida..................................................... 12
Southwest................................................... 12
Midwest..................................................... 11
Northcentral................................................ 5
---
Total..................................................... 100%
===
</TABLE>

Sales and Marketing

HERC focuses its major sales and marketing strategy on large local and
multi-regional users of industrial and construction equipment. The strategy is
led by a national accounts sales organization consisting of 15 people and is
backed by a field sales force of 340 highly trained sales professionals. Each
branch has its own dedicated sales force.

HERC's national account program began in 1983 and has over 1,700 national
account agreements with major regional and national companies. Revenues from
national accounts have grown at a 25.6% compound annual rate from $11 million in
1984, the first full year of the national accounts program, to $170 million in
1996, representing 43% of HERC's 1996 revenues.

HERC's national sales force effectively emphasizes HERC's strengths such as its
geographically diverse system of branches and the size, consistency and quality
of HERC's fleet. HERC reaches its smaller accounts through a local sales force.
The Company believes that the combination of HERC's professional sales force,
high quality fleet and the ability to transfer equipment from various locations
to satisfy local demands provides a competitive advantage.

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<PAGE> 51

Information Systems

The Company believes that HERC uses the most sophisticated information systems
in the equipment rental industry and that HERC has benefitted substantially from
the Company's investment in strategic information systems used by the car rental
business.

Using techniques substantially the same as those employed in the Company's car
rental operations, HERC uses its information systems, which link its various
rental locations, to enhance profitability by allowing centralized management
control of each piece of equipment in the rental fleet, monitoring demand by
location to assist in maintaining high utilization and managing the acquisition
and disposition of equipment.

Equipment Maintenance

Each HERC facility performs its own preventive maintenance. Centralized computer
programs link all HERC facilities to monitor on-time preventive maintenance as
well as annual American National Standard Institute and Department of
Transportation inspections. This process is designed to ensure peak equipment
performance and availability, and reduces the need for major repairs, resulting
in approximately 99% of HERC's fleet being rented or available for rental at any
time. Other automated programs track mandatory safety and service modifications
and equipment deadlines. HERC has developed comprehensive in-house warranty
programs to repair equipment on behalf of manufacturers and is eligible to
receive reimbursement for such work.

Equipment Acquisition

Equipment purchasing is centralized to leverage and maintain what the Company
believes is the lowest average fleet costs within the equipment rental industry.
The Company believes that HERC is the largest single buyer of industrial and
construction equipment within the equipment rental industry. During 1996, HERC
made $378.4 million of rental equipment acquisitions and other capital
expenditures.

HERC selectively buys its equipment from vendors with reputations for high
product quality, reliability and significant market share. Some of HERC's
leading suppliers include Case Corporation, Lull Industries, Inc, the Gradall
Co., Deere & Company (John Deere equipment), Ingersoll-Rand Company, JLG
Industries, Inc. and Ford.

Centralized purchasing has allowed HERC to standardize its fleet specifications
by model and geographic needs, allowing for economies of scale. HERC has
developed a fully automated fleet planning and purchasing process that
streamlines and expedites fleet orders.

The Company believes that HERC's fleet age is a major competitive advantage and
assures customer satisfaction with equipment as well as lower maintenance costs.
Through aggressive used equipment sales, the Company has been able to maintain
an average fleet age of 19.7 months.

The Company is generally "at risk" with respect to all the equipment used in its
industrial and construction equipment rental operations.

Fleet Disposal

The Company believes that HERC is the largest distributor of used industrial and
construction equipment in the United States and has established itself as a
highly reliable supplier of used equipment. In 1996, HERC disposed of equipment
having an original cost of over $140 million. All used equipment is sold
directly from branch locations.

Pricing for used HERC equipment has been centralized. Relationships with major
equipment brokers and wholesalers allow HERC to trim fleet levels and mix to
improve utilization. HERC publishes The Source magazine two to three times per
year and distributes it nationally to over 40,000 customers and

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prospects. This full color publication advertises price, model, year and
location of used equipment for sale. The Company also prints a Spanish version.

This overall used equipment strategy has allowed HERC to maintain what it
believes to be the youngest fleet in the industry by selling off assets that are
between 24 and 60 months old on average. With a younger fleet, HERC has
significantly reduced its maintenance and repair costs which are largely covered
by manufacturer warranties. The Company has been able to exploit its significant
presence in the U.S. market for sales of used industrial and construction
equipment, to actively manage its fleet size and, in particular, to reduce fleet
levels during typical seasonal downturns.

STRATEGIC INFORMATION SYSTEMS

Centralized control, achieved through the use of the Company's strategic systems
technology, of major business processes such as reservations, rate structures
and fleet control provides the disciplined environment in which the Company can
deliver consistent quality service at its car rental and equipment rental
operations. The Company has over 3,900 MIPS (millions of instructions per
second) of computing power and over four Terabytes (trillion characters) of
online data storage to run its global reservations, point-of-sale,
administrative and financial systems. The Company maintains real-time
communications with its many locations by means of what it believes is the
largest private data network in the industry.

In 1991, the Company began centralizing its worldwide information technology
resources in Oklahoma City, Oklahoma. This project, which is expected to be
completed by 1999, is expected to allow the Company to gain efficiencies in
support and development and to continue improving productivity and cost
effectiveness.

Global Reservations System

The Company's global reservations system operates through real-time, on-line
centers on five continents. Direct access with other computerized reservations
systems allows real-time processing for travel agents and corporate travel
departments. Company rental locations worldwide depend upon the global
reservations system to provide information critical to fleet and personnel
planning, rate management and the timely computerized delivery of reservations.
Customer information captured and made available in the reservations process
support such premium services as Hertz #1 Club Gold.

The Company's reservations system annually handles approximately 40 million
incoming calls, during which customers inquire about locations, rates and
availability, and place or modify reservations. In addition, millions of
inquiries and reservations come to the Company through travel agents and travel
industry partners. The Company maintains and continually monitors quality
standards for accuracy and consistency in the reservations process. Regardless
of where in the world the customer may be, the Company's reservations system is
designed to ensure that availability of cars, rates and personal profile
information is reliably applied and that correct information is delivered at the
proper time to the customer's rental destination.

The Company expects to complete its transition to a state of the art,
client-server based reservations system at its Oklahoma City reservations center
in the second quarter of 1997. This new system is expected to allow for greater
accuracy and speed in processing reservations, thereby improving customer
service. The client-server architecture minimizes the need for additional
computer equipment as the demands of the business grow. Additionally, the design
of the new system is expected to be more flexible, facilitating rapid response
to changing market demands.

The Company also is in the process of consolidating individual European
reservations centers into a single facility in Ireland. As a result, the Company
expects to realize substantial cost savings, while providing uniformly high
service levels. Currently, the European and domestic reservations systems are
linked, providing for global reservation capabilities.

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Yield Management System

Yield management affords the opportunity to achieve greater returns from a fixed
number of assets. The Company's yield management system is designed to optimize
revenue through controlling, simultaneously, the availability of various rates
as well as the availability of cars. The system monitors the flow of demand over
time on a location by location basis, in order to supply a sufficient number of
cars at those times when available rates are high.

Enhancements to the yield management system are produced on an ongoing basis.
The Company is currently developing a car distribution optimization program,
which is expected to be fully integrated with the yield management system, and
anticipates that this program will be made available throughout the Company's
major locations in the United States by 1998. This enhancement is expected to
facilitate the distribution of cars among rental locations within a regional
area to take maximum advantage of demand and price opportunities over a period
of time.

In the Company's European operations, the yield management system is expected to
be introduced with modifications appropriate to those markets.

Competitive Rate Detection

The Company recognizes that it is essential to respond promptly to pricing
changes in the marketplace. The ability to respond rests on the ability to
detect pricing changes when they occur. The Company believes it has the most
sophisticated competitive price detection software in the industry. Developed
internally and using global distribution systems (such as United Airlines'
Apollo system and American Airlines' Sabre system) for its source of
information, competitors' rates are electronically canvassed nightly. "Scouting"
routines are used to identify future rates in the marketplace. If rate changes
are detected, they result in more in-depth canvassing, as appropriate. The
benefit of this system is to provide enhanced awareness of competitive rate
changes far more frequently, and for a greater number of locations and time
periods, than would otherwise be available.

Internationally, canvassing is generally done manually, due to the limited
information available concerning competitors in the global distribution systems.
However, the Company's European operations have in place a reporting system
which, while dependent on manual input, parallels the information available in
the United States.

Cost Allocation Model

The Company's cost allocation model supports the Company's objective that all
segments of its businesses must provide contributions above a strategically set
threshold. Contribution per rental day is determined by location, business
segment and car and equipment category by using data from the financial
management system, the fleet accounting system, the marketing database and the
yield management process. Additional models, based on this core cost allocation
model, allow the sales department to determine the profitability of customer
accounts by rental location.

To support the Company's European operations, a comparable cost allocation model
is used to reflect the individual operating environments of the respective
countries and to manage profitability.

Disaster Recovery; Year 2000 Date Conversion

The Company's systems disaster recovery planning is a comprehensive, ongoing
process which is updated as products are developed, tested and modified.
Disaster recovery for reservations, financial and other strategic systems is
provided at alternative locations serviced by third parties or at Company
maintained facilities.

In 1997, the Company will commence, for all of its systems, a year 2000 date
conversion project to address all necessary code changes, testing and
implementation. Project completion is planned for the middle of 1999 at an
estimated total cost of approximately $15 million. The Company expects its year

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2000 date conversion project to be completed on a timely basis. However, there
can be no assurance that the systems of other companies on which the Company's
systems rely also will be timely converted or that any such failure to convert
by another company would not have an adverse effect on the Company's systems.

OTHER OPERATIONS OF THE COMPANY

Claim Management

The Company's wholly-owned subsidiary, Hertz Claim Management Corporation,
provides claim administration services to the Company and to numerous customers.
These services include investigating, evaluating, negotiating and disposing of a
wide variety of claims, including third-party, first-party, bodily injury,
property damage, general liability and product liability, but not the
underwriting of risks. Prior to March 1, 1996, the Company, through a
subsidiary, also administered for the Company's operations and others, workers'
compensation and medical, dental and other employee health benefit claims. That
subsidiary, renamed HCM Claim Management Corporation, was sold at a profit to an
investor group during 1996. However, Hertz Claim Management Corporation
continues to administer liability claims for the Company and for outside
clients.

Telecommunications

In 1991, the Company began purchasing and reselling telecommunications services
through its subsidiary, Hertz Technologies, Inc. ("HTI"). HTI takes advantage of
the Company's negotiated rates with its telecommunications carriers to market
custom designed rate packages and services to small and medium size businesses
throughout the United States. Available services include call detail and
management reports, inbound/outbound call packages and travel calling card
services that include voice mail and fax options.

The knowledge of competitive telecommunications services gained from developing
a leading management information system for the Company's car rental operations
has resulted in significant savings to the Company. Due to the nature of the
telecommunications business, there is very little overhead or capital investment
required. Services are sold through independent sales agents and other groups.
HTI provides its services from Oklahoma City, Oklahoma.

SELF INSURANCE

For its domestic operations, the Company is, where permitted by applicable local
law, a qualified self insurer against liability resulting from accidents under
certificates of self insurance for financial responsibility in all states where
its cars are registered. The Company also self insures general public liability
and property damage for all domestic operations. Since July 1, 1987, all claims
have been retained and borne by the Company up to a limit of $5 million for each
occurrence, and the Company has maintained insurance with unaffiliated carriers
in excess of $5 million up to $450 million per occurrence. Hertz Claim
Management Corporation, a wholly-owned subsidiary of the Company, administers
this public liability and property damage program through a network of eight
regional offices throughout the United States.

For its international operations, the Company purchases insurance to comply with
local legal requirements. From January 1, 1993 through December 31, 1996,
vehicle liability insurance purchased locally from unaffiliated carriers by
Company-owned operations in Europe was reinsured by Hertz International RE
Limited, a wholly-owned subsidiary of the Company operating as a reinsurer in
Dublin, Ireland. Hertz International RE Limited is responsible for the first
$1.5 million of motor vehicle liability for each accident during this period,
with excess liability insurance coverage maintained by the Company with
unaffiliated carriers. Effective January 1, 1997, the Company replaced the
unaffiliated carrier that was the fronted insurer for claims up to $1.5 million
by establishing a wholly-owned subsidiary, Probus Insurance Company Europe
Limited ("Probus"), a direct writer domiciled in Dublin, Ireland. Probus now
underwrites the Company's Pan-European motor vehicle liability program (except

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in Switzerland and Denmark) up to $1.5 million per occurrence. Excess coverage
for claims that exceed $1.5 million per occurrence continue to be maintained
with unaffiliated carriers. In the Company's international operations other than
Europe, the Company is self-insured at various amounts up to $100,000 per
occurrence, and maintains excess liability insurance coverage up to $450 million
per occurrence with unaffiliated carriers.

Provisions for public liability and property damage on self-insured domestic
claims and reinsured foreign claims are made by charges to expense based upon
evaluations of estimated ultimate liabilities on reported and unreported claims.
At December 31, 1996, this liability was estimated at $321 million for combined
domestic and foreign operations.

Ordinarily, collision damage costs and the costs of stolen or unaccounted for
cars are carried on a self-insured basis, with such costs being charged to
expense as incurred.

HERC generally requires its customers to provide their own liability insurance
on rented equipment with HERC held harmless under various agreements.

Other types of insurance usually carried by business organizations, such as
workers' compensation, (i.e., on a fronted basis up to $5 million per
occurrence) property (including boiler and machinery and business interruption),
commercial crime and fidelity, performance bonds and director's and officer's
liability insurance, are purchased from various insurance companies in amounts
deemed adequate by the Company for the respective hazards. The Company and its
directors and officers participate as additional insureds in certain insurance
policies maintained by Ford. See "Relationship with Ford".

COMPETITION

The markets in which the Company operates are highly competitive. In any given
location, the Company may encounter competition from national, regional and
local companies. In the United States, the Company's principal competitors in
the business car rental market are Avis and National, and in the leisure market,
the Company's principal competitor is Alamo. In Europe, the Company's principal
competitors in the car rental market are Avis Europe plc, Europcar and,
operating principally through licensees, Budget. The Company competes primarily
on the basis of customer service and price. In addition, the Company believes
extensive worldwide ownership of its operations and its access to the global
capital markets provide it with an advantage over its competitors.

The Company, through H.I.R.E., intends to expand its presence in the insurance
replacement market in the United States where Enterprise is currently the
dominant participant.

The Company believes that HERC is the largest equipment rental company in the
United States. HERC's competitors range from large national companies such as
U.S. Rentals, BET Plant Services and Prime Equipment to small regional
businesses. HERC's competitive success is, in part, due to its state of the art
systems for monitoring, controlling and developing its branch network, its
capacity to maintain a comprehensive rental fleet and its established national
accounts program.

The Company believes that price is one of the primary competitive factors in the
car and industrial and construction equipment rental markets. Competitors of the
Company, many of which have access to substantial capital, may seek to compete
aggressively on the basis of pricing. To the extent that the Company matches
downward competitor pricing, it could have an adverse impact on the Company's
results of operations. To the extent that the Company is not willing to match
competitor pricing, it could also have an adverse impact on the Company's
results of operations as the Company may lose market share.

EMPLOYEES

On December 31, 1996, the Company employed approximately 21,000 persons in its
domestic and foreign operations. Labor contracts covering the terms of
employment of approximately 5,400 employees in the United States are presently
in effect under 167 active contracts with local unions,

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affiliated primarily with the International Brotherhood of Teamsters and the
International Association of Machinists (AFL-CIO). Labor contracts which cover
approximately 1,500 of these employees will expire during 1997. Employee
benefits in effect include group life insurance, hospitalization and surgical
insurance, pension plans, and an income savings plan. Overseas employees are
covered by a wide variety of union contracts and governmental regulations
affecting, among other things, compensation, job retention rights and pensions.
The Company has had no material work stoppage as a result of labor problems
during the last 10 years. The Company believes its labor relations to be good.

In addition to the employees referred to above, the Company employs a
substantial number of temporary workers, and engages outside services, as is
customary in the industry principally for the non-revenue movement of the rental
fleet between locations.

LEGAL PROCEEDINGS

In July 1996, the Company was sued in Harris County, Texas District Court in a
purported class action in which the plaintiff alleges that the Company's
practice of providing certain insurance products violates the Texas Insurance
Code because the Company did not obtain approval to sell insurance or obtain
regulatory approval of the premiums it charges. The complaint seeks restitution
of excessive premiums, equitable rescission of all insurance contracts entered
into by the class members, a declaratory judgment that the Company is selling
insurance illegally in Texas and injunctive relief. Currently the action is in
its preliminary stages and the class has not been certified. While it is
possible that the action could result in significant liability to the Company,
the Company does not expect the action to have a material adverse effect on the
Company's consolidated financial position or results of operations. For a
discussion of a related inquiry by the Texas Department of Insurance, see "--
Governmental Regulation and Environmental Matters".

The Company is involved in a legal proceeding through which the Company is
challenging the legality of a New York City ordinance that would prohibit the
Company's practice of assessing higher rental rates for renters who reside in
certain New York City boroughs. See "-- Government Regulation and Environmental
Matters".

In addition to the foregoing, various legal actions, claims and governmental
inquiries and proceedings are pending or may be instituted or asserted in the
future against the Company and its subsidiaries. Litigation is subject to many
uncertainties, and the outcome of the individual litigated matters is not
predictable with assurance. It is possible that certain of the actions, claims,
inquiries or proceedings, including those discussed above, could be decided
unfavorably to the Company or the subsidiary involved. Although the amount of
liability with respect to these matters cannot be ascertained, potential
liability in excess of related accruals is not expected to materially affect the
consolidated financial position or results of operations of the Company.

GOVERNMENTAL REGULATION AND ENVIRONMENTAL MATTERS

Throughout the world, the Company is subject to numerous types of governmental
controls, including those relating to price regulation and advertising, currency
controls, labor matters, charge card operations, environmental protection, used
car sales and franchising.

The Company's operations, as well as those of its competitors, could be affected
by any limitation in the fuel supply or by any imposition of mandatory
allocation or rationing regulations. In the event of a severe disruption of fuel
supplies, the operations of all car and industrial and construction equipment
renting and leasing companies could be adversely affected. Historically, there
has been no disruption of operations resulting from lack of fuel availability.

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pricing practice. The Company filed suit against The City of New York claiming
that such ordinance was in violation of federal anti-trust laws. The Company's
claim was rejected in U.S. District Court, and the Company appealed to the U.S.
Court of Appeals for the Second Circuit. That Court remanded the proceeding to
the U.S. District Court for trial. Pending the outcome of the action in the U.S.
District Court, the Court has stayed the ordinance, permitting the Company to
continue its pricing practice. If the Company is ultimately unsuccessful in
challenging the ordinance, the Company believes it could take actions to
mitigate the higher costs that would be experienced from such rentals.
Accordingly, the Company believes that an adverse outcome would not have a
material adverse effect on the Company's consolidated financial position or
results of operations.

The Texas Department of Insurance (the "TDI") is currently reviewing the
Company's practice of offering certain insurance products underwritten by
unaffiliated third parties to car rental customers in Texas. Among other things,
the TDI is considering whether the Company's counter sales representatives in
Texas should be licensed to sell insurance. While the Company does not believe
that the enrollment of customers in such policies requires that representatives
be licensed to sell insurance, the Company is unable to predict what
determination the TDI will make or what action, if any, it will take. The
Company does not believe, however, that the outcome of this matter will have a
material adverse effect on the Company's consolidated financial position or
results of operations.

The environmental legal and regulatory requirements applicable to the Company's
operations pertain to (i) the operation of automobiles, trucks and other
vehicles such as heavy equipment and buses; (ii) the ownership and operation of
tanks for the storage of petroleum products, including gasoline, diesel fuel and
used oil; and (iii) the generation, storage, transportation and disposal of
waste materials, including used oil, car wash sludge and waste water. The
Company has made, and will continue to make, expenditures to comply with
environmental laws and regulations.

The use of automobiles and other vehicles is subject to various governmental
requirements designed to limit environmental damage, including that caused by
emissions and noise. Generally, these requirements are met by the manufacturer
except, on occasion, equipment failure requiring repair by the Company. Measures
are being taken at certain locations in states that require the installation of
Stage II Vapor Recovery equipment to reduce the loss of vapor during the fueling
process.

The Company operates approximately 500 underground tanks nationwide to store
petroleum products, and the Company believes its tanks are maintained in
material compliance with environmental regulations, including federal and state
financial responsibility requirements for corrective action and third party
claims due to releases. The Company has established a compliance program for its
tanks to ensure that (i) the tanks are properly registered with the state in
which the tanks are located; and (ii) the tanks have been either upgraded or
replaced to meet federal and state leak detection and spill, overfill and
corrosion protection requirements. The Company anticipates spending
approximately $2.9 million in 1997 and approximately $1 million in 1998 to
complete the registration and upgrade or replacement of such tanks.

The Company is also incurring and providing for expenses for the cleanup of
contamination from fuel discharges at its owned and leased properties, as well
as contamination at other locations at which the Company's wastes have
reportedly been identified. With respect to cleanup expenditures for fuel
discharges at the Company's owned or leased properties, the Company has received
reimbursement, in whole or in part, from certain states that maintain
underground storage tank petroleum cleanup funds. Such funds have been
established to assist tank owners in the payment of cleanup costs associated
with releases from registered tanks. The Company expects to continue to receive
reimbursement for cleanup costs incurred due to releases from certain of its
tanks. With respect to off-site locations at which the Company's wastes have
reportedly been identified, the Company has been and continues to be required to
contribute to cleanup costs due to strict joint and several cleanup liability
under federal and state statutes for companies that send wastes to such off-site
locations for disposal. The Company has recovered a substantial amount of such
costs incurred through settlements with its insurance carriers.

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Environmental legislation and regulations and related administrative policies
have changed rapidly in recent years. There is a risk that governmental
environmental requirements, or enforcement thereof, may become more stringent in
the future and that the Company may be subject to legal proceedings brought by
government agencies or private parties with respect to environmental matters. In
addition, with respect to cleanup of contamination, additional locations at
which wastes generated by the Company may have been released or disposed, and of
which the Company is currently unaware, may in the future become the subject of
cleanup for which the Company may be liable, in whole or part. Accordingly,
while the Company believes that it is in substantial compliance with applicable
requirements of environmental laws, there can be no assurance that the Company's
future environmental liabilities will not be material to the Company's
consolidated financial position or results of operations.

PROPERTIES

As of December 31, 1996, the Company's owned operations were carried on at 2,328
locations worldwide, including rental and sales offices, car sales locations and
service facilities located on or near airports and in central business districts
in major U.S. cities and suburban areas. Most of such premises are leased,
except for 115 that are owned in fee. The Company has various concession
agreements with governmental authorities charged with the operation of airports
under arrangements generally providing for payment of rents and a percentage of
revenues with a guaranteed annual minimum fee. See Note 9 of the Notes to the
Company's consolidated financial statements included in this Prospectus.

The Company has three major facilities in the vicinity of Oklahoma City,
Oklahoma (one of which is operated under a capital lease and two of which are
owned) at which reservations for its worldwide car rental operations are
processed, global strategic information systems are serviced and major domestic
and international accounting functions are performed. The Company owns its
executive offices in Park Ridge, New Jersey.

RELATIONSHIP WITH FORD

Immediately prior to the Offerings, Ford and a Ford subsidiary will be the only
stockholders of the Company. Upon completion of the Offerings, Ford will
beneficially own 55.4% of the outstanding Class A Common Stock (51.9% if the
Underwriters' over-allotment options are exercised in full) and 100% of the
outstanding Class B Common Stock of the Company (which Class B Common Stock is
entitled to five votes per share on any matter submitted to a vote of the
Company's stockholders). Upon completion of the Offerings, the common stock
beneficially owned by Ford will represent in the aggregate 95.3% of the combined
voting power of all of the Company's outstanding common stock (or 94.6% if the
Underwriters' over-allotment options are exercised in full). For as long as Ford
continues to beneficially own shares of common stock representing more than 50%
of the combined voting power of the Company's common stock, Ford will be able to
direct the election of all of the members of the Company's Board of Directors
and exercise a controlling influence over the business and affairs of the
Company, including any determinations with respect to mergers or other business
combinations involving the Company, the acquisition or disposition of assets by
the Company, the incurrence of indebtedness by the Company, the issuance of any
additional common stock or other equity securities, the repurchase or redemption
of common stock or preferred stock and the payment of dividends. Similarly, Ford
will have the power to determine matters submitted to a vote of the Company's
stockholders without the consent of the Company's other stockholders, will have
the power to prevent a change in control of the Company and could take other
actions that might be favorable to Ford. See "Management".

Ford has advised the Company that its current intent is to continue to hold all
of the common stock beneficially owned by it following the Offerings. However,
Ford is not subject to any contractual obligation to retain its controlling
interest, except that each of the Company and Ford has agreed, subject to
certain exceptions, not to sell or otherwise dispose of any shares of Class A
Common Stock or Class B Common Stock for a period of 180 days after the date of
this Prospectus without the prior written consent of J.P. Morgan Securities Inc.
As a result, there can be no assurance concerning the

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period of time during which Ford will maintain its beneficial ownership of
common stock of the Company owned by it following the Offerings. See
"Underwriting".

Beneficial ownership of at least 80% of the total voting power and value of the
outstanding Common Stock is required in order for Ford to include the Company in
its consolidated group for federal income tax purposes, and beneficial ownership
of at least 80% of the total voting power and 80% of each class of nonvoting
capital stock is required in order for Ford to be able to effect a tax-free
spin-off or certain other tax-free transactions.

In addition, by virtue of its controlling beneficial ownership and the terms of
a tax-sharing agreement between the Company and Ford, Ford will effectively
control all of the Company's tax decisions, and conflicts of interest regarding
tax matters between the Company and Ford may arise. See "-- Tax-Sharing
Agreement".

Certain of the Company's airport concession agreements require the consent of
the airport authority in connection with changes in ownership of the Company.
Those consents which are required in connection with the Offerings have been
obtained, other than certain consents the lack of which the Company does not
believe will have a material adverse effect on the Company's consolidated
financial position or results of operations. In the event that Ford seeks to
sell any of its Common Stock following the Offerings, additional consents will
be required.

For a description of certain provisions of the Company's Restated Certificate of
Incorporation concerning the allocation of business opportunities that may be
suitable for both the Company and Ford, See "Description of Capital Stock --
Certain Certificate of Incorporation and By-law Provisions -- Corporate
Opportunities".

Set forth below are descriptions of certain agreements, relationships and
transactions between the Company and Ford.

CAR SUPPLY AGREEMENT

The Company and Ford have entered into a car supply agreement (the "Car Supply
Agreement") having a term of ten years, commencing September 1, 1997 and ending
August 31, 2007. Under the Car Supply Agreement, Ford and the Company have
agreed to negotiate in good faith on an annual basis with respect to the supply
of cars. Ford has agreed to supply to the Company and the Company has agreed to
purchase from Ford, for each car model year during the term of the agreement
(i.e., the 1998 model year through the 2007 model year), (a) the lesser of
150,000 cars or 55% of the Company's fleet requirements for its car rental
business conducted in the United States; (b) 35% of the Company's fleet
requirements for its car rental business conducted in Europe; and (c) 55% of the
Company's fleet requirements for its car rental business conducted other than in
the United States and Europe. For each model year, at least 50% of the cars
supplied by Ford are required to be non-risk cars. The Car Supply Agreement also
provides that, for each model year, Ford must strive to offer car fleet programs
to the Company on terms and conditions that are competitive with terms and
conditions for the supply of cars then being offered by other automobile
manufacturers to the Company and other daily car rental companies. In addition,
for each model year, Ford must supply cars to the Company on terms and
conditions that are no less favorable than those offered by Ford to other daily
car rental companies, excluding franchised Ford vehicle dealers who rent cars.
See "Business -- Worldwide Car Rental -- Car Acquisition".

JOINT ADVERTISING AGREEMENT

The Company and Ford have entered into a joint advertising agreement (the "Joint
Advertising Agreement") having a term of ten years, commencing September 1, 1997
and ending August 31, 2007. Under the Joint Advertising Agreement, Ford has
agreed to pay to the Company one-half of the Company's advertising costs, up to
a limit of $39 million for the first year and, for each year thereafter, a limit
equal to the prior year's limit adjusted for inflation, subject to a ceiling. In
addition, if for any year, one-half of the Company's advertising costs exceed
such limit and the Company has purchased

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from Ford a percentage of its car fleet requirements for its car rental business
conducted in the United States for the corresponding model year (the "Ford
Vehicle Share") equal to 58% or more, then Ford will pay to the Company
additional amounts for such excess advertising costs. To be eligible for cost
reimbursement under the Joint Advertising Agreement, the advertising must meet
certain conditions, including the condition that it indicates that the Company
features Ford vehicles in a manner and with a prominence that is reasonably
satisfactory to Ford.

The Joint Advertising Agreement further provides that if the Ford Vehicle Share
for any model year is less than 55%, Ford will not be obligated to pay the
Company any amount for its advertising costs for that year, except to the extent
that the Company's failure to achieve a 55% Ford Vehicle Share is attributable
to (a) Ford's failure to supply a sufficient quantity of cars for the Company to
achieve a 55% Ford Vehicle Share or (b) the fact that the terms and conditions
of Ford's car fleet programs offered to the Company were not competitive with
the terms and conditions for the supply of cars offered by other automobile
manufacturers to the Company and other daily car rental companies. In no event,
however, will Ford be required to pay any amount for the Company's advertising
costs for any year if the Ford Vehicle Share for the corresponding model year is
less than 40%.

For information regarding amounts paid by Ford to the Company for its
advertising costs in past years under a similar agreement, see "Business --
Worldwide Car Rental -- Marketing, Sales and Advertising".

CORPORATE AGREEMENT

The Company and Ford intend to enter into a corporate agreement (the "Corporate
Agreement") under which the Company will grant to Ford a continuing option,
assignable to any of its subsidiaries, to purchase, under certain circumstances,
additional shares of Class B Common Stock or shares of nonvoting capital stock
of the Company (the "Stock Option"). The Stock Option may be exercised
simultaneously with the issuance of any equity security of the Company (other
than in the Offerings or upon the exercise of the Underwriters' over-allotment
options), with respect to Class B Common Stock, only to the extent necessary to
maintain its then-existing percentage of the total voting power and value of the
Company and, with respect to shares of nonvoting capital stock, to the extent
necessary to own 80% of each outstanding class of such stock. The purchase price
of the shares of Class B Common Stock purchased upon any exercise of the Stock
Option, subject to certain exceptions, will be based on the market price of the
Class A Common Stock, and the purchase price of nonvoting capital stock will be
the price at which such stock may be purchased by third parties. The Stock
Option expires in the event that Ford reduces its beneficial ownership of Common
Stock in the Company to Common Stock representing less than 45% of the
outstanding shares of Common Stock.

The Corporate Agreement will further provide that, upon the request of Ford, the
Company will use its best efforts to effect the registration under the
applicable federal and state securities laws of any of the shares of Common
Stock and nonvoting capital stock (and any other securities issued in respect of
or in exchange for either) beneficially owned by Ford for sale in accordance
with Ford's intended method of disposition thereof, and will take such other
actions as may be necessary to permit the sale thereof in other jurisdictions,
subject to certain specified limitations. Ford will also have the right which,
subject to certain limitations, it may exercise at any time and from time to
time, to include the shares of Common Stock and nonvoting capital stock (and any
other securities issued in respect of or in exchange for either) beneficially
owned by it in certain other registrations of common equity securities of the
Company initiated by the Company on its own behalf or on behalf of its other
stockholders. The Company will agree to pay all out-of-pocket costs and expenses
in connection with each such registration that Ford requests or in which Ford
participates. Subject to certain limitations specified in the Corporate
Agreement, such registration rights will be assignable by Ford and its assigns.
The Corporate Agreement will contain indemnification and contribution
provisions: (i) by Ford and its permitted assigns for the benefit of the Company
and related persons; and (ii) by the Company for the benefit of Ford and the
other persons entitled to effect registrations of Common Stock (and other
securities) pursuant to its terms and related persons.

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<PAGE> 61

The Corporate Agreement will also provide that for so long as Ford maintains
beneficial ownership of a majority of the number of outstanding shares of Common
Stock, the Company may not take any action or enter into any commitment or
agreement which may reasonably be anticipated to result, with or without notice
and with or without lapse of time, or otherwise, in a contravention (or an event
of default) by Ford of: (i) any provision of applicable law or regulation,
including but not limited to provisions pertaining to the Internal Revenue Code
of 1986, as amended, or the Employee Retirement Income Security Act of 1974, as
amended; (ii) any provision of Ford's certificate of incorporation or by-laws;
(iii) any credit agreement or other material instrument binding upon Ford or its
assets or (iv) any judgment, order or decree of any governmental body, agency or
court having jurisdiction over Ford or its assets.

The Corporate Agreement will provide that the Company will enter into a similar
agreement for the benefit of the Class B Transferee (as defined below), if any.

TAX-SHARING AGREEMENT

The Company is, and after the Offerings will continue to be, included in Ford's
federal consolidated income tax group, and the Company's federal income tax
liability will be included in the consolidated federal income tax liability of
Ford and its subsidiaries. In certain circumstances, certain of the Company's
subsidiaries will also be included with certain Ford subsidiaries in combined,
consolidated or unitary income tax groups for state and local tax purposes. The
Company and Ford entered into a tax-sharing agreement (the "Tax-Sharing
Agreement"). Pursuant to the Tax-Sharing Agreement, the Company and Ford will
make payments between them such that, with respect to any period, the amount of
taxes to be paid by the Company, subject to certain adjustments, will be
determined as though the Company were to file separate federal, state and local
income tax returns (including, except as provided below, any amounts determined
to be due as a result of a redetermination of the tax liability of Ford arising
from an audit or otherwise) as the common parent of an affiliated group of
corporations filing combined, consolidated or unitary (as applicable) federal,
state and local returns rather than a consolidated subsidiary of Ford with
respect to federal, state and local income taxes. With respect to foreign tax
credits, the Company's right to reimbursement will be determined based on the
usage of such foreign tax credits by the consolidated group.

In determining the amount of tax-sharing payments under the Tax-Sharing
Agreement, Ford will prepare or cause to be prepared pro forma returns with
respect to federal and applicable state and local income taxes that reflect the
same positions and elections used by Ford in preparing the returns for Ford's
consolidated group and other applicable groups. Ford will continue to have all
the rights of a parent of a consolidated group (and similar rights provided for
by applicable state and local law with respect to a parent of a combined,
consolidated or unitary group), will be the sole and exclusive agent for the
Company in any and all matters relating to the income, franchise and similar
liabilities of the Company, will have sole and exclusive responsibility for the
preparation and filing of consolidated federal and consolidated or combined
state and local income tax returns (or amended returns), and will have the
power, in its sole discretion, to contest or compromise any asserted tax
adjustment or deficiency and to file, litigate or compromise any claim for
refund on behalf of the Company related to such return.

In general, the Company will be included in Ford's consolidated group for
federal income tax purposes for so long as Ford beneficially owns at least 80%
of the total voting power and value of the outstanding common stock. Each member
of a consolidated group is jointly and severally liable for the federal income
tax liability of each other member of the consolidated group. Accordingly,
although the Tax-Sharing Agreement allocates tax liabilities between the Company
and Ford, during the period in which the Company is included in Ford's
consolidated group, the Company could be liable in the event that any federal
tax liability is incurred, but not discharged, by any other member of Ford's
consolidated group. See "Risk Factors -- Control by and Relationship with Ford".

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<PAGE> 62

COMMERCIAL PAPER DEALER AGREEMENTS

The Company maintains a Sales Agency Agreement with Ford Financial Services,
Inc., an NASD registered broker-dealer and an indirect, wholly-owned subsidiary
of Ford ("FFS"), whereby FFS acts as a dealer for the Company's domestic
commercial paper program. The Company pays fees to FFS which range from .035% to
.05% per annum of commercial paper placed depending upon the monthly average
dollar value of the notes outstanding in the portfolio. In 1996, the Company
paid FFS $556,754 of such fees. FFS is under no obligation to purchase any of
the notes for its own account. FFS has acted as the sole commercial paper dealer
for the Company since October 1994. The Company, through its subsidiary Hertz
Australia Pty. Limited ("Hertz Australia"), has a similar agreement with Ford
Credit Australia Limited, also an indirect, wholly-owned subsidiary of Ford.

CREDIT FACILITY AND LOANS

As discussed under "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources", Ford has extended
to the Company a $500 million committed credit facility under which the Company
may borrow, repay and reborrow amounts from time to time at rates of interest
based on London Interbank Offered Rates. The Company will pay Ford an annual
commitment fee on the undrawn amounts equal to (i) for the period from the date
of the agreement to and including June 30, 1997, the rate of .09% and (ii) for
the period from July 1, 1997 to and including the expiration date of the
facility, a rate to be agreed upon. The credit agreement expires on June 30,
1999, but is automatically extended annually for an additional year unless Ford
gives notice of termination. No amounts are currently outstanding under this
facility.

Ford also has lent to the Company an aggregate of $269 million, of which $250
million matures on November 15, 1999 and $19 million matures on July 1, 1997.

OTHER RELATIONSHIPS AND TRANSACTIONS

The Company and Ford also engage in other arms' length transactions in the
ordinary course of their respective businesses. These include HERC providing
equipment rental services to Ford, the Company providing insurance claim
management services to Ford and the Company providing car rental services to
Ford. In addition, an affiliate of Ford provides equipment resale financing to
HERC's customers and relocation services to employees of the Company.

The Company is named as an additional insured under certain of Ford's insurance
policies for which the Company pays its allocated portion of the premiums.

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<PAGE> 63

MANAGEMENT

The following table sets forth certain information with respect to the executive
officers and directors of the Company, and their ages as of February 3, 1997:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NAME AGE POSITION AND OFFICE
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Frank A. Olson 64 Chairman of the Board, Chief Executive Officer and Director
Craig R. Koch 50 President, Chief Operating Officer and Director
Daniel I. Kaplan 54 Executive Vice President
Brian J. Kennedy 55 Executive Vice President, Marketing and Sales
Joseph R. Nothwang 50 Executive Vice President and General Manager,
U.S. Car Rental Division
William Sider 63 Executive Vice President and Chief Financial Officer and
Director
Robert J. Bailey 62 Senior Vice President
Donald F. Steele 58 Senior Vice President, Employee Relations
Paul M. Tschirhart 56 Senior Vice President and General Counsel
Antoine E. Cau 49 Vice President
Leo A. Massad, Jr. 65 Controller
Robert H. Rillings 56 Treasurer
John M. Devine 52 Director
Peter J. Pestillo 58 Director
</TABLE>

All directors are elected annually to serve until the next annual meeting of
stockholders and until their successors have been elected and qualified. Upon
completion of the Offerings, the Company will have a Board of Directors
consisting of the five current members of the Company's Board of Directors
identified above. After completion of the Offerings, the Company anticipates
that the size and composition of the Board of Directors will be changed and will
include three directors who will be officers of the Company, three directors who
will be officers of Ford and two directors who will be persons not associated
with the Company or Ford. Ford will have the ability to change the size and
composition of the Company's Board of Directors and committees of the Board of
Directors. See "Relationship with Ford".

The Company's Board of Directors is expected to appoint directors who are not
affiliated with the Company or Ford to a compensation committee of the Board of
Directors (the "Compensation Committee") and an audit committee of the Board of
Directors (the "Audit Committee") after such directors are elected. Both such
committees will be comprised solely of independent directors. The Compensation
Committee will establish remuneration levels for certain officers of the Company
and perform such functions as may be delegated to it under the Company's
employee benefit programs and executive compensation programs. The Audit
Committee will select and engage, on behalf of the Company, the independent
public accountants to audit the Company's annual financial statements. The Audit
Committee also will review and approve the planned scope of the annual audit.

The Board of Directors may, from time to time, establish certain other
committees to facilitate the management of the Company.

Officers are elected at the organizational meeting of the Board of Directors
held each year for a term of one year, and they are elected to serve until the
next annual meeting.

MR. OLSON has been Chairman of the Board of Directors since June 1980, and a
director of the Company since November 1974. From June 9, 1987 to December 12,
1987 he was Chairman of the Board, President and Chief Executive Officer of UAL
Corporation, Elk Grove, Illinois (the Company's former parent). He is also a
director of Becton, Dickinson and Co., Franklin Lakes, New Jersey; Cooper

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<PAGE> 64

Industries, Inc., Houston, Texas; Unicom Corporation, Chicago, Illinois; and
Fund American Holdings, Inc., Lebanon, New Hampshire.

MR. KOCH was elected President and Chief Operating Officer of the Company on
September 1, 1993. From February 1988 through August 1993 he served as Executive
Vice President and President of North America Car Rental operations of the
Company. He served as President and Chief Operating Officer of the Company from
May 1987 to February 1988. In October 1983 he became Executive Vice President
and General Manager of the Company's Car Rental Division after having served as
Vice President and General Manager since March 1980. He has been a director of
the Company since June 27, 1994 and previously served as a director of the
Company from May 1987 to July 1993 and from October 1983 to September 1985.

MR. KAPLAN was elected Executive Vice President of the Company in May 1987.
Previously, he was Vice President, Materials and Support Services from July 1982
to September 1982 and continued as a Vice President until May 1987. In September
1982, he was elected a director and President of Hertz Equipment Rental
Corporation, a subsidiary of the Company.

MR. KENNEDY was elected Executive Vice President, Marketing and Sales of the
Company in February 1988. From May 1987 through January 1988, he served as
Executive Vice President and General Manager of the Car Rental Division of the
Company, prior to which, from October 1983, he served as Senior Vice President,
Marketing.

MR. NOTHWANG was elected Executive Vice President of the Company and General
Manager
U.S. Car Rental in August 1995. He served as Vice President and General Manager
U.S. Car Rental from September 1993 to August 1995. Previously he served as
Division Vice President, Region Operations since 1985. He has served in various
operating positions since 1976.

MR. SIDER was elected Executive Vice President and Chief Financial Officer of
the Company in February 1988. From June 25, 1987 to December 31, 1987, he served
as Chief Financial Officer of UAL Corporation, Elk Grove, Illinois. From October
1983 to February 1988, he served as Senior Vice President, Finance of the
Company. In April 1981, he was elected Vice President, Finance, and in 1980
served as Vice President and Controller of the Company. He has been a director
of the Company since October 1983.

MR. BAILEY was elected Senior Vice President of the Company in May 1990.
Previously, he served in various functions with the Company since 1956, except
for the years 1966 and 1981.

MR. STEELE was elected Senior Vice President, Employee Relations of the Company
in July 1984. Previously, he served in various functions with the Company since
1972.

MR. TSCHIRHART was elected Senior Vice President and General Counsel of the
Company in October 1986, and also served as Secretary from February 1988 to
November 1992. Previously, he served as Senior Counsel for United Airlines,
Inc., Elk Grove, Illinois, since 1982.

MR. CAU was elected Vice President of the Company and President of Hertz
International, Ltd., a subsidiary of the Company, in April 1990. Previously, he
served in various functions with Hertz International, Ltd. foreign operations
since 1973.

MR. MASSAD was elected Controller of the Company in July 1986. Previously, he
served in various positions with the Company since 1965.

MR. RILLINGS was elected Treasurer of the Company in November 1986. Previously,
he served in various positions with the Company since 1961.

MR. DEVINE was elected a director of the Company and became a member of the
Compensation Committee in August 1996. Mr. Devine was elected Executive Vice
President of Ford in November 1996, and also is Chief Financial Officer of Ford,
a position which he assumed in October 1994. Mr. Devine also is a director of
Associates First Capital Corporation, an affiliate of the Company. From April
1991 until May 1994 he served as Chairman and Chief Executive Officer of First
Nationwide

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<PAGE> 65

Bank, a wholly-owned subsidiary of Ford. Previously, Mr. Devine served in
various positions with Ford since 1967.

MR. PESTILLO was elected a director of the Company in July 1993, and has also
served as Chairman of the Compensation Committee since August 1989. He is
Executive Vice President, Corporate Relations of Ford. He was Vice President,
Corporate Relations and Diversified Businesses of Ford from April 1990 to
January 1993. From January 1986 to April 1990 he was Vice President, Employee
and External Affairs for Ford. He is also a director of Rouge Steel Company.

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned and/or paid to the
Company's five most highly compensated executive officers for services rendered
in all capacities to the Company for the fiscal years ended December 31, 1996,
1995 and 1994. Compensation of the executive officers is reviewed and approved
by the Company's Compensation Committee and is determined in part by the
operating performance and the contributions made to the consolidated results of
the Company.

Summary Compensation Table (5)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------
ANNUAL COMPENSATION
--------------------------------------
OTHER LONG-TERM
ANNUAL COMPENSATION ALL OTHER
YEAR SALARY(1) BONUS(2) COMPENSATION(3) PAYOUTS(2) COMPENSATION(4)
---- --------- -------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Dollars in thousands
Frank A. Olson................. 1996 $731 $900 $ -- $668 $5
Chairman of the Board and 1995 694 500 -- 645 5
Chief Executive Officer 1994 650 728 -- 680 5
Craig R. Koch.................. 1996 439 475 -- 334 5
President and Chief 1995 424 258 -- 323 5
Operating Officer 1994 400 318 -- 340 5
William Sider.................. 1996 337 280 -- 200 5
Executive Vice President 1995 325 163 -- 194 5
and Chief Financial Officer 1994 305 244 204 5
Antoine E. Cau................. 1996 303 154 80 320 --
Vice President 1995 296 185 82 310 --
1994 255 208 78 326 --
Joseph R. Nothwang............. 1996 241 209 -- 200 5
Executive Vice President 1995 231 106 -- 129 5
1994 215 121 -- 68 5
</TABLE>

- -------------------------
(1) Amounts included consist of salary payments for the respective year and
amounts deferred pursuant to section 401(k) of the Internal Revenue Code of
1986, as amended.

(2) Includes executive and long-term incentive bonuses earned and paid for the
respective year.

(3) Includes the following for the years 1996, 1995 and 1994 (in thousands):
$42, $42 and $41 housing allowance; $11, $12 and $11 automobile use; and $27,
$28 and $26 tax equalization payments, respectively.

(4) Represents the amounts contributed by the Company to the Income Savings Plan
for the respective year.

(5) The Company did not grant or issue any stock options or stock appreciation
rights during the years covered by this table.

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<PAGE> 66

INCENTIVE COMPENSATION PLANS

The Company has an Executive Incentive Compensation Plan for key employees and
certain officers of the Company and its subsidiaries. The grant of awards and
the size thereof depends upon the degree to which each operation's financial
targets (pre-tax income and return on total average equity, each as defined in
the plan) approved by senior officers of the Company and members of the
Company's Compensation Committee, are reached or exceeded. Performance is
measured annually, and the awards are paid in full in the following year, or may
be deferred pursuant to a prior election by a participant, to a period selected
by the participant.

In 1991, the Company established a Long-Term Incentive Plan for certain officers
and other key employees of the Company and its subsidiaries. The grant of awards
and the size thereof will be determined by the achievement of certain
qualitative and quantitative performance targets. A new four year performance
cycle begins on each January 1. Performance generally is measured in four year
periods and awards will be made in cash at the end of each performance period.
The performance factors used include net income of the Company relative to the
net income average for the Dow 30 Industrials, market share and customer
satisfaction. To phase in this plan, transitional grants were made as of January
1, 1991, covering one-year, two-year and three-year performance periods. Target
and maximum award grants in place for 1996 to the Company's five most highly
compensated executive officers are set forth in the table below.

Long-Term Incentive Plans -- Awards in Last Fiscal Year

<TABLE>
<CAPTION>
-----------------------------------------------
PERFORMANCE
OR OTHER ESTIMATED FUTURE PAYOUTS UNDER
DOLLARS IN THOUSANDS PERIOD UNTIL NON-STOCK PRICE-BASED PLANS
MATURATION OR ------------------------------
PAYOUT THRESHOLD TARGET MAXIMUM
NAME ------------- --------- ------ -------
<S> <C> <C> <C> <C>
Frank A. Olson....................................... (1) $0 $500 $1,000
Craig R. Koch........................................ (1) 0 250 500
William Sider........................................ (1) 0 150 300
Antoine E. Cau....................................... (1) 0 240 480
Joseph R. Nothwang................................... (1) 0 150 300
</TABLE>

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

(1) Awards for 1996 are included in the Summary Compensation Table.

Target award grants have also been made for the performance years 1997, 1998 and
1999 versus performance for the previous four years. The amount of the payments
for the performance years subsequent to 1996 can range from zero to twice the
amount of the target. Such target award grants made for the performance years
1997, 1998 and 1999, respectively, to the Company's five most highly compensated
officers are as follows (in thousands): Mr. Olson $500, $500 and $600; Mr. Koch
$300, $300 and $350; Mr. Sider $150, $150 and $180, Mr. Cau $240, $240 and $240;
Mr. Nothwang $200, $200 and $200.

The Company also maintains Field Incentive Compensation Plans for certain
employees of the Company and its subsidiaries. Awards are made and paid annually
based on the achievement of revenue and pre-tax income objectives. Each award is
determined and approved by the Company's Compensation Committee.

INCOME SAVINGS PLAN

The Income Savings Plan of the Company was established effective August 30,
1985. Prior thereto, qualified employees of the Company participated in the RCA
Income Savings Plan ("RCA Plan"). The assets and liabilities maintained under
the RCA Plan attributable to participating employees of the Company were
transferred as of September 1, 1985 to the Company's Income Savings Plan (the
"Plan"). Under the Plan, the Company continued substantially the same provisions
as provided under

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<PAGE> 67

the RCA Plan, except for the following: (1) the RCA Stock Fund as an investment
option was discontinued and fund assets were reinvested in other investment
funds as elected by the participants, and (2) the eligibility requirement for
qualified employees hired on or after September 30, 1985 was changed to two
years of service in lieu of the one year of service previously required.
Effective January 1, 1989, the eligibility requirement was again reduced to one
year of service.

The Plan is a defined contribution plan available, as specified in the Plan, to
certain full-time and part-time employees of the Company who have been credited
with the Company for at least 1,000 hours of service during any twelve
consecutive months commencing on the day he/she is credited with his/her first
hour of service (or any anniversary thereof). Employees covered by a collective
bargaining agreement are not eligible unless their collective bargaining
agreement makes the Plan applicable to them.

Prior to July 1, 1987, the Company contributed a fixed percentage (4%) of
eligible employees' base salary to the Plan. Employees could also make their own
before-tax and after-tax contributions of their base salary, subject to
percentage and monetary limitations. Effective July 1, 1987, the Plan was
amended whereby the Company contributes only 66.7% of the first 6% of the
employee's contribution for a maximum match contribution by the Company of 4% of
the employee's base salary. Employee after-tax contributions were eliminated.
Effective January 1, 1988, the Plan was further amended to change the Company's
contribution from 66.7% to 50% of the first 6% of the employee's contribution
for a maximum match contribution by the Company of 3% of the employee's base
salary. Effective July 1, 1991, the Company's contribution was suspended and was
resumed on January 1, 1992.

Employees hired prior to January 1, 1987 become fully vested when contributions
are made. Employees hired on or after January 1, 1987 are immediately fully
vested in the contributions the employee made and become fully vested in the
amount contributed by the Company after the employee completes five years of
service. Each Plan member determines the fund distribution to which
contributions will be applied. The funds include the General Common Stock Fund,
a commingled index fund investing in common stock (shares in medium to
large-size companies chosen for the purpose of approximating the rate of growth
for the S&P 500 Composite Stock Index); the Fixed Income Fund invested in a
managed commingled fund with high quality fixed rate securities, including
guaranteed investment contracts, as well as with insurance companies that
guarantee interest rates at agreed upon levels and a Balanced Fund consisting of
a mix of stocks or bonds ranging from 30% to 70% (stocks are in medium to large-
size companies and bonds are in U.S. Treasury and Agency and highly-rated
corporate issues). The performance of the Balanced Fund is measured against an
index consisting of a 50% weighing of the S&P 500 and a 50% weighing of the
Salomon Broad Bond Investment Grade Bond Index. Plan funds may be invested in
interim investments prior to investments in the General Common Stock Fund, Fixed
Income Fund and the Balanced Fund. Distributions and withdrawals are based on
the unit value of the employee's account as of a specified month end valuation
date and are subject to conditions stated in the Plan.

PENSION PLAN

Effective August 30, 1985, the Company established the Retirement Plan for the
Employees of the Company ("Hertz Plan"). Prior thereto, the Company participated
in the Retirement Plan for the Employees of RCA Corporation and Subsidiary
Companies ("RCA Plan"). The assets and liabilities associated with benefits
accrued by participating employees of the Company as of August 30, 1985 were
retained under the RCA Plan. Benefits accrued by the Company's employees through
August 30, 1985 will be paid under the RCA Plan. The RCA Plan was replaced by a
restated Hertz Plan which continued the RCA Plan for the Company's employees
without interruption.

The Hertz Plan is qualified under the Internal Revenue Code of 1986, as amended,
and is a defined benefit plan for which contributions were made by the employees
up to June 30, 1987 and by the employer.

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<PAGE> 68

Effective July 1, 1987, the Hertz Plan was revised to an "Account Balance
Pension Plan" under which the Company pays the entire cost and employees are no
longer required to contribute. Employees are eligible for participation in the
Hertz Plan on the first day of the month coinciding with or following the date
on which they complete one year of continuous service, as defined by the
Employee Retirement Income Security Act of 1974 ("ERISA"). Employees covered by
a collective bargaining agreement are not eligible unless their union contract
makes the Hertz Plan applicable to them. Effective July 1, 1987, a qualified
employee's cash balance account was credited with an annual cash balance credit
equal to 3% of their pensionable earnings. For each plan year beginning January
1, 1996 and thereafter, a qualified employee's cash balance account shall be
credited with an annual cash balance credit equal to: (a) 3% of his/her
pensionable earnings for that plan year in the case of a qualified employee who
is credited with less than 60 continuous months of service from his/her most
recent date of hire, or (b) 4% of his/her pensionable earnings for that plan
year in the case of a qualified employee who is credited with 60 or more
continuous months of service from his/her most recent date of hire. In the case
of a qualified employee who is first credited with 60 continuous months of
service after January 1 of a plan year, the percentage of his/her pensionable
earnings utilized in determining his/her annual cash balance credit for that
plan year shall be increased to 4% effective as of the first day of the month
coincident with or next following his/her completion of 60 continuous months of
service from his/her most recent date of hire. This benefit is credited with
guaranteed interest rates compounded annually based on rates issued by the
Pension Benefit Guaranty Corporation in effect for the preceding December. In
addition, all qualified employees age 50 or over with 10 or more years of
credited service as of July 1, 1987, will have an additional amount of their
pensionable earnings credited to their cash balance account as follows: 1% for
ages 50 through age 54 as of July 1, 1987, 2% for ages 55 through 59 as of July
1, 1987 and 3% for ages 60 and over as of July 1, 1987.

Officers of the Company and its subsidiaries participate in the Hertz Plan. The
amount of the normal retirement benefit under this plan is determined as a
percentage of final average compensation (highest five consecutive of last ten
years of covered compensation), and based upon years of credited service up to
July 1, 1987 plus the value of their cash balance account accrued after July 1,
1987. The benefits are not offset by Social Security. Compensation covered by
the Hertz Plan means all salary and wages, including overtime and premium pay,
sales commissions and amounts paid under executive and field compensation plans,
but excluding the compensation paid under the Long-Term Incentive Plan. The
Company has instituted non-qualified unfunded pension plans for certain of its
executives to pay those benefits which are excess to those provided under the
qualified plans which include (1) the Benefit Equalization Plan that provides
equalization benefits that cannot be provided under the Hertz Plan due to
limitations imposed by the Internal Revenue Code of 1986, as amended, and (2)
the Supplemental Retirement and Savings Plan that, when combined with the Hertz
Plan, provides a benefit as if the pre-July 1, 1987 benefit formula had remained
in effect until the participants' normal retirement date. Set forth on the next
page is a table indicating annual pension benefits payable under both the Hertz
Plan and the non-qualified Supplemental Retirement and Savings Plan. The table
indicates benefits applicable for participants in specified remuneration and
years of service classifications, based on retirement at age 65, and for life
annuity (other annuity options are available, which would influence the amounts
shown on the following page).

68
<PAGE> 69

Pension Plan Table

<TABLE>
<CAPTION>
FINAL --------------------------------------------------------
AVERAGE YEARS OF PARTICIPATION IN PLAN
PENSIONABLE 15 20 25 30 35
COMPENSATION -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 175,000 $ 41,026 $ 54,701 $ 68,376 $ 82,051 $ 95,726
225,000 52,996 70,661 88,326 105,991 123,656
275,000 64,966 86,621 108,276 129,931 151,586
325,000 76,936 102,581 128,226 153,871 179,516
375,000 88,906 118,541 148,176 177,811 207,446
425,000 100,876 134,501 168,126 201,751 235,376
475,000 112,846 150,461 188,076 225,691 263,306
525,000 124,816 166,421 208,026 249,631 291,236
575,000 136,786 182,380 227,976 273,571 319,167
625,000 148,756 198,341 247,927 297,511 347,096
675,000 160,726 214,301 267,876 321,452 375,026
725,000 172,696 230,261 287,826 345,391 402,956
775,000 184,666 246,221 307,776 369,331 430,886
825,000 196,636 262,181 327,726 393,271 458,816
1,000,000 238,531 318,041 397,551 477,061 556,571
1,500,000 358,231 477,641 597,051 716,461 835,871
2,000,000 477,931 637,241 796,551 955,861 1,115,171
2,500,000 597,631 796,841 996,051 1,195,261 1,394,471
</TABLE>

Total credited service with the Company and its subsidiaries for persons named
in the cash compensation table is as follows: Mr. Olson -- 30 years; Mr. Koch --
25 years; Mr. Sider -- 30 years; and Mr. Nothwang -- 20 years. Mr. Cau does not
participate in the Hertz Plan or the RCA Plan.

In addition to the above, the Company maintains a non-qualified plan to provide
a Special Supplemental Executive Pension Benefit (the "SEP Benefit") for Messrs.
Olson and Sider. The SEP is intended to provide any necessary excess benefit to
ensure the designated participants receive an aggregate pension benefit (from
all qualified and non-qualified plans) equal to 50% of the participant's final
average earnings as defined under the Hertz Plan. The projected annual life
annuity SEP Benefit payable at age 65 to Mr. Olson is $137,000 and to Mr. Sider
is $31,000.

COMPENSATION OF DIRECTORS

It is anticipated that directors who do not receive compensation as officers or
employees of the Company or any of its affiliates will be paid an annual board
membership fee of $25,000, and an attendance fee of $1,000 for each meeting of
the Board of Directors and committees thereof. The Company does not pay any
additional compensation to directors who receive compensation as officers or
employees of the Company or any of its affiliates.

EMPLOYMENT AGREEMENTS

Messrs. Olson, Koch and Sider serve the Company under employment agreements
which currently expire on January 31, 2000, April 30, 2002 and June 30, 1997,
respectively. Mr. Cau serves a subsidiary of the Company under an employment
agreement dated April 9, 1993, that is terminable by either party under certain
circumstances stated therein. The employment agreements do not provide for any
compensatory plan or arrangement upon termination of employment or change in
control, except for the compensation of Mr. Cau. The employment agreement of Mr.
Koch is automatically extended one (1) additional year on May 1 of each year
unless not later than December 31st of the preceding year, the Company or Mr.
Koch shall have given notice not to extend the agreement.

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<PAGE> 70

LONG-TERM EQUITY COMPENSATION PLAN

The Company will sponsor a stock-based incentive plan (the "ECP") covering the
Company's five most highly compensated executive officers (the "Named Executive
Officers") and other executives of the Company. The Company adopted the ECP in
1997 prior to the Offerings. Awards granted under the ECP are based on shares of
Class A Common Stock.

The ECP is administered by a committee appointed by the Company's Board of
Directors. After the completion of the Offerings, the ECP will be administered
by the Compensation Committee. The ECP provides for the grant of incentive and
nonqualified stock options, stock appreciation rights, restricted stock,
performance shares and performance units (individually, an "Award" or
collectively, "Awards"). Only officers or certain salaried employees of the
Company with potential to contribute to the future success of the Company or its
subsidiaries will be eligible to receive Awards under the ECP (initially
approximately 600 employees). The administrator of the ECP has the discretion to
select the employees to whom Awards will be granted, to determine the type, size
and terms and conditions applicable to each Award and the authority to
interpret, construe and implement the provisions of the ECP. The administrator's
decisions will be binding.

The total number of shares of Class A Common Stock that may be subject to Awards
under the ECP is 7.5% of all outstanding Common Stock as of the tenth business
day following the closing date of the Offerings, or approximately 7,871,700
shares (8,067,450 shares if the Underwriters' over-allotment options are
exercised in full), including Awards granted prior to the Offerings and subject
to adjustment as provided in the ECP. No more than 500,000 shares of Class A
Common Stock may be subject to stock options, with or without any related stock
appreciation rights, or stand-alone stock appreciation rights, awarded to any
individual participant under the ECP in any one calendar year. Class A Common
Stock issued under the ECP may be either authorized but unissued shares (subject
to a maximum limit of 747,845 shares), treasury shares or any combination
thereof. No more than 300,000 shares of Class A Common Stock may be granted
under the ECP as Awards of performance-based "Restricted Stock" (as herein
defined) to any individual participant in any one calendar year and which are
intended to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code of 1986, as amended. The maximum aggregate payout
(determined as of the end of the applicable performance period) with respect to
Awards of "Performance Shares" or "Performance Units" (as such terms are
hereinafter defined) that may be granted under the ECP to any individual
participant in any one calendar year and which are intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986, as amended, shall be equal to the closing trading price on the New York
Stock Exchange of 300,000 shares of Class A Common Stock. Any shares of Class A
Common Stock in addition to 747,845 shares to be issued as Awards under the ECP
or pursuant to Awards granted under the ECP will be obtained by the Company
either through forfeitures of shares of Restricted Stock (to the extent that
such shares are made available again for issuance under the ECP) or from
treasury shares (to the extent that the Company is permitted by applicable law
to acquire its own shares). Any shares of Class A Common Stock subject to an
Award which lapses, expires or is otherwise terminated without the issuance of
such shares may become available for new Awards.

The Company intends to grant Awards to the Named Executive Officers and other
selected participants which will be contingent on the successful completion of
the Offerings. The terms of the Awards will be

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<PAGE> 71

set forth in award agreements ("Award Agreements"). These Awards are summarized
in the following table and are described below:

ECP Table

<TABLE>
<CAPTION>
------------------------------------
NO. OF
NO. OF SHARES OF NONQUALIFIED
NAME AND POSITION RESTRICTED STOCK STOCK OPTIONS(1)
----------------- ---------------- ----------------
<S> <C> <C>
Frank A. Olson.............................................. 229,535 161,530
Chairman of the Board and
Chief Executive Officer
Craig R. Koch............................................... 167,540 113,710
President and Chief
Operating Officer
William Sider............................................... 31,935 64,825
Executive Vice President
and Chief Financial Officer
Antoine E. Cau.............................................. 31,935 64,825
Vice President
Joseph R. Nothwang.......................................... 63,875 129,650
Executive Vice President
All Executive Officers as a Group (including those listed
above).................................................... 747,845 987,250
Non-Employee Directors...................................... 0 0
All Other Employees as a Group.............................. 0 510,000
</TABLE>

- -------------------------
(1) The Company intends to grant these options with an exercise price equal to
the initial public offering price set forth on the cover page of this
Prospectus.

The principal terms of the Award Agreements are as follows:

(i) An Award will be granted to the Chairman and Chief Executive Officer,
which will consist of shares of Restricted Stock that will vest on the
third anniversary of the date of grant,

(ii) An Award will be granted to each Named Executive Officer other than
the Chairman and Chief Executive Officer and to approximately seven other
officers, which will consist of shares of Restricted Stock that will vest
33% on the third anniversary of the date of grant, an additional 33% on the
fourth anniversary of the date of grant, and in full on the fifth
anniversary of the date of grant,

(iii) An Award will be granted to each Named Executive Officer and to a
significantly larger group of eligible employees, which will consist of
Options that will vest 33% on the first anniversary of the date of grant,
an additional 33% on the second anniversary of the date of grant and in
full on the third anniversary of the date of grant.

Set forth below is a brief description of the Awards that may be granted under
the ECP:

Stock Options. Options (each an "Option") to purchase shares of Class A Common
Stock, which may be incentive or nonqualified stock options, may be granted
under the ECP at an exercise price (the "Option Price") determined by the
administrator of the ECP in its discretion, provided that the Option Price may
be no less than the closing trading price of the Class A Common Stock on the New
York Stock Exchange on the date of grant, except the initial grants described
above will be granted with an exercise price equal to the initial public
offering price set forth on the cover page of this Prospectus. Each Option
represents the right to purchase one share of Class A Common Stock at the
specified Option Price.

Options will expire not later than 10 years after the date on which they are
granted and will become exercisable at such times and in such installments as
determined by the administrator of the ECP. Payment of the Option Price must be
made in full at the time of exercise in cash, certified or bank check. As
determined by the administrator of the ECP, payment in full or in part may also
be made by

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<PAGE> 72

tendering to the Company shares of Class A Common Stock having a fair market
value equal to the Option Price (or such portion thereof). The Committee may
also allow a cashless exercise of such options.

Stock Appreciation Rights. An Award of a stock appreciation right ("SAR") may be
granted under the ECP. Generally, one SAR is granted with respect to one share
of Class A Common Stock. The SAR entitles the participant, upon the exercise of
the SAR, to receive an amount equal to the appreciation in the underlying share
of Class A Common Stock. The appreciation is equal to the difference between (i)
the "base value" of the SAR (which is determined with reference to the closing
trading price of the Class A Common Stock on the New York Stock Exchange on the
date the SAR is granted), and (ii) the closing trading price of the Class A
Common Stock on the New York Stock Exchange on the date the SAR is exercised.
Upon the exercise of a vested SAR, the exercising participant will be entitled
to receive the appreciation in the value of one share of Class A Common Stock as
so determined, payable at the discretion of the participant in cash, shares of
Class A Common Stock, or some combination thereof, subject to the availability
of shares of Class A Common Stock to the Company.

SARs will expire not later than 10 years after the date on which they are
granted. SARs become exercisable at such times and in such installments as
determined by the administrator of the ECP.

Tandem Option/SARs. An Option and a SAR may be granted "in tandem" with each
other (a "Tandem Option/SAR"). An Option and a SAR are considered to be in
tandem with each other because the exercise of the Option aspect of the tandem
unit automatically cancels the right to exercise the SAR aspect of the tandem
unit, and vice versa. The Option may be an incentive stock option or a
nonqualified stock option, and the Option may be coupled with one SAR, more than
one SAR or a fractional SAR in any proportionate relationship selected by the
Compensation Committee. Descriptions of the terms of the Option and the SAR
aspects of a Tandem Option/SAR are provided above.

Restricted Stock. An Award of restricted stock ("Restricted Stock") is an Award
of Class A Common Stock that is subject to such restrictions as the
administrator of the ECP deems appropriate, including forfeiture conditions and
restrictions against transfer for a period specified by the administrator of the
ECP. Restricted Stock Awards may be granted under the ECP for services and/or
payment of cash. Restrictions on Restricted Stock may lapse in installments
based on factors selected by the administrator of the ECP. Prior to the
expiration of the restricted period, except as and only if provided by the
administrator of the ECP, a grantee who has received a Restricted Stock Award
generally has the rights of a stockholder of the Company, including the right to
vote and to receive cash dividends on the shares subject to the Award. Stock
dividends issued with respect to a Restricted Stock Award may be treated as
additional shares under such Award and may be subject to the same restrictions
and other terms and conditions that apply to the shares with respect to which
such dividends are issued.

Performance Shares and Performance Units. A performance share Award (a
"Performance Share") and/or a performance unit Award (a "Performance Unit") may
be granted under the ECP. Each Performance Unit will have an initial value that
is established by the administrator of the ECP at the time of grant. Each
Performance Share will have an initial value equal to the closing trading price
of one share of Class A Common Stock on the New York Stock Exchange on the date
of grant. Such Awards may be earned based upon satisfaction of certain specified
performance criteria, subject to such other terms and conditions as the
administrator of the ECP deems appropriate. Performance objectives will be
established before, or as soon as practicable after, the commencement of the
performance period during which performance will be measured (the "Performance
Period") and may be based on net earnings, operating earnings or income, net
income, absolute and/or relative return on equity, capital invested or assets,
earnings per share, cash flow, profits, earnings growth, revenue growth,
comparisons to peer companies, share price, total shareholder return, economic
value added, expense reduction, customer satisfaction, any combination of the
foregoing and/or such other measures, including individual measures of
performance, as the administrator of the ECP deems appropriate. Prior to the end
of a Performance Period, the administrator of the ECP, in its discretion, may
adjust the performance objectives to reflect an event that may materially affect
the performance of the Company,

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<PAGE> 73

including, but not limited to, market conditions or a significant acquisition or
disposition of assets or other property by the Company. The extent to which a
grantee is entitled to payment in settlement of such an Award at the end of the
Performance Period will be determined by the administrator of the ECP, in its
discretion, based on whether the performance criteria have been met and payment
will be made in cash or in shares of Class A Common Stock in accordance with the
terms of the applicable Award Agreements.

Additional Information. Under the ECP, if there is any change in the
capitalization of the Company, a corporate transaction, a reorganization or a
partial liquidation of the Company, such proportionate adjustments as may be
necessary (in the form determined by the administrator of the ECP) to reflect
such change will be made to prevent dilution or enlargement of the rights with
respect to the aggregate number of shares of Class A Common Stock for which
Awards in respect thereof may be granted under the ECP, the number of shares of
Class A Common Stock covered by each outstanding Award and the price per share
in respect thereof. Unless otherwise provided in an Award Agreement, an
individual's rights under the ECP may not be assigned or transferred (except in
the event of death). An individual's rights under the ECP are subject to
forfeiture for competitive activity or activity that is inimical to the best
interest of the Company.

The ECP will remain in effect until terminated by the board of directors and
thereafter until all Awards granted thereunder are satisfied by the issuance of
shares of Class A Common Stock and/or the payment of cash or the ECP is
otherwise terminated pursuant to the terms of the ECP or under any Award
Agreements. Notwithstanding the foregoing, no Awards may be granted under the
ECP after the tenth anniversary of the effective date of the ECP. The board of
directors may at any time terminate, modify or amend the ECP; provided, however,
that no such amendment, modification or termination may materially adversely
affect an optionee's or grantee's rights under any Award theretofore granted
under the ECP, except with the consent of such optionee or grantee.

Certain Federal Income Tax Consequences of Awards. Certain of the federal income
tax consequences to ECP participants and the Company of Awards granted under the
ECP are generally set forth in the following summary.

An employee to whom an Option which is an incentive stock option ("ISO") that
qualifies under Section 422 of the Internal Revenue Code of 1986, as amended, is
granted will not recognize income at the time of grant or exercise of such
Option. No federal income tax deduction will be allowable to the Company upon
the grant or exercise of such ISO. However, upon the exercise of an ISO, any
excess in the fair market price of the Class A Common Stock over the Option
Price constitutes a tax preference item that may have alternative minimum tax
consequences for the employee. When the employee sells such shares more than one
year after the date of transfer of such shares and more than two years after the
date of grant of such ISO, the employee will normally recognize a long-term
capital gain or loss equal to the difference, if any, between the sales price of
such shares and the aggregate Option Price and the Company will not be entitled
to a federal income tax deduction with respect to the exercise of the ISO or the
sale of such shares. If the employee does not hold such shares for the required
period, when the employee sells such shares, the employee will recognize
ordinary compensation income and possibly capital gains or losses in such
amounts as are prescribed by the Internal Revenue Code of 1986, as amended, and
the regulations thereunder and the Company will generally be entitled to a
federal income tax deduction in the amount of such ordinary compensation income.

An employee to whom an Option which is a nonqualified stock option ("NSO") is
granted will not recognize income at the time of grant of such Option. When the
employee exercises such NSO, the employee will recognize ordinary compensation
income equal to the difference, if any, between the Option Price paid and the
fair market value, as of the date of Option exercise, of the shares of Class A
Common Stock the employee receives. The tax basis of such shares to such
employee will be equal to the Option Price paid plus the amount includible in
the employee's gross income, and the employee's holding period for such shares
will commence on the date of exercise. Subject to the applicable provisions of
the Internal Revenue Code of 1986, as amended, and regulations thereunder, the

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<PAGE> 74

Company will generally be entitled to a federal income tax deduction in respect
of an NSO in an amount equal to the ordinary compensation income recognized by
the employee upon the exercise of the NSO.

OWNERSHIP OF COMMON STOCK

Ford owns 100% of the common stock of the Company outstanding prior to the
Offerings. Upon completion of the Offerings, Ford will beneficially own 55.4% of
the outstanding Class A Common Stock (51.9% if the Underwriters' over-allotment
options are exercised in full) and 100% of the outstanding Class B Common Stock
and, accordingly, will own Common Stock representing approximately 83.4% of the
economic interest in the Company (81.4% if the Underwriter's over-allotment
options are exercised in full) and representing approximately 95.3% of the
combined voting power of the Company's outstanding common stock (94.6% if the
Underwriters' over-allotment options are exercised in full). See "Relationship
with Ford".

The principal executive offices of Ford are located at The American Road,
Dearborn, Michigan 48121.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The authorized capital stock of the Company will consist of (i) 440,000,000
shares of Class A Common Stock and 140,000,000 shares of Class B Common Stock
and (ii) 40,000,000 shares of Preferred Stock, par value $0.01 per share (the
"Preferred Stock"). Of the 440,000,000 shares of Class A Common Stock,
17,400,000 shares are being offered in the Offerings (excluding 2,610,000 shares
subject to over-allotment options granted by the Company to the Underwriters),
140,000,000 shares will be reserved for issuance upon conversion of Class B
Common Stock into Class A Common Stock and 747,845 shares have been reserved for
issuance pursuant to an employee benefit plan. See "Management -- Long-Term
Equity Compensation Plan". Of the 140,000,000 shares of Class B Common Stock,
65,956,000 shares will be outstanding and beneficially owned by Ford as of the
closing date of the Offerings. As of the closing date of the Offerings, there
will be no preferred stock outstanding. A description of the material terms and
provisions of the Company's Restated Certificate of Incorporation affecting the
relative rights of the Class A Common Stock, the Class B Common Stock and the
Preferred Stock is set forth below. The following description of the capital
stock of the Company is intended as a summary only and is qualified in its
entirety by reference to the form of the Company's Restated Certificate of
Incorporation filed with the Registration Statement of which this Prospectus
forms a part and to Delaware corporate law.

COMMON STOCK

Voting Rights

The holders of Class A Common Stock and Class B Common Stock generally have
identical rights except that holders of Class A Common Stock are entitled to one
vote per share. Holders of Class B Common Stock are entitled to five votes per
share on all matters to be voted on by stockholders, subject to the right of
Ford or the Class B Transferee (as defined below), as the case may be, to reduce
from time to time the number of votes per share of Class B Common Stock by
written notice to the Company specifying the reduced number of votes per share.
Holders of shares of Class A Common Stock and Class B Common Stock are not
entitled to cumulate their votes in the election of directors. Generally, all
matters to be voted on by stockholders must be approved by a majority (or, in
the case of election of directors, by a plurality) of the votes entitled to be
cast by all shares of Class A Common Stock and Class B Common Stock present in
person or represented by proxy, voting together as a single class, subject to
any voting rights granted to holders of any Preferred Stock. Except as otherwise
provided by law, and subject to any voting rights granted to holders of any
outstanding Preferred Stock,

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<PAGE> 75

amendments to the Company's Restated Certificate of Incorporation must be
approved by a majority of the combined voting power of all Class A Common Stock
and Class B Common Stock, voting together as a single class. However, amendments
to the Company's Restated Certificate of Incorporation that would alter or
change the powers, preferences or special rights of the Class A Common Stock or
the Class B Common Stock so as to affect them adversely also must be approved by
a majority of the votes entitled to be cast by the holders of the shares
affected by the amendment, voting as a separate class. Notwithstanding the
foregoing, any amendment to the Company's Restated Certificate of Incorporation
to increase or decrease the authorized shares of any class shall be approved
upon the affirmative vote of the holders of a majority of the Common Stock,
voting together as a single class.

Dividends

Holders of Class A Common Stock and Class B Common Stock will share ratably in
any dividend declared by the Board of Directors, subject to any preferential
rights of any outstanding Preferred Stock. Dividends consisting of shares of
Class A Common Stock and Class B Common Stock may be paid only as follows: (i)
shares of Class A Common Stock may be paid only to holders of shares of Class A
Common Stock, and shares of Class B Common Stock may be paid only to holders of
Class B Common Stock; and (ii) shares shall be paid proportionally with respect
to each outstanding share of Class A and Class B Common Stock.

The Company may not subdivide or combine shares of either class of Common Stock
without at the same time proportionally subdividing or combining shares of the
other class.

Conversion

Each share of Class B Common Stock is convertible while held by Ford, any of its
subsidiaries or the Class B Transferee (as defined below), if any, at the option
of the holder thereof into one share of Class A Common Stock. Following the
occurrence of a distribution, if any, of shares of Class B Common Stock to
stockholders of Ford in a transaction intended to be tax-free under section 355
of the Internal Revenue Code of 1986, as amended (a "tax-free spin-off"), shares
of Class B Common Stock shall not be convertible into shares of Class A Common
Stock at the option of the holder thereof.

Except as provided below, any shares of Class B Common Stock transferred to a
person other than Ford or any of its subsidiaries or the Class B Transferee or
any of its subsidiaries shall automatically convert to shares of Class A Common
Stock upon such disposition. Shares of Class B Common Stock representing more
than a 50% economic interest in the Company transferred by Ford or any of its
subsidiaries in a single transaction to one unrelated person (the "Class B
Transferee") shall not automatically convert to shares of Class A Common Stock
upon such disposition. Any shares of Class B Common Stock retained by Ford or
any of its subsidiaries following any such disposition to the Class B Transferee
shall automatically convert to shares of Class A Common Stock upon such
disposition. Shares of Class B Common Stock transferred to stockholders of Ford
or stockholders of the Class B Transferee as a distribution intended to be a
tax-free spin-off shall not convert to shares of Class A Common Stock upon the
occurrence of a tax-free spin-off. Following a tax-free spin-off, shares of
Class B Common Stock shall be transferable as Class B Common Stock, subject to
applicable laws; provided, however, that shares of Class B Common Stock shall
automatically convert into shares of Class A Common Stock on the fifth
anniversary of the tax-free spin-off, unless prior to such tax-free spin-off,
Ford or the Class B Transferee, as the case may be, delivers to the Company an
opinion of counsel reasonably satisfactory to the Company (which, in the case of
Ford, shall include Ford's Chief Tax Officer) to the effect that such conversion
would preclude Ford or the Class B Transferee, as the case may be, from
obtaining a favorable ruling from the Internal Revenue Service that the
distribution would be a tax-free spin-off. If such an opinion is received,
approval of such conversion shall be submitted to a vote of the holders of the
Common Stock as soon as practicable after the fifth anniversary of the tax-free
spin-off unless Ford or the Class B Transferee, as the case may be, delivers to
the Company an opinion of counsel reasonably satisfactory to the Company (which,
in the case of Ford, shall include Ford's Chief Tax Officer) prior to such
anniversary that such vote would adversely

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<PAGE> 76

affect the status of the tax-free spin-off. Approval of such conversion will
require the affirmative vote of the holders of a majority of the shares of both
the Class A Common Stock and Class B Common Stock present and voting, voting
together as a single class, with each share entitled to one vote for such
purpose. No assurance can be given that such conversion would be consummated.
The requirement to submit such conversion to a vote of the holders of Common
Stock is intended to ensure tax treatment of the tax-free spin-off is preserved
should the Internal Revenue Service challenge such automatic conversion as
violating the 80% vote requirement. Ford has no current plans with respect to a
tax-free spin-off of the Company.

All shares of Class B Common Stock shall automatically convert into Class A
Common Stock if a tax-free spin-off has not occurred and the number of
outstanding shares of Class B Common Stock beneficially owned by Ford or the
Class B Transferee, as the case may be, falls below 20% of the aggregate number
of outstanding shares of Common Stock. This will prevent Ford or the Class B
Transferee, as the case may be, from decreasing its economic interest in the
Company to less than 20% while still retaining control of more than 55% of the
Company's voting power. Automatic conversion of the Class B Common Stock into
Class A Common Stock if a tax-free spin-off has not occurred and Ford or the
Class B Transferee, as the case may be, decreases its economic interest in the
Company to less than 20% is intended to ensure that Ford or the Class B
Transferee, as the case may be, retains voting control by virtue of its
ownership of Class B Common Stock only if it has a significant economic interest
in the Company. All conversions will be effected on a share-for-share basis.

Other Rights

In the event of any merger or consolidation of the Company with or into another
company in connection with which shares of Common Stock are converted into or
exchangeable for shares of stock, other securities or property (including cash),
all holders of Common Stock, regardless of class, will be entitled to receive
the same kind and amount of shares of stock and other securities and property
(including cash).

On liquidation, dissolution or winding up of the Company, after payment in full
of the amounts required to be paid to holders of Preferred Stock, if any, all
holders of Common Stock, regardless of class, are entitled to share ratably in
any assets available for distribution to holders of shares of Common Stock.

No shares of either class of Common Stock are subject to redemption or have
preemptive rights to purchase additional shares of Common Stock. However, see
"Relationship with Ford -- Corporate Agreement" with respect to certain rights
of Ford to purchase additional shares of Common Stock.

Upon consummation of the Offerings, all the outstanding shares of Class A Common
Stock and Class B Common Stock will be legally issued, fully paid and
nonassessable.

PREFERRED STOCK

The Preferred Stock is issuable from time to time in one or more series and with
such designations and preferences for each series as shall be stated in the
resolutions providing for the designation and issue of each such series adopted
by the Board of Directors of the Company. The Board of Directors is authorized
by the Company's Restated Certificate of Incorporation to determine, among other
things, the voting, dividend, redemption, conversion and liquidation powers,
rights and preferences and the limitations thereon pertaining to such series.
The Board of Directors, without stockholder approval, may issue Preferred Stock
with voting and other rights that could adversely affect the voting power and
other rights of the holders of the Common Stock and could have certain
anti-takeover effects. The Company has no present plans to issue any shares of
Preferred Stock. The ability of the Board of Directors to issue Preferred Stock
without stockholder approval could have the effect of delaying, deferring or
preventing a change in control of the Company or the removal of existing
management.

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<PAGE> 77

CERTAIN CERTIFICATE OF INCORPORATION AND BY-LAW PROVISIONS

Corporate Opportunities

The Company's Restated Certificate of Incorporation will provide that: Ford
shall have no duty to refrain from engaging in the same or similar activities or
lines of business as the Company, and neither Ford nor any officer or director
thereof (except as provided below) shall be liable to the Company or its
stockholders for breach of any fiduciary duty by reason of any such activities
of Ford. In the event that Ford acquires knowledge of a potential transaction or
matter which may be a corporate opportunity for both Ford and the Company, Ford
shall have no duty to communicate or offer such corporate opportunity to the
Company and shall not be liable to the Company or its stockholders for breach of
any fiduciary duty as a stockholder of the Company by reason of the fact that
Ford pursues or acquires such corporate opportunity for itself, directs such
corporate opportunity to another person, or does not communicate information
regarding such corporate opportunity to the Company.

In the event that a director or officer of the Company who is also a director or
officer of Ford acquires knowledge of a potential transaction or matter which
may be a corporate opportunity for both the Company and Ford, such director or
officer of the Company shall have fully satisfied and fulfilled the fiduciary
duty of such director or officer of the Company and its stockholders with
respect to such corporate opportunity if such director or officer acts in a
manner consistent with the following policy:

(i) a corporate opportunity offered to any person who is an officer of the
Company, and who is also a director but not an officer of Ford, shall
belong to the Company;

(ii) a corporate opportunity offered to any person who is a director but
not an officer of the Company, and who is also a director or officer of
Ford, shall belong to the Company if such opportunity is expressly offered
to such person in writing solely in his or her capacity as a director of
the Company, and otherwise shall belong to Ford; and

(iii) a corporate opportunity offered to any person who is an officer of
both the Company and Ford shall belong to the Company if such opportunity
is expressly offered to such person in writing solely in his or her
capacity as an officer of the Company, and otherwise shall belong to Ford.

For purposes of the foregoing:

(i) A director of the Company who is Chairman of the Board of Directors of
the Company or of a committee thereof shall not be deemed to be an officer
of the Company by reason of holding such position (without regard to
whether such position is deemed an officer of the Company under the By-laws
of the Company), unless such person is a full-time employee of the Company;
and

(ii) (A) The term "Company" shall mean the Company and all corporations,
partnerships, joint ventures, associations and other entities in which the
Company beneficially owns (directly or indirectly) 50% or more of the
outstanding voting stock, voting power, partnership interests or similar
voting interests, and (B) the term "Ford" shall mean Ford and all
corporations, partnerships, joint ventures, associations and other entities
(other than the Company, defined in accordance with clause (A) of this
section (ii)) in which Ford beneficially owns (directly or indirectly) 50%
or more of the outstanding voting stock, voting power, partnership
interests or similar voting interests.

The foregoing provisions of the Company's Restated Certificate of Incorporation
shall expire on the date that Ford ceases to own beneficially Common Stock
representing at least 20% of the total voting power of all classes of
outstanding Common Stock and no person who is a director or officer of the
Company is also a director or officer of Ford or any of its subsidiaries (other
than the Company).

In addition to any vote of the stockholders required by the Company's Restated
Certificate of Incorporation, until the time that Ford ceases to own
beneficially Common Stock representing at least 20% of the total voting power of
all classes of outstanding Common Stock, the affirmative vote of the holders of
more than 80% of the total voting power of all classes of outstanding Common
Stock shall

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<PAGE> 78

be required to alter, amend or repeal in a manner adverse to the interests of
Ford and its subsidiaries (other than the Company), or adopt any provision
adverse to the interests of Ford and its subsidiaries (other than the Company),
and inconsistent with, the corporate opportunity provisions described above.
Accordingly, so long as Ford beneficially owns Common Stock representing at
least 20% of the total voting power of all classes of outstanding Common Stock,
it can prevent any such alteration, amendment, repeal or adoption.

Any person purchasing or otherwise acquiring Common Stock will be deemed to have
notice of, and to have consented to, the foregoing provisions of the Company's
Restated Certificate of Incorporation.

Provisions That May Have an Anti-Takeover Effect

Certain provisions of the Company's Restated Certificate of Incorporation and
By-laws summarized below may be deemed to have an anti-takeover effect and may
delay, deter or prevent a tender offer or takeover attempt that a stockholder
might consider to be in its best interest, including attempts that might result
in a premium being paid over the market price for the shares held by
stockholders.

The Company's Restated Certificate of Incorporation will provide that, subject
to any rights of holders of Preferred Stock to elect additional directors under
specified circumstances, the number of directors of the Company will be fixed by
the By-laws. The By-laws will provide that, subject to any rights of holders of
Preferred Stock to elect directors under specified circumstances, the number of
directors will be fixed from time to time exclusively by resolution of the Board
of Directors adopted by the vote of directors constituting a majority of the
total number of directors that the Company would have if there were no vacancies
on the Company's Board of Directors, but shall consist of not more than twelve
nor less than three directors. In addition, the Restated Certificate of
Incorporation and By-laws will provide that, subject to any rights of holders of
Preferred Stock, and unless the Company's Board of Directors otherwise
determines, any vacancies will be filled by the affirmative vote of a majority
of the remaining members of the Board of Directors, though less than a quorum,
or by a sole remaining director; except as otherwise provided by law, any such
vacancy may not be filled by the stockholders.

The Company's By-laws will provide for an advance notice procedure for the
nomination, other than by or at the direction of the Board of Directors, of
candidates for election as directors as well as for other stockholder proposals
to be considered at annual meetings of stockholders. In general, notice of
intent to nominate a director or raise matters at such meetings will have to be
received in writing by the Company not less than 60 nor more than 90 days prior
to the anniversary of the previous year's annual meeting of stockholders, and
must contain certain information concerning the person to be nominated or the
matters to be brought before the meeting and concerning the stockholder
submitting the proposal. The Company's Restated Certificate of Incorporation and
By-laws will also provide that special meetings of stockholders may be called
only by certain specified officers of the Company or by any such officer at the
request in writing of the Board of Directors; special meetings of stockholders
cannot be called by stockholders. In addition, the Company's Restated
Certificate of Incorporation will provide that any action required or permitted
to be taken by stockholders may be effected by written consent; provided,
however, that on and after the date on which neither Ford nor the Class B
Transferee continues to beneficially own 50% or more of the total voting power
of all classes of outstanding Common Stock, any action required or permitted to
be taken by stockholders may be effected only at a duly called annual or special
meeting of stockholders and may not be effected by a written consent by
stockholders in lieu of such a meeting.

The Company's Restated Certificate of Incorporation will also provide that the
affirmative vote of the holders of at least 75% of the total voting power of all
classes of outstanding Common Stock, voting together as a single class, is
required to amend, repeal or adopt any provision inconsistent with the foregoing
provisions of the Restated Certificate of Incorporation. The Restated
Certificate of Incorporation and By-laws will further provide that the By-laws
may be altered, amended or repealed by the Company's Board of Directors or by
the affirmative vote of the holders of at least 75% of the total voting power of
all classes of outstanding Common Stock, voting together as a single class.

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<PAGE> 79

In addition to the foregoing, certain of the Company's airport concession
agreements require the consent of the airport authority in connection with
transfers of varying percentages of the Company's common stock. See
"Relationship with Ford".

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is a Delaware corporation subject to Section 203 of the Delaware
General Corporation Law (the "Delaware Law"). Section 203 provides that, subject
to certain exceptions specified therein, a corporation shall not engage in any
business combination with any "interested stockholder" for a three-year period
following the time that such stockholder becomes an interested stockholder
unless (i) prior to such time, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced (excluding
certain shares) or (iii) on or subsequent to such time, the business combination
is approved by the board of directors of the corporation and by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned by
the interested stockholder. Except as specified in Section 203 of the Delaware
Law, an interested stockholder is defined to include (x) any person that is the
owner of 15% or more of the outstanding voting stock of the corporation, or is
an affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation, at any time within three years
immediately prior to the relevant date and (y) the affiliates and associates of
any such person. Under certain circumstances, Section 203 of the Delaware Law
makes it more difficult for an "interested stockholder" to effect various
business combinations with a corporation for a three-year period, although the
stockholders may elect to exclude a corporation from the restrictions imposed
thereunder. By virtue of its ownership of 15% or more of the outstanding voting
stock of the Company for more than a three-year period, Ford and its
subsidiaries are not themselves restricted from engaging in a business
combination with the Company pursuant to Section 203 of the Delaware Law.

LIMITATIONS ON DIRECTORS' LIABILITY

The Company's Restated Certificate of Incorporation provides that no director of
the Company shall be liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) in respect of certain unlawful
dividend payments or stock redemptions or repurchases or (iv) for any
transaction from which the director derived an improper personal benefit. The
effect of these provisions will be to eliminate the rights of the Company and
its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of fiduciary
duty as a director (including breaches resulting from grossly negligent
behavior), except in the situations described above.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock will be First Chicago
Trust Company of New York.

SHARES AVAILABLE FOR FUTURE SALE

Upon completion of the Offerings, the Company will have 39,000,000 shares of
Class A Common Stock issued and outstanding (41,610,000 if the Underwriters'
over-allotment options are exercised in full) and 65,956,000 shares of Class B
Common Stock issued and outstanding. All of the shares of Class A Common Stock
to be sold in the Offerings will be freely tradeable without restrictions or
further registration under the Securities Act of 1933, as amended (the
"Securities Act"), except for any shares

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<PAGE> 80

purchased by an "affiliate" of the Company (as that term is defined in Rule 144
adopted under the Securities Act ("Rule 144")), which will be subject to the
resale limitations of Rule 144. All of the outstanding shares of Class B Common
Stock are beneficially owned by Ford and have not been registered under the
Securities Act and may not be sold in the absence of an effective registration
statement under the Securities Act other than in accordance with Rule 144 or
another exemption from registration. Ford has certain rights to require the
Company to effect registration of shares of Common Stock owned by Ford, which
rights may be assigned. See "Relationship with Ford -- Corporate Agreement".

In general, under Rule 144 as in effect as of April 29, 1997, a person (or
persons whose shares are required to be aggregated) who has beneficially owned
shares of Common Stock for at least one year, including a person who may be
deemed an "affiliate", is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of one percent of the total
number of shares of the class of stock sold or the average weekly reported
trading volume of the class of stock being sold or the average weekly reported
trading volume of the class of stock being sold during the four calendar weeks
preceding such sale. A person who is not deemed an "affiliate" of the Company at
any time during the three months preceding a sale and who has beneficially owned
shares for at least two years is entitled to sell such shares under Rule 144
without regard to the volume limitations described above. As defined in Rule
144, an "affiliate" of an issuer is a person that directly or indirectly through
the use of one or more intermediaries controls, is controlled by, or is under
common control with, such issuer. Rule 144A under the Securities Act ("Rule
144A") provides a non-exclusive safe harbor exemption from the registration
requirements of the Securities Act for specified resales of restricted
securities to certain institutional investors. In general, Rule 144A allows
unregistered resales of restricted securities to a "qualified institutional
buyer", which generally includes an entity, acting for its own account or for
the account of other qualified institutional buyers, that in the aggregate owns
or invests at least $100 million in securities of unaffiliated issuers. Rule
144A does not extend an exemption to the offer or sale of securities that, when
issued, were of the same class as securities listed on a national securities
exchange or quoted on an automated quotation system. The shares of Class B
Common Stock outstanding as of the date of this Prospectus would be eligible for
resale under Rule 144A because such shares, when issued, were not of the same
class as any listed or quoted securities. The foregoing summary of Rule 144 and
Rule 144A is not intended to be a complete description thereof.

Prior to the Offerings, there has been no market for the Class A Common Stock,
and no prediction can be made as to the effect, if any, that market sales of
outstanding shares of Class B Common Stock, or the availability of such shares
for sale, will have on the market price of the Class A Common Stock prevailing
from time to time. Nevertheless, sales of substantial amounts of Class B Common
Stock beneficially owned by Ford in the public market, or the perception that
such sales could occur, could adversely affect prevailing market prices for the
Class A Common Stock offered in the Offerings.

Although Ford in the future may effect or direct sales or other dispositions of
Common Stock that would reduce its beneficial ownership interest in the Company,
Ford has advised the Company that its current intent is to continue to hold all
of the Common Stock beneficially owned by it following the Offerings. However,
Ford is not subject to any contractual obligation to retain its controlling
interest except that Ford and the Company have agreed, subject to certain
exceptions, not to sell or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of J.P. Morgan Securities Inc. As a result, there can be no assurance
concerning the period of time during which Ford will maintain its beneficial
ownership of Common Stock owned by it following the Offerings. See
"Underwriting". Beneficial ownership of at least 80% of the total voting power
and value of the outstanding Common Stock is required in order for Ford to
continue to include the Company in its consolidated group for federal income tax
purposes, and beneficial ownership of at least 80% of the total voting power and
80% of each class of nonvoting capital stock is required in order for Ford to be
able to effect a tax-free spin-off or certain other tax-free transactions. See
"Relationship with Ford".

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<PAGE> 81

DESCRIPTION OF CERTAIN INDEBTEDNESS

GENERAL

In connection with the funding of its operations, the Company and certain of its
foreign subsidiaries from time to time issue publicly and privately held debt
securities (the "Debt Securities"). At December 31, 1996, the Company and its
subsidiaries had an aggregate of $5.1 billion in Debt Securities outstanding.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources".

MATURITIES AND INTEREST RATES

The Debt Securities have maturities ranging from 1997 to 2009 with interest
rates ranging from 2.0% to 12% (excluding immaterial borrowings by the Company's
operation in Brazil, which accrue interest at higher rates due to the high
inflationary environment in that country). Certain Debt Securities issued by the
Company are redeemable at the option of the holders, including $100 million of
Debt Securities due 2009, which are redeemable in 1999, and $150 million of Debt
Securities due 2006, which are redeemable in 2002. If such Debt Securities are
redeemed, the last to mature of the Debt Securities would mature in 2005. See
Note 2 of the Notes to the Company's consolidated financial statements included
in this Prospectus.

COVENANTS

Certain debt instruments under which the Company has issued Debt Securities or
guarantees contain the following restrictive covenants:

Limitations on Mergers

The Company may not, subject to certain exceptions, consolidate with, merge
into, or sell, convey or transfer its properties and assets substantially as an
entirety to another person, if, as a result thereof, any property owned by the
Company or certain subsidiaries of the Company ("Restricted Subsidiaries")
immediately prior thereto would become subject to any security interest, unless
certain publicly held Debt Securities issued by the Company are secured equally
and ratably with (or prior to) the debt secured by such security interest.

Limitations on Certain Loans and Advances

The Company may not, and may not permit any Restricted Subsidiary to, make any
loan or advance to any person owning more than 50% of the outstanding voting
stock of the Company or to any affiliate of such person (other than the Company
or a Restricted Subsidiary) if the aggregate outstanding amount of senior
indebtedness of the Company and its Restricted Subsidiaries exceeds 400% of the
consolidated net worth and subordinated indebtedness of the Company and its
Restricted Subsidiaries.

Limitations on Secured Debt

Subject to certain exceptions, including those set forth below, the Company may
not create, incur, assume or guarantee, and may not cause, suffer or permit a
Restricted Subsidiary to create, incur, assume or guarantee, any secured
indebtedness without making effective provisions whereby certain Debt Securities
then outstanding and any other indebtedness of or guaranteed by the Company or
such Restricted Subsidiary then entitled thereto, subject to applicable
priorities of payment, shall be secured by the security interest securing such
secured indebtedness equally and ratably with any and all other obligations and
indebtedness thereby secured (subject, however, to applicable priorities of
payment) so long as such secured indebtedness remains outstanding; provided,
however, that the foregoing prohibition shall not be applicable to (i) any
security interest in favor of the Company or a Restricted Subsidiary; (ii)
certain pre-existing security interests; (iii) security interests existing on
property at the

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<PAGE> 82

time it is acquired by the Company or a Restricted Subsidiary, provided, such
security interest is limited to all or part of the property so acquired; (iv)(a)
any security interest existing on the property of or on the outstanding shares
or indebtedness of a corporation at the time such corporation shall become a
Restricted Subsidiary or (b) subject to the provisions referred to above under
"-- Limitations on Mergers", any security interest on property of a corporation
existing at the time such corporation is merged into or consolidated with the
Company or a Restricted Subsidiary or at the time of a sale, lease or other
disposition of the properties of a corporation as an entirety or substantially
as an entirety to the Company or a Restricted Subsidiary, provided, in each such
case, that such security interest does not extend to any property owned prior to
such transaction by the Company or any Restricted Subsidiary which was a
Restricted Subsidiary prior to such transaction; and (v) security interests on
certain business equipment.

Notwithstanding the foregoing provisions, the Company and any one or more
Restricted Subsidiaries may issue, assume or guarantee secured indebtedness
which would otherwise be subject to the foregoing restrictions in an aggregate
amount which, together with all other secured indebtedness of the Company and
its Restricted Subsidiaries which would otherwise be subject to the foregoing
restrictions (not including indebtedness permitted to be secured as described
under "-- Limitations on Secured Debt" above), and the aggregate value of the
sale and leaseback transactions in existence at such time (not including sale
and leaseback transactions the proceeds of which have been or will be applied in
accordance with clause (ii) under "-- Limitations on Sale and Leaseback
Transactions" below), do not at the time of incurrence exceed 10% of the
consolidated net worth and subordinated indebtedness of the Company and its
Restricted Subsidiaries.

Limitations on Sale and Leaseback Transactions

The Company may not, and may not permit any Restricted Subsidiary to, engage in
any sale and leaseback transaction unless (i) the Company or such Restricted
Subsidiary would be entitled, without reference to the provisions described
under "-- Limitations on Secured Debt" above, to incur secured indebtedness in
an amount equal to the amount realized or to be realized upon the sale or
transfer involved in such sale and leaseback transaction, secured by a security
interest on the property to be leased without equally and ratably securing
certain outstanding Debt Securities as provided under "-- Limitations on Secured
Debt" or (ii) the Company or a Restricted Subsidiary apply, within 120 days
after such sale or transfer, an amount equal to the fair value of the property
so leased (as determined by the Board of Directors) to the repayment of senior
indebtedness of the Company or of any Restricted Subsidiary (other than senior
indebtedness owed to the Company or any Restricted Subsidiary) then prepayable.

Limitations on Dividends

The Company may not pay dividends, invest in its own shares or permit
investments by its Restricted Subsidiaries in the Company's shares subsequent to
a specified date if, together with total investments by the Company and its
Restricted Subsidiaries in subsidiaries that are not Restricted Subsidiaries
made subsequent to such specified date, the aggregate of any such dividends or
investments exceeds the sum of (i) a specified dollar amount, (ii) the aggregate
net income of the Company and its Restricted Subsidiaries earned subsequent to
such specified date and (iii) net proceeds received from capital stock issued
subsequent to such specified date. Immediately following the Offerings, the
Company will be permitted to pay $ in dividends under the most restrictive of
such covenants. See "Use of Proceeds" and "Capitalization".

The last to mature of the outstanding securities of the Company containing any
of the foregoing restrictions listed above have a final maturity of November 1,
2009.

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<PAGE> 83

CERTAIN UNITED STATES TAX CONSEQUENCES

TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain U.S. federal income and estate
tax consequences of the ownership and disposition of Class A Common Stock by a
Non-U.S. Holder. For this purpose, a "Non-U.S. Holder" is any person who is, for
U.S. federal income tax purposes, a foreign corporation, a non-resident alien
individual, a foreign partnership or a foreign estate or trust. This discussion
does not address all aspects of U.S. federal income and estate taxes and does
not deal with foreign, state and local consequences that may be relevant to such
Non-U.S. Holders in light of their personal circumstances. Furthermore, this
discussion is based on provisions of the Internal Revenue Code of 1986, as
amended, existing and proposed regulations promulgated thereunder and
administrative and judicial interpretations thereof, as of the date hereof, all
of which are subject to change (possibly with retroactive effect). EACH
PROSPECTIVE PURCHASER OF CLASS A COMMON STOCK IS ADVISED TO CONSULT A TAX
ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF
ACQUIRING, HOLDING AND DISPOSING OF CLASS A COMMON STOCK AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, MUNICIPALITY OR
OTHER TAXING JURISDICTION.

DIVIDENDS

Dividends paid to a Non-U.S. Holder of Class A Common Stock generally will be
subject to withholding of U.S. federal income tax either at a rate of 30% of the
gross amount of the dividends or at such lower rate as may be specified by an
applicable income tax treaty. However, dividends that are effectively connected
with the conduct of a trade or business by the Non-U.S. Holder within the United
States and, where a tax treaty applies, are attributable to a U.S. permanent
establishment of the Non-U.S. Holder, are not subject to the withholding tax,
but instead are subject to U.S. federal income tax on a net income basis at
applicable graduated individual or corporate rates. Any such effectively
connected dividends received by a foreign corporation may, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.

Under current law, dividends paid to an address outside the United States are
presumed to be paid to a resident of such country (unless the payer has
knowledge to the contrary) for purposes of the withholding discussed above and,
under the current interpretation of United States Treasury regulations, for
purposes of determining the applicability of a tax treaty rate. Under proposed
United States Treasury regulations not currently in effect, however, a Non-U.S.
Holder of Class A Common Stock who wishes to claim the benefit of an applicable
treaty rate (and avoid backup withholding, as discussed below) would be required
to satisfy applicable certification and other requirements. Currently, certain
certification and disclosure requirements must be complied with in order to be
exempt from withholding under the effectively connected income exemption
discussed above.

A Non-U.S. Holder of Class A Common Stock eligible for a reduced rate of U.S.
withholding tax pursuant to an income tax treaty may obtain a refund of any
excess amounts withheld by filing an appropriate claim for refund with the
Internal Revenue Service (the "IRS").

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal income tax with
respect to gain recognized on a sale or other disposition of Class A Common
Stock unless (i) the gain is effectively connected with a trade or business of
the Non-U.S. Holder in the United States, and, where a tax treaty applies, is
attributable to a U.S. permanent establishment of the Non-U.S. Holder, (ii) in
the case of a Non-U.S. Holder who is an individual and holds the Class A Common
Stock as a capital asset, such holder is present in the United States for 183 or
more days in the taxable year of the sale or other disposition and certain other
conditions are met, (iii) the Non-U.S. Holder is subject to tax pursuant to
certain provisions of the Code applicable to U.S. expatriates or (iv) the
Company is or has been a "U.S.

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<PAGE> 84

real property holding corporation" for U.S. federal income tax purposes. The
Company believes it is not and does not anticipate becoming a "U.S. real
property holding corporation" for U.S. federal income tax purposes.

An individual Non-U.S. Holder described in clause (i) above, will, unless an
applicable treaty provides otherwise, be taxed on the net gain derived from the
sale under regular graduated U.S. federal income tax rates. An individual
Non-U.S. Holder described in clause (ii) above, will be subject to a flat 30%
tax on the gain derived from the sale, which may be offset by certain U.S.
source capital losses.

If a Non-U.S. Holder that is a foreign corporation falls under clause (i) above,
it will be taxed on its gain under regular graduated U.S. federal income tax
rates and may be subject to an additional branch profits tax at a 30% rate,
unless it qualifies for a lower rate under an applicable income tax treaty.

FEDERAL ESTATE TAX

Class A Common Stock owned or treated as owned by an individual Non-U.S. Holder
at the time of death will be included in such holder's gross estate for U.S.
federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise, and therefore may be subject to U.S. federal estate tax.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to such holder and the tax withheld with respect to
such dividends, regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may also be made
available to the tax authorities in the country in which the Non-U.S. Holder
resides under the provisions of an applicable income tax treaty.

Under current law, backup withholding at the rate of 31% generally will not
apply to dividends paid to a Non-U.S. Holder at an address outside the United
States (unless the payer has knowledge that the payee is a U.S. person). Under
proposed United States Treasury regulations not currently in effect, however, a
Non-U.S. Holder will be subject to backup withholding unless applicable
certification requirements are met.

Payment of the proceeds of a sale of Class A Common Stock by or through a U.S.
office of a broker is subject to both backup withholding and information
reporting unless the beneficial owner provides the payer with its name and
address and certifies under penalties of perjury that it is a Non-U.S. Holder,
or otherwise establishes an exemption. In general, backup withholding and
information reporting will not apply to a payment of the proceeds of a sale of
Class A Common Stock by or through a foreign office of a foreign broker. If,
however, such broker is, for U.S. federal income tax purposes a U.S. person, a
controlled foreign corporation, or a foreign person that derives 50% or more of
its gross income for a certain period from the conduct of a trade or business in
the United States, such payments will be subject to information reporting, but
not backup withholding, unless (1) such broker has documentary evidence in its
records that the beneficial owner is a Non-U.S. Holder and certain other
conditions are met, or (2) the beneficial owner otherwise establishes an
exemption.

Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.

The backup withholding and information reporting rules are under review by the
Treasury Department and their application to the Class A Common Stock could be
changed by future regulations. Non-U.S. Holders should consult their tax
advisors regarding the application of these rules to their particular
situations, the availability of an exemption therefrom, the procedure for
obtaining such an exemption, if available, and the possible application of the
proposed United States Treasury regulations addressing the withholding and the
information reporting rules.

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UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "U.S. Underwriting Agreement"),
the U.S. Underwriters named below, for whom J.P. Morgan Securities Inc.,
Goldman, Sachs & Co., Lehman Brothers Inc., Salomon Brothers Inc and Smith
Barney Inc. are acting as representatives (the "U.S. Representatives"), have
severally agreed to purchase, and the Company has agreed to sell to them, the
respective number of shares of Class A Common Stock set forth opposite their
names below. Under the terms and subject to the conditions contained in an
Underwriting Agreement dated the date of this Prospectus (the "International
Underwriting Agreement" and, together with the U.S. Underwriting Agreement, the
"Underwriting Agreements"), the International Managers named below, for whom
J.P. Morgan Securities Ltd., Goldman Sachs International, ABN AMRO Rothschild,
Banque Nationale de Paris, Commerzbank Aktiengesellschaft, Credit Lyonnais,
Lehman Brothers International (Europe), Morgan Grenfell & Co. Limited, Salomon
Brothers International Limited and Smith Barney Inc. are acting as
representatives (the "International Representatives"), have severally agreed to
purchase, and the Company has agreed to sell to them, the respective number of
shares of Class A Common Stock set forth opposite their names below. The closing
of the offering made hereby is a condition to the closing of the International
Offering, and vice versa. Under the terms and conditions of the Underwriting
Agreements, the Underwriters are obligated to take and pay for all such shares
of Class A Common Stock, if any are taken. Under certain circumstances, the
commitments of nondefaulting Underwriters may be increased as set forth in the
Underwriting Agreements.

<TABLE>
<CAPTION>
----------------
NUMBER OF SHARES
U.S. UNDERWRITERS ----------------
<S> <C>
J.P. Morgan Securities Inc. ................................
Goldman, Sachs & Co. .......................................
Lehman Brothers Inc. .......................................
Salomon Brothers Inc........................................
Smith Barney Inc. ..........................................

----------
Subtotal.................................................. 15,660,000
----------
</TABLE>

<TABLE>
<CAPTION>
----------------
NUMBER OF SHARES
INTERNATIONAL MANAGERS ----------------
<S> <C>
J.P. Morgan Securities Ltd. ................................
Goldman Sachs International.................................
ABN AMRO Rothschild.........................................
Banque Nationale de Paris...................................
Commerzbank Aktiengesellschaft..............................
Credit Lyonnais.............................................
Lehman Brothers International (Europe)......................
Morgan Grenfell & Co. Limited...............................
Salomon Brothers International Limited......................
Smith Barney Inc............................................

----------
Subtotal.................................................. 1,740,000
----------
Total.................................................. 17,400,000
----------
</TABLE>

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<PAGE> 86

The U.S. Underwriters and the International Managers have entered into an
Agreement Between Syndicates (the "Agreement Between Syndicates") which provides
for the coordination of their activities. Pursuant to the Agreement Between
Syndicates, sales may be made between the U.S. Underwriters and the
International Managers of such number of shares as they may mutually agree. The
price of any shares so sold shall be the offering price, less such amount as may
be mutually agreed upon by the U.S. Representatives and the International
Representatives, but not exceeding the selling concession to dealers applicable
to such shares. To the extent there are sales between the U.S. Underwriters and
the International Managers pursuant to the Agreement Between Syndicates, the
number of shares initially available for sale by the U.S. Underwriters or by the
International Managers may be more or less than the amount appearing on the
cover page of this Prospectus with respect to the Offerings. Neither the U.S.
Underwriters nor the International Managers are obligated to purchase from the
other any unsold shares. The Underwriters have agreed to reimburse the Company
for certain expenses in the amount of $ .

Pursuant to the Agreement Between Syndicates, each U.S. Underwriter has
represented and agreed that (i) it is not purchasing any Class A Common Stock
for the account of anyone other than a United States or Canadian Person and (ii)
it has not offered or sold, and will not offer or sell, directly or indirectly,
any Class A Common Stock or distribute any prospectus relating to the Offerings
outside the United States or Canada or to anyone other than a United States or
Canadian Person. Pursuant to the Agreement Between Syndicates, each
International Manager has represented and agreed that (i) it is not purchasing
Class A Common Stock for the account of any United States or Canadian Person and
(ii) it has not offered or sold, and will not offer or sell, directly or
indirectly, any Class A Common Stock or distribute any prospectus relating to
the Offerings within the United States or Canada or to any United States or
Canadian Person. The foregoing limitations do not apply to certain transactions
specified in the Agreement Between Syndicates, including stabilization
transactions and transactions between the U.S. Underwriters and the
International Managers pursuant to the Agreement Between Syndicates. As used
herein, "United States or Canadian Person" means any individual who is a
national or a resident of the United States or Canada or any corporation,
pension, profit-sharing or other trust or other entity organized under the laws
of the United States or Canada or any political subdivision thereof (other than
a branch located outside the United States or Canada), and includes any United
States or Canadian branch of a person who is otherwise not a United States or
Canadian Person.

Pursuant to the Agreement Between Syndicates, each U.S. Underwriter has
represented that it has not offered or sold, and agreed not to offer or sell,
any Class A Common Stock, directly or indirectly, in Canada in contravention of
the securities laws of Canada or any province or territory thereof and has
represented that any offer of Class A Common Stock in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchased from it any
of the Class A Common Stock a notice stating in substance that it has not
offered or sold, and will not offer or sell, directly or indirectly, any Class A
Common Stock in Canada or to, or for the benefit of, any resident of Canada in
contravention of the securities laws of Canada or any province or territory
thereof and that any offer of Class A Common Stock in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer is made, and that such
dealer will deliver to any other dealer to whom it sells any of such Class A
Common Stock a notice containing substantially the same statement as is
contained in this sentence.

Pursuant to the Agreement Between Syndicates, each International Manager has
also represented and agreed that (i) it has not offered or sold and prior to the
expiration of the period six months from the closing date for the issuance of
the Class A Common Stock, will not offer or sell any Class A Common Stock to
persons in the United Kingdom, except to those persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for purpose of their businesses or otherwise in
circumstances that have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995,

86
<PAGE> 87

(ii) it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the Class A Common Stock in, from or otherwise involving the United Kingdom and
(iii) it has only issued and passed on and will only issue and pass on in the
United Kingdom any document received by it in connection with the issue of the
Class A Common Stock to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom the document may otherwise lawfully be issued or
passed on.

The Underwriters propose initially to offer the Class A Common Stock directly to
the public at the price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After the initial
public offering of the Class A Common Stock, the public offering price and such
concession may be changed.

The Company has granted to the U.S. Underwriters an option expiring at the close
of business on the 30th day after the date of this Prospectus, to purchase up to
2,349,000 additional shares of Class A Common Stock at the initial public
offering price, less the underwriting discount. The U.S. Underwriters may
exercise such option solely for the purpose of covering over-allotments, if any.
If the U.S. Underwriters exercise their option, each U.S. Underwriter will have
a firm commitment, subject to certain conditions, to purchase approximately the
same number of option shares as the number of shares of Class A Common Stock to
be purchased by that U.S. Underwriter shown in the foregoing table bears to the
total number of shares of Class A Common Stock initially offered by the U.S.
Underwriters hereby. The Company has granted the International Managers a
similar option exercisable for up to 261,000 additional shares of Class A Common
Stock.

In connection with the Offerings, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Class A Common
Stock. Specifically, the Underwriters may over-allot in connection with the
Offerings, creating a syndicate short position. In addition, the Underwriters
may bid for, and purchase, shares of Class A Common Stock in the open market to
cover syndicate short positions or to stabilize the price of the Class A Common
Stock. Finally, the underwriting syndicate may reclaim selling concessions
allowed for distributing the Class A Common Stock in the Offerings if the
syndicate repurchases previously distributed Class A Common Stock in syndicate
covering transactions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Class A 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.

The Company and Ford have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.

The Company and Ford have agreed that during the period beginning from the date
of this Prospectus and continuing to and including the date 180 days after the
date of this Prospectus they will (i) not offer, sell, contract to sell or
otherwise dispose of any securities of the Company which are substantially
similar to the Class A Common Shares, including but not limited to any
securities that are convertible into or exchangeable for, or that represent the
right to receive, Class A Common Stock or any such substantially similar
securities or (ii) enter into any swap, option, future, forward or other
agreement that transfers, in whole or in part, the economic consequence of
ownership of Class A Common Stock or any securities substantially similar to the
Class A Common Stock (other than (i) pursuant to employee stock option plans
existing on, or upon the conversion or exchange of convertible or exchangeable
securities outstanding as of, the date of this Prospectus and (ii) the issuance
of Common Stock in connection with the transactions described in this
Prospectus), without the prior written consent of J.P. Morgan Securities Inc.

The Underwriters have reserved for sale, at the initial public offering price,
shares of the Class A Common Stock for certain employees of the Company and its
affiliates in the United States and, subject to local laws, internationally, who
have expressed an interest in purchasing such shares of Class A

87
<PAGE> 88

Common Stock in the Offerings. Such employees are expected to purchase, in the
aggregate, not more than 10% of the Class A Common Stock offered in the
Offerings. The number of shares available for sale to the general public in the
Offerings will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares not so purchased will be offered to the general
public on the same basis as other shares offered hereby.

The Class A Common Stock has been approved for listing on the New York Stock
Exchange, upon notice of issuance, under the trading symbol "HRZ". In order to
meet the requirements for listing the Class A Common Stock on the New York Stock
Exchange, the Underwriters have undertaken to sell lots of 100 or more shares of
Class A Common Stock to a minimum of 2,000 beneficial owners.

Prior to the Offerings, there has been no public market for the Class A Common
Stock. The initial public offering price for the shares of Class A Common Stock
offered hereby will be determined by agreement among the Company and the
Underwriters. Among the factors considered in making such determination will be
the history of and the prospects for the industry in which the Company competes,
an assessment of the Company's management, the present operations of the
Company, the historical results of operations of the Company and the trend of
its revenues and earnings, the prospects for future earnings of the Company, the
general condition of the securities markets at the time of the Offerings and the
prices of similar securities of generally comparable companies. There can be no
assurance that an active trading market will develop for the Class A Common
Stock or that the Class A Common Stock will trade in the public market
subsequent to the Offerings at or above the initial public offering price.

The Underwriters have advised the Company that they do not expect that sales to
accounts over which they exercise discretionary authority will exceed 5% of the
shares offered hereby.

From time to time in the ordinary course of their respective businesses, certain
of the Underwriters and their affiliates have engaged in and may in the future
engage in commercial and/or investment banking transactions with the Company and
its affiliates.

LEGAL MATTERS

The validity of the Class A Common Stock offered hereby will be passed upon for
the Company by Simpson Thacher & Bartlett (a partnership which includes
professional corporations), New York, New York and for the Underwriters by
Shearman & Sterling, New York, New York. Simpson Thacher & Bartlett and Shearman
& Sterling have in the past provided, and may continue to provide, legal
services to Ford and its affiliates.

EXPERTS

The Consolidated Balance Sheet of the Company as of December 31, 1996 and 1995
and the Consolidated Statements of Income and Retained Earnings and Cash Flows
for each of the three years in the period ended December 31, 1996 included in
this Prospectus, have been included herein in reliance on the report of Coopers
& Lybrand L.L.P., independent accountants, given on the authority of that firm
as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, exhibits, schedules and supplements thereto, the "Registration
Statement"), under the Securities Act and the rules and regulations thereunder,
for the registration of the Class A Common Stock offered hereby. This
Prospectus, which forms a part of the Registration Statement, does not contain
all the information set forth in the Registration Statement, certain parts of
which have been omitted as permitted by the rules

88
<PAGE> 89

and regulations of the Commission. For further information with respect to the
Company and the Class A Common Stock offered hereby, reference is made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein are not
necessarily complete and, where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit, to which reference is hereby made. The
Registration Statement can 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 Commission's regional offices at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any portion of the Registration Statement can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Registration Statement is publicly
available through the Commission's site on the Internet's World Wide Web,
located at http://www.sec.gov.

The Class A Common Stock has been approved for listing on the New York Stock
Exchange (the "NYSE"), upon notice of issuance, under the symbol "HRZ". In
addition, certain debt securities of the Company are listed for trading on the
NYSE. Copies of the Registration Statement and reports and other information are
available for inspection and copying at the office of the NYSE at 20 Broad
Street, New York, New York 10005.

The Company is currently subject to abbreviated informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in
accordance with General Instruction J(1)(a) and (b) to Form 10-K and in
accordance therewith files reports and other information with the Commission.
Such reports and other information can be inspected and copied at the offices of
the Commission set forth above. Copies of such material can be obtained from the
Public Reference Section of the Commission at the address set forth above at
prescribed rates. In addition, such material is publicly available through the
Commission's site on the Internet located at the address set forth above. As a
result of the Offerings, the Company will become subject to the full
informational requirements of the Exchange Act. The Company will fulfill its
obligations with respect to such requirements by filing periodic reports and
other information with the Commission. The Company intends to furnish its
stockholders with annual reports containing consolidated financial statements
certified by an independent public accounting firm.

89
<PAGE> 90

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
<S> <C>
The Hertz Corporation and Subsidiaries
Report of Independent Accountants......................... F-2
Consolidated Balance Sheet at December 31, 1996 and
1995................................................... F-3
Consolidated Statement of Income for the years ended
December 31, 1996, 1995 and 1994....................... F-4
Consolidated Statement of Stockholders' Equity for the
years ended December 31, 1996, 1995 and 1994........... F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1996, 1995 and 1994....................... F-6
Notes to Consolidated Financial Statements................ F-8
Schedule II -- Valuation and Qualifying Accounts for the
years ended December 31, 1996, 1995 and 1994........... F-30
</TABLE>

F-1
<PAGE> 91

REPORT OF INDEPENDENT ACCOUNTANTS

To The Hertz Corporation:

We have audited the accompanying consolidated balance sheet of The Hertz
Corporation (a wholly-owned subsidiary of Ford Motor Company) and subsidiaries
as of December 31, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity and cash flows and the financial statement schedule
listed in F-1 for each of the three years ended December 31, 1996. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule 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 The Hertz
Corporation and subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information required to be included therein.

COOPERS & LYBRAND L.L.P.

Parsippany, New Jersey
January 24, 1997, except for Note 14,
as to which the date is March 13, 1997

F-2
<PAGE> 92

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
------------------------
DECEMBER 31
1996 1995
---------- ----------
<S> <C> <C>
Dollars in thousands
ASSETS
Cash and equivalents (Note 13).............................. $ 179,311 $ 137,257
Receivables, less allowance for doubtful accounts of $12,268
(1995 -- $7,985) (Schedule II)............................ 798,686 789,801
Due from affiliates (Notes 5 and 7)......................... 456,025 407,442
Inventories, at lower of cost or market..................... 20,220 17,930
Prepaid expenses and other assets (Note 4).................. 80,530 83,345
Revenue earning equipment, at cost (Note 7):
Cars...................................................... 4,698,656 3,951,351
Less accumulated depreciation.......................... (380,391) (324,193)
Other equipment........................................... 908,106 705,084
Less accumulated depreciation.......................... (190,677) (162,073)
---------- ----------
Total revenue earning equipment...................... 5,035,694 4,170,169
---------- ----------
Property and equipment, at cost:
Land, buildings and leasehold improvements................ 515,063 473,930
Service equipment......................................... 554,134 507,640
---------- ----------
1,069,197 981,570
Less accumulated depreciation.......................... (526,466) (485,680)
---------- ----------
Total property and equipment......................... 542,731 495,890
---------- ----------
Franchises, concessions, contract costs and leaseholds, net
of amortization........................................... 10,117 7,722
Cost in excess of net assets of purchased businesses, net of
amortization (Note 5)..................................... 525,853 547,074
---------- ----------
Total assets......................................... $7,649,167 $6,656,630
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable (Note 7)................................... $ 468,817 $ 585,663
Accrued salaries and other compensation..................... 171,508 142,096
Other accrued liabilities................................... 384,191 330,923
Accrued taxes............................................... 105,524 74,714
Debt (Notes 2 and 13)....................................... 5,091,844 4,297,484
Public liability and property damage (Schedule II).......... 321,118 311,669
Deferred taxes on income (Note 8)........................... 116,800 77,800
Commitments and contingencies (Notes 9, 11 and 13)
Stockholders' equity (Notes 1 and 2):
Preferred stock --
Series A, 10% cumulative............................... 236,000 236,000
Series B, various rates cumulative..................... 249,900 249,900
Common stock, par value $1 per share, shares issued -- 200
Class A, 51 Class B and 490 Class C.................... 1 1
Additional capital paid-in................................ 59,008 59,008
Retained earnings......................................... 435,352 276,733
Translation adjustment.................................... 9,129 14,539
Unrealized holding gains (losses) for available-for-sale
securities (Note 4).................................... (25) 100
---------- ----------
Total stockholders' equity........................... 989,365 836,281
---------- ----------
Total liabilities and stockholders' equity........... $7,649,167 $6,656,630
========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-3
<PAGE> 93

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
--------------------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Dollars in thousands

Revenues:
Car rental.......................................... $3,161,605 $2,911,703 $2,581,157
Industrial and construction equipment rental........ 392,322 332,328 263,154
Car leasing (Note 5)................................ 35,407 35,548 231,372
Other (Note 5)...................................... 79,049 121,009 218,718
---------- ---------- ----------
Total revenues................................... 3,668,383 3,400,588 3,294,401
---------- ---------- ----------
Expenses:
Direct operating.................................... 1,795,157 1,724,791 1,766,228
Depreciation of revenue earning equipment (Note
7)............................................... 892,678 803,862 702,644
Selling, general and administrative................. 425,179 392,518 385,470
Interest, net of interest income of $10,449, $16,798
and $7,210 (Note 2).............................. 298,800 307,073 277,228
---------- ---------- ----------
Total expenses................................... 3,411,814 3,228,244 3,131,570
---------- ---------- ----------
Income before income taxes............................ 256,569 172,344 162,831
Provision for taxes on income (Note 8)................ 97,950 67,138 71,749
---------- ---------- ----------
Net income............................................ $ 158,619 $ 105,206 $ 91,082
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of this statement.

F-4
<PAGE> 94

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------
UNREALIZED
COMMON HOLDING GAINS
AND ADDITIONAL (LOSSES) FOR TOTAL
PREFERRED CAPITAL RETAINED TRANSLATION AVAILABLE-FOR- STOCKHOLDERS'
STOCK PAID-IN EARNINGS ADJUSTMENT SALE SECURITIES EQUITY
--------- ---------- -------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dollars in thousands
Balances at December 31,
1993......................... $ 439,901 $100,099 $105,445 $(28,749) $ -- $ 616,696
Net Income..................... 91,082 91,082
Translation adjustment changes
during the year.............. 23,478 23,478
Redemption of preferred
stock........................ (104,000) (104,000)
Redemption of common and
preferred stock in excess of
par value and related
expenses..................... (41,091) (41,091)
Stock issued in exchange for
subordinated promissory
note......................... 150,000 150,000
Unrealized holding losses for
available-for-sale
securities................... (222) (222)
--------- -------- -------- -------- ----- ---------
Balances at December 31,
1994......................... 485,901 59,008 196,527 (5,271) (222) 735,943
Net Income..................... 105,206 105,206
Cash dividend on common stock
paid to Ford Motor Company... (25,000) (25,000)
Translation adjustment changes
during the year.............. 19,810 19,810
Unrealized holding gains for
available-for-sale securities
during the year.............. 322 322
--------- -------- -------- -------- ----- ---------
Balances at December 31,
1995......................... 485,901 59,008 276,733 14,539 100 836,281
Net Income..................... 158,619 158,619
Translation adjustment changes
during the year.............. (5,410) (5,410)
Unrealized holding losses for
available-for-sale securities
during the year.............. (125) (125)
--------- -------- -------- -------- ----- ---------
Balances at December 31,
1996......................... $ 485,901 $ 59,008 $435,352 $ 9,129 $ (25) $ 989,365
========= ======== ======== ======== ===== =========
</TABLE>

The accompanying notes are an integral part of this statement.

F-5
<PAGE> 95

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
-----------------------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Dollars in thousands
Cash flows from operating activities:
Net income......................................... $ 158,619 $ 105,206 $ 91,082
Non-cash expenses:
Depreciation of revenue earning equipment....... 892,678 803,862 702,644
Depreciation of property and equipment.......... 82,457 79,696 68,646
Amortization of intangibles..................... 18,232 19,978 19,401
Provision for public liability and property
damage........................................ 133,417 134,926 159,049
Provision for losses for doubtful accounts...... 9,912 4,926 6,813
Write-off of interest on Park Ridge Limited
Partnership promissory note................... -- -- 8,586
Deferred income taxes........................... 39,000 28,500 4,700
Other........................................... (3,060) -- --
Revenue earning equipment expenditures............. (8,204,179) (7,255,250) (6,873,281)
Proceeds from sales of revenue earning equipment... 6,445,337 6,163,455 4,747,409
Changes in assets and liabilities, net of effects
from sale in 1996 of certain claim
administration service operations, and in 1995
of the European car leasing and car dealership
operations --
Receivables................................... (20,482) (180,613) (181,439)
Due from affiliates........................... (48,583) (35,843) (43,087)
Inventories and prepaid expenses and other
assets..................................... (1,325) (1,422) 30,463
Accounts payable.............................. (117,767) 311,498 70,001
Accrued liabilities........................... 85,192 9,785 74,633
Accrued taxes................................. 30,316 6,067 6,656
Payments of public liability and property damage
claims and expenses............................. (123,928) (127,814) (118,380)
----------- ----------- -----------
Net cash flows (used for) provided by operating
activities.................................... $ (624,164) $ 66,957 $(1,226,104)
----------- ----------- -----------
</TABLE>

The accompanying notes are an integral part of this statement.

F-6
<PAGE> 96

THE HERTZ CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
--------------------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
----------- --------- ----------
<S> <C> <C> <C>
Dollars in thousands
Cash flows from investment activities:
Property and equipment expenditures.................. $ (179,802) $(178,279) $ (150,569)
Proceeds from sales of property and equipment........ 44,950 34,148 35,839
Available-for-sale securities --
Purchases......................................... (6,219) (6,375) (8,145)
Sales............................................. 6,422 6,625 5,221
Proceeds from sale in 1996 of certain claim
administration service operations and in 1995 of
the European car leasing and car dealership
operations, net of cash and equivalents........... 15,346 56,560 --
Purchases of various operations (see supplemental
disclosures below)................................ (6,054) -- (2,044)
----------- --------- ----------
Net cash flows used for investing activities.... (125,357) (87,321) (119,698)
----------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt............. 304,604 329,157 719,289
Repayment of long-term debt.......................... (205,276) (340,442) (207,195)
Short-term borrowings:
Proceeds.......................................... 1,379,740 984,870 736,430
Repayments........................................ (1,180,063) (945,283) (614,439)
Ninety day term or less, net...................... 492,526 54,487 864,816
Cash dividend on common stock paid to Ford Motor
Company........................................... -- (25,000) --
Payment for the redemption of common and preferred
stock and related expenses........................ -- -- (145,091)
----------- --------- ----------
Net cash flows provided from financing
activities................................... 791,531 57,789 1,353,810
----------- --------- ----------
Effect of foreign exchange rate changes on cash........ 44 83 3,184
----------- --------- ----------
Net increase in cash and equivalents during the
period............................................... 42,054 37,508 11,192
Cash and equivalents at beginning of year.............. 137,257 99,749 88,557
----------- --------- ----------
Cash and equivalents at end of year.................... $ 179,311 $ 137,257 $ 99,749
=========== ========= ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for --
Interest (net of amounts capitalized)............. $ 300,120 $ 313,139 $ 257,652
Income taxes...................................... 38,899 33,775 36,341
</TABLE>

In connection with acquisitions made during the years 1996 and 1994,
liabilities assumed were $36 million and $27 million, respectively.

The accompanying notes are an integral part of this statement.

F-7
<PAGE> 97

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Merger, Change in Ownership and Capitalization

The Hertz Corporation (together with its subsidiaries, referred to herein as
"Hertz" or the "Company"), which was incorporated in Delaware in 1967, is a
successor to corporations which were engaged in the automobile and truck leasing
and rental business since 1918. UAL Corporation ("UAL") (formerly Allegis
Corporation) purchased all of the Company's outstanding capital stock from RCA
Corporation ("RCA") on August 30, 1985. Park Ridge Corporation ("Park Ridge"),
which was 80%-owned by Ford Motor Company ("Ford"), purchased all of the
Company's outstanding capital stock from UAL on December 30, 1987. By 1989, Ford
reduced its ownership interest in Park Ridge to 49%. On July 19, 1993, Park
Ridge (which had no material assets other than the Company) was merged with and
into the Company, with the prior stockholders of Park Ridge becoming the
stockholders of the Company. The merger has been recorded as a "pooling of
interests".

In March 1994, Ford acquired the Company's common stock owned by Commerzbank
Aktiengesellschaft. On April 29, 1994, the Company redeemed its preferred and
common stock owned by AB Volvo for $145 million, borrowing the funds from Ford
to pay for the redemption, and Ford purchased all of the common stock of the
Company owned by Park Ridge Limited Partnership ("Partnership"). This resulted
in the Company becoming a wholly-owned subsidiary of Ford. In addition, the $150
million subordinated promissory note of the Company held by Ford Motor Credit
Company, a wholly-owned subsidiary of Ford ("FMCC"), was exchanged for $150
million of the Series B Preferred Stock of the Company, and a promissory note in
the amount of $18.5 million, owed by the Partnership to the Company was assumed
by Ford ("Ford Note"). In connection with these transactions, notes payable were
increased by $145 million, the Series A Preferred Stock was reduced by $104
million, and additional capital paid-in was reduced by $41 million; interest
expense was increased by $8.6 million and provision for taxes was decreased by
$3.0 million; and subordinated promissory notes were reduced by $150 million and
Series B Preferred Stock was increased by $150 million. The Ford Note was repaid
in 1996.

As of December 31, 1996, 100% of the Common Stock of the Company was owned by
Ford and 100% of the outstanding Preferred Stock was owned by FMCC.

F-8
<PAGE> 98

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The capital stock of the Company authorized, issued and outstanding as of
December 31, 1996, 1995 and 1994 is set forth below.

<TABLE>
<CAPTION>
--------------------------------------
PAR VALUE NUMBER OF SHARES
PER ISSUED AND
SHARE AUTHORIZED OUTSTANDING
--------- ---------- -----------
<S> <C> <C> <C>
Series A Preferred Stock:
Balance December 31, 1993................................ $100 4,500,000 3,400,000
Redemption in 1994....................................... -- (1,040,000)
--------- ----------
Balance December 31, 1994, 1995 and 1996................. $100 4,500,000 2,360,000
==== ========= ==========
Series B Preferred Stock
Balance December 31, 1993................................ $100 1,000,000 999,000
Issued in exchange for subordinated promissory note in
1994.................................................. 100 1,500,000 1,500,000
--------- ----------
Balance December 31, 1994, 1995 and 1996................. $100 2,500,000 2,499,000
==== ========= ==========
Class A Common Stock
Balance December 31, 1993, 1994, 1995 and 1996........... $ 1 200 200
==== ========= ==========
Class B Common Stock
Balance December 31, 1993................................ $ 1 800 311
Redemption in 1994....................................... -- (260)
--------- ----------
Balance December 31, 1994, 1995 and 1996................. $ 1 800 51
==== ========= ==========
Class C Common Stock
Balance December 31, 1993, 1994, 1995 and 1996........... $ 1 800 490
==== ========= ==========
</TABLE>

The holders of Series A Preferred Stock and Series B Preferred Stock are
entitled, when, as and if declared by the Board of Directors of the Company, to
cumulative annual dividends, but payable only out of funds legally available
therefor, compounded annually (if in arrears). The annual dividend rate through
December 31, 1998 is 10% for the Series A Preferred Stock and at various rates
which average 4.5% for the Series B Preferred Stock. Commencing January 1, 1999
the annual dividend rates for the Series A Preferred Stock and Series B
Preferred Stock are subject to adjustment and are reset on an annual basis. The
Series A Preferred Stock and the Series B Preferred Stock are redeemable by
their terms at the option of the Company at any time, and do not have any voting
rights, except that the holders of the Series A Preferred Stock shall have the
right to elect two directors in the event of default, and the holders of the
Series B Preferred Stock will be granted voting rights in the event of
significant and continuing net operating losses.

The holders of the Class A Common Stock and Class B Common Stock have one vote
per share and no special preferences. The holders of the Class C Common Stock
have one vote per share and have the right to designate three directors, until
such time as fewer than 40 shares thereof (adjusted for stock splits and the
like) shall be outstanding, provided, however, that the Class C Common Stock
shall in any event have 40% of the general voting power and the right to elect
not less than 40% of the members of such Board of Directors, until such time as
fewer than 40 shares thereof (as so adjusted) shall be outstanding. The Class C
Common Stock is convertible into Class B Common Stock on a share for share basis
at any time at the holder's option. Under certain circumstances, shares of Class
B Common Stock convert or are convertible into an equivalent number of shares of
Class A Common Stock.

F-9
<PAGE> 99

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Principles of Consolidation

The consolidated financial statements include the accounts of The Hertz
Corporation and its domestic and foreign subsidiaries. All significant
intercompany transactions are eliminated.

Consolidated Statement of Cash Flows

For purposes of this statement, the Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to be
cash equivalents. See Merger, Change of Ownership and Capitalization for noncash
investing and financing activities.

Depreciable Assets

The provisions for depreciation and amortization are computed on a straight-line
basis over the estimated useful lives of the respective assets, as follows:

<TABLE>
<CAPTION>
Revenue Earning Equipment: --------------
<S> <C>
Cars...................................................... 3 to 6 years
Other equipment........................................... 3 to 11 years
Buildings................................................... 20 to 50 years
Leasehold improvements...................................... Term of lease
Service cars and service equipment.......................... 3 to 25 years
Franchises, concessions, contract costs and leaseholds...... 10 to 40 years
Cost in excess of net assets of purchased businesses........ 10 to 40 years
</TABLE>

Hertz follows the practice of charging maintenance and repairs, including the
cost of minor replacements, to maintenance expense accounts. Costs of major
replacements of units of property are charged to property and equipment accounts
and depreciated on the basis indicated above. Gains and losses on dispositions
of property and equipment are included in income as realized. Upon disposal of
revenue earning equipment, depreciation expense is adjusted for the difference
between the net proceeds from sale and the remaining book value.

Environmental Conservation

The use of automobiles and other cars is subject to various governmental
controls designed to limit environmental damage, including that caused by
emissions and noise. Generally, these controls are met by the manufacturer,
except in the case of occasional equipment failure requiring repair by Hertz. To
comply with environmental regulations, measures are being taken at certain
locations to reduce the loss of vapor during the fueling process and to maintain
and replace underground fuel storage tanks. Hertz is also incurring and
providing for expenses for the cleanup of fuel discharges and other alleged
violations of environmental laws arising from the disposition of waste products.
Hertz does not believe that it will be required to make any material capital
expenditures for environmental control facilities or to make any other material
expenditures to meet the requirements of governmental authorities in this area.
Liabilities for these expenditures are recorded when it is probable that
obligations have been incurred and the amounts can be reasonably estimated.

Public Liability and Property Damage

F-10
<PAGE> 100

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
applicable local law, a qualified self-insurer against liability resulting from
accidents under certificates of self-insurance for financial responsibility in
all states wherein its vehicles are registered. The Company also self-insures
general public liability and property damage for all domestic operations. Since
July 1, 1987, all claims have been retained and borne by the Company up to a
limit of $5 million for each occurrence, and the Company has maintained
insurance with unaffiliated carriers in excess of $5 million up to $450 million
per occurrence.

For its foreign operations, the Company purchases insurance to comply with local
legal requirements. From January 1, 1993 through December 31, 1996, vehicle
liability insurance purchased locally from unaffiliated carriers by Company
owned operations in Europe was reinsured by Hertz International RE Limited, a
wholly-owned subsidiary of the Company operating as a reinsurer in Dublin,
Ireland. Hertz International RE Limited effectively responded to the first $1.5
million of motor vehicle liability for each accident during this period, with
excess liability insurance coverage maintained by the Company with unaffiliated
carriers. Effective January 1, 1997, the Company replaced an unaffiliated
carrier that was the fronted insurer for claims up to $1.5 million per
occurrence by establishing a wholly-owned subsidiary, Probus Insurance Company
Europe Limited ("Probus"), a direct writer domiciled in Dublin, Ireland. Probus
now underwrites the Company's European vehicle liability program (except in
Switzerland and Denmark) up to $1.5 million per occurrence. Excess coverage for
claims that exceed $1.5 million continues to be maintained with unaffiliated
carriers. In the Company's foreign operations other than Europe, the Company is
self insured at various amounts up to $100,000 per occurrence, and maintains
excess liability insurance coverage up to $450 million per occurrence with
unaffiliated carriers.

Foreign Currency Translation

Assets and liabilities of foreign subsidiaries are translated at the rate of
exchange in effect on the balance sheet date; income and expenses are translated
at the average rate of exchange prevailing during the year. The related
translation adjustments are reflected in the stockholders' equity section of the
consolidated balance sheet. Foreign currency gains and losses resulting from
transactions are included in earnings.

Income Taxes

Effective April 30, 1994, the Company and its domestic subsidiaries are filing
consolidated Federal income tax returns with Ford. The Company and its domestic
subsidiaries filed consolidated Federal income tax returns after December 31,
1987; prior thereto, from September 1, 1985 to December 31, 1987 they were
included in the consolidated Federal income tax return of UAL, and prior thereto
in the consolidated Federal income tax return of RCA. The Company provides for
current and deferred taxes as if it filed a separate consolidated tax return
with its domestic subsidiaries, except that under a tax sharing arrangement with
Ford, the Company's right to reimbursement for foreign tax credits is determined
based on the usage of such foreign tax credits by the consolidated group. By
virtue of its controlling beneficial ownership of the Company, Ford effectively
controls all of the Company's tax decisions. The Company and its subsidiaries
account for investment tax credits under the flow-through method. As of December
31, 1996, U.S. income taxes have not been provided on $209 million in
undistributed earnings of subsidiaries that have been or are intended to be
permanently reinvested outside the United States or are expected to be remitted
free of taxes.

F-11
<PAGE> 101

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Advertising

Hertz is a party to a cooperative advertising agreement with Ford pursuant to
which Ford participates in some of the cost of certain of Hertz' advertising
programs in the United States and abroad which feature the Ford name or
products. The amounts contributed by Ford for the years ended December 31, 1996,
1995 and 1994 were (in millions) $45.4, $44.1 and $42.0, respectively. This
program is expected to continue in the future. The Company incurred advertising
expense for the years ended December 31, 1996, 1995 and 1994 of (in millions)
$148.0, $134.5 and $133.6, respectively.

Pension and Income Saving Plans

Qualified domestic employees, after completion of specified periods of service,
are eligible to participate in the Retirement Plan for the Employees of The
Hertz Corporation ("Hertz Retirement Plan") and in the Income Savings Plan of
The Hertz Corporation ("Hertz Income Savings Plan"). Payments are made to
pension plans of others pursuant to various collective bargaining agreements.
Under the Hertz Retirement Plan, the Company pays the entire cost and employees
are not required to contribute. For each plan year beginning January 1, 1996 and
thereafter, a qualified employee's cash balance account is credited with an
annual cash balance credit equal to: (a) 3% of his/her pensionable earnings for
that plan year in the case of a qualified employee who is credited with less
than 60 continuous months of service from his/her most recent date of hire, or
(b) 4% of his/her pensionable earnings for that plan year in the case of a
qualified employee who is credited with 60 or more continuous months of service
from his/her most recent date of hire. In the case of a qualified employee who
is first credited with 60 continuous months of service after January 1 of a plan
year, the percentage of his/her pensionable earnings utilized in determining
his/her annual cash balance credit for that plan year shall be increased to 4%
effective as of the first day of the month coincident with or next following
his/her completion of 60 continuous months of service from his/her most recent
date of hire. This benefit is credited with guaranteed interest rates compounded
annually based on rates issued by the Pension Benefit Guaranty Corporation in
effect for the preceding December. In addition, all qualified employees age 50
or over with 10 or more years of credited service as of July 1, 1987, will have
an additional amount of their pensionable earnings credited to their account.
Hertz' funding policy is to contribute at least the minimum amount required by
the Employee Retirement Income Security Act of 1974.

Under the Hertz Income Savings Plan, the Company contributes 50% of the first 6%
of the employee's contribution for a maximum match contribution by the Company
of 3% of the employee's base salary.

Most of the Company's foreign subsidiaries have defined benefit retirement plans
or are required to participate in government plans. These plans are all funded,
except in Germany, where an unfunded liability is recorded. In certain
countries, when the subsidiaries make the required funding payments, they have
no further obligations under such plans.

Impairment of Long-Lived Assets and Certain Identifiable Intangibles

The Company evaluates the carrying value of goodwill for potential impairment on
an ongoing basis. Such evaluations compare operating income before amortization
of goodwill to the amortization recorded for the operations to which the
goodwill relates. The Company also considers projected future operating results,
trends and other circumstances in making such estimates and evaluations. In
addition, the Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable.

F-12
<PAGE> 102

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Use of Estimates and Assumptions

Use of estimates and assumptions as determined by management is required in the
preparation of consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those estimates
and assumptions. Certain amounts for prior periods have been reclassified to
conform with 1996 presentations.

NOTE 2 -- DEBT

Debt of the Company and its subsidiaries (in thousands of dollars) consists of
the following:

<TABLE>
<CAPTION>
-----------------------
DECEMBER 31
1996 1995
---------- ----------
<S> <C> <C>
Notes payable, including commercial paper, average interest
rate: 1996, 5.6%; 1995, 5.8%.............................. $1,498,002 $1,036,413
Promissory notes, average interest rate: 1996, 7.3%; 1995,
7.6% (effective average interest rate: 1996, 7.4%; 1995,
7.7%); net of unamortized discount: 1996, $3,602; 1995,
$3,019; due 1997 to 2005.................................. 1,941,398 1,694,641
Property and equipment lease obligations, average interest
rate: 1996, 7.5%; 1995, 7.9%; due 1997 to 1998............ 2,554 3,602
Medium-term notes, average interest rate: 1996, 9.3%; 1995,
9.4%; due 1997............................................ 75,300 119,175
Senior subordinated promissory notes, average interest rate:
1996, 9.7%; 1995, 9.5% (effective average interest rate:
1996, 9.8%; 1995, 9.6%); net of unamortized discount:
1996, $172; 1995, $313; due 1997 to 1998.................. 149,828 249,687
Junior subordinated promissory notes, average interest rate
6.9%; net of unamortized discount: 1996, $244; 1995, $286;
due 2000 to 2003.......................................... 399,756 399,714
Subsidiaries' debt:
Short-term borrowings --
Banks, average interest rate: 1996, 5.1%; 1995, 6.0%,
in foreign currencies................................. 782,765 684,634
Commercial paper, average interest rate: 1996, 6.2%;
1995, 5.8%, in foreign currencies..................... 141,805 11,357
Others, average interest rate: 1996, 2.7%; 1995, 3.7%,
in foreign currencies................................. 56,518 51,200
Other borrowings, average interest rate: 1996, 7.4%; 1995,
7.0%; in foreign currencies............................ 43,918 47,061
---------- ----------
Total....................................................... $5,091,844 $4,297,484
========== ==========
</TABLE>

The aggregate amounts of maturities of debt, in millions, are as follows: 1997,
$2,718.9 (including $2,478.9 of commercial paper, demand and other short-term
borrowings); 1998, $374.5; 1999, $451.1; 2000, $249.8; 2001, $398.9; after 2001,
$898.6. Included in these maturities at the earliest possible redemption date
are the following promissory notes of the Company which have put options that
can be exercised by the holders of such notes as follows: $5 million at 9.3% due
in 2005, that can be redeemed at the option of the holders in 1997; $25 million
at 9% due in 2000, that can be redeemed at the option of the holders in 1997,
1998 or 1999; $100 million at 9% due 2009, that can be redeemed at the option of
the holders in 1999; and $150 million at 6.3% due 2006, that can be redeemed at
the option of the holders in 2002.

F-13
<PAGE> 103

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- DEBT -- (CONTINUED)
The Company and its subsidiaries have entered into arrangements to manage
exposures to fluctuations in interest rates. See Note 13 -- Financial
Instruments.

During the year ended December 31, 1996, short-term borrowings, in millions,
were as follows: maximum amounts outstanding $2,129.2 commercial paper, $838.1
banks and $137.2 other; monthly average amounts outstanding $1,615.9 commercial
paper (weighted average interest rate 5.6%), $754.2 banks (weighted average
interest rate 5.3%) and $91.1 other (weighted average interest rate 2.5%).

During the year ended December 31, 1995, short-term borrowings, in millions,
were as follows: maximum amounts outstanding $1,853.8 commercial paper, $1,083.5
banks and $193.5 other; monthly average amounts outstanding $1,292.6 commercial
paper (weighted average interest rate 6.1%), $828.2 banks (weighted average
interest rate 6.4%) and $108.6 other (weighted average interest rate 4.3%).

During the year ended December 31, 1994, short-term borrowings, in millions,
were as follows: maximum amounts outstanding $1,021.3 commercial paper, $1,247.6
banks and $194.1 other; monthly average amounts outstanding $659.9 commercial
paper (weighted average interest rate 4.9%), $975.5 banks (weighted average
interest rate 5.8%) and $95.5 other (weighted average interest rate 5.3%).

The net amortized discount charged to interest expense for the years ended
December 31, 1996, 1995 and 1994 relating to debt and other liabilities, in
millions, was $.9, $.9, and $1.3, respectively. In addition, interest expense,
in millions, for the years 1995, and 1994 was reduced by $1.3 and $1.6,
respectively, of interest income, relating to refunds of prior years' state,
local and federal income taxes.

In 1996, the Company renewed the following two committed bank facilities with a
group of thirty-one commercial banks, which will be utilized to support
commercial paper and other short-term borrowings in the aggregate amount of
$2.08 billion: (i) five year credit agreement for $1.185 billion is committed
until June 30, 2001. The termination date is automatically extended for an
additional one-year period each June 30, unless the bank gives notice to the
contrary. A facility fee of .09% per annum is payable on the entire commitment
amount; and (ii) 364-day credit agreement for $895 million, renewed in June
1996, is committed through June 25, 1997. A facility fee of .0625% per annum is
payable on the entire commitment amount.

The Company also entered into a revolving loan agreement with Ford on June 8,
1994 under which the Company could borrow from Ford from time to time up to $250
million outstanding. See Note 14 -- Subsequent Events. Obligations of the
Company under this agreement would rank pari passu with the Company's senior
debt securities. A commitment fee of .09% per annum is payable on the unused
available credit. In addition, at December 31, 1996, the Company and a
subsidiary had $269 million of outstanding loans from Ford.

The Company had consolidated unused committed lines of credit subject to
customary terms and conditions, which include unused amounts under the three
facilities indicated above, of approximately $2.4 billion at December 31, 1996.

The Company maintains a Sales Agency Agreement with Ford Financial Services,
Inc., an NASD registered broker-dealer and an indirect, wholly-owned subsidiary
of Ford ("FFS"), whereby FFS acts as the exclusive dealer for the Company's
domestic commercial paper program. The Company pays fees to FFS which range from
.035% to .05% per annum of commercial paper placed depending upon the monthly
average dollar value of the notes outstanding in the portfolio. In 1996, the
Company paid FFS $556,754 of such fees. FFS is under no obligation to purchase
any of the notes for its own account. FFS has acted as the Company's exclusive
commercial paper dealer since October 1994, and the Sales Agency Agreement may
not be amended or terminated without the written consent of both parties. The

F-14
<PAGE> 104

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 2 -- DEBT -- (CONTINUED)
Company, through its subsidiary Hertz Australia Pty. Limited ("Hertz
Australia"), has a similar agreement with Ford Credit Australia Limited, also an
indirect, wholly-owned subsidiary of Ford Motor Company.

Certain debt instruments under which the Company has issued debt securities
restrict the Company's ability to pay dividends. Such restrictions generally
provide that the Company may not pay dividends, invest in its own shares or
permit investments by certain subsidiaries of the Company ("Restricted
Subsidiaries") in the Company's shares subsequent to a specified date if,
together with total investments by the Company and its Restricted Subsidiaries
in subsidiaries that are not Restricted Subsidiaries made subsequent to such
specified date, the aggregate of any such dividends or investments exceeds the
sum of (i) a specified dollar amount, (ii) the aggregate net income of the
Company and its Restricted Subsidiaries earned subsequent to such specified date
and (iii) net proceeds received from capital stock issued subsequent to such
specified date. At December 31, 1996, approximately $331 million of consolidated
stockholders' equity was free of such limitations.

NOTE 3 -- FOREIGN CURRENCY

Foreign currency exchange gains and losses included in net income were net gains
of $3.4 million, $2.0 million and $1.2 million for the years ended December 31,
1996, 1995 and 1994, respectively.

NOTE 4 -- AVAILABLE-FOR-SALE SECURITIES

As of December 31, 1996, Prepaid Expenses and Other Assets in the consolidated
balance sheet include available-for-sale securities at fair value (in thousands)
of $5,405 (cost $5,432). The fair value is calculated using information provided
by outside quotation services. These securities include various governmental and
corporate debt obligations, with the following maturity dates (in thousands):
fair value $113 (cost $116) in 1997; fair value $4,373 (cost $4,376) 1998
through 2002; fair value $899 (cost $929) 2003 through 2012; $20 fair value
(cost $11) after 2012. For the year ended December 31, 1996, proceeds of $6.4
million from the sale of available-for-sale securities were received, and a
gross realized gain of $105,813 and gross realized loss of $134,474 were
included in earnings. Actual cost was used in computing the realized gain and
loss on the sale. For the year ended December 31, 1996, unrealized holding
losses and unrealized holding gains, net of taxes, included in Stockholders'
Equity were $62,000 and $37,000, respectively.

NOTE 5 -- PURCHASES AND SALES OF OPERATIONS

In June 1996, the Company acquired all of the capital stock of a foreign
licensee car rental and leasing operation and the assets of a domestic car
rental operation. In February 1996, the Company acquired the assets of a
domestic construction equipment rental operation. The costs related to these
acquisitions exceeded the net assets acquired by $6.1 million.

F-15
<PAGE> 105

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5 -- PURCHASES AND SALES OF OPERATIONS -- (CONTINUED)
In May 1996, the Company sold certain of its claim administration service
operations effective February 29, 1996, which included the administration of
workers' compensation claims and other related services, and health related
benefit claims. The net proceeds from the sale approximated $15.3 million, which
exceeded its book value by approximately $3 million. The total assets of these
operations at February 29, 1996 were $15.5 million and revenues for the year
ended December 31, 1995 were $31.0 million, with negligible net income.
Therefore, the Company believes that this transaction will not have a material
effect on its financial position or results of operations.

On July 31, 1994, Axus, S.A., a car leasing company of the Company which
operates in various countries in Europe, acquired an additional interest in
Locaplan S.A., a car leasing operation in France, increasing its ownership from
50% to 100%. The cost relating to this acquisition approximated $2.3 million,
which exceeded the net assets acquired by approximately $2.2 million. Commencing
in August 1994, the accounts of this operation have been included in the
consolidated financial statements of the Company, which did not have a material
effect on the Company's consolidated financial position or results of
operations. These operations were sold by the Company effective January 1, 1995
to Hertz Leasing International, Inc. ("HLI"), at an amount equal to its book
value of approximately $61 million. HLI is an indirect, wholly-owned subsidiary
of Ford. For additional consideration payable over five years, except for
Australia, New Zealand and Brazil, Ford has received the worldwide rights
(subject to certain existing license rights) to use and sublicense others to use
the "Hertz" name in the conduct of car leasing businesses -- $9.3 million was
received in each of the years 1996 and 1995. The unaudited total assets as of
December 31, 1994 and unaudited total revenues and net income for the year ended
December 31, 1994 of the Company's European car leasing and car dealership
operations were (in millions) $482, $295 and $6, respectively. This transaction
did not have a material effect on the Company's financial position or results of
operations.

At December 31, 1996, a foreign subsidiary of the Company had $10.9 million of
loans receivable including related interest from foreign subsidiaries of HLI,
which mature in 1997.

In connection with the acquisition of the Company by Park Ridge in December 1987
and UAL in August 1985, the excess of the purchase price over the consolidated
equity of the Company at the time of these purchases was $658.3 million. These
costs are being amortized by the Company over 40 years. The unamortized amount
of such costs at December 31, 1996 was $501.3 million.

F-16
<PAGE> 106

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- PENSION AND INCOME SAVINGS PLAN AND POSTRETIREMENT BENEFIT PLANS

The following tables set forth the funded status and the net periodic pension
cost of the Hertz Retirement Plan covering its domestic ("U.S.") employees and
the retirement plans for foreign operations ("Non-U.S.") and amounts included in
the consolidated balance sheet and statement of income (in millions of dollars):

<TABLE>
<CAPTION>
-----------------------------------------
DECEMBER 31, 1996 DECEMBER 31, 1995
U.S. NON-U.S. U.S. NON-U.S.
------- -------- ------ --------
<S> <C> <C> <C> <C>
Actuarial present value of accumulated benefit
obligation --
Vested................................................ $ (73.7) $(34.1) $(62.6) $(27.9)
Nonvested............................................. (8.9) (4.8) (8.4) (3.7)
------- ------ ------ ------
Total.............................................. $ (82.6) $(38.9) $(71.0) $(31.6)
======= ====== ====== ======
Actuarial present value of projected benefit
obligation............................................ $(111.4) $(49.3) $(98.9) $(37.3)
Plan assets at fair value............................... 101.1 32.5 90.4 25.5
------- ------ ------ ------
Projected benefit obligation in excess of plan assets... (10.3) (16.8) (8.5) (11.8)
Unrecognized net (gain) loss............................ (20.0) 9.9 (14.2) 5.0
Prior service cost not yet recognized in net periodic
pension cost.......................................... -- -- .2 --
Remaining unrecognized net obligation................... 1.0 -- 1.3 --
------- ------ ------ ------
Pension liability included in the balance sheet......... $ (29.3) $ (6.9) $(21.2) $ (6.8)
======= ====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
------------------ ------------------ -----------------
U.S. NON-U.S. U.S. NON-U.S. U.S. NON-U.S.
------ -------- ------ -------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Service cost -- benefits earned during
the period............................ $ 8.0 $ 4.0 $ 5.3 $ 2.2 $ 6.4 $ 2.3
Interest cost on projected benefit
obligation............................ 7.0 2.3 6.1 2.1 7.2 1.5
Return on assets:
Actual (gain) loss.................... (14.1) (1.9) (21.3) (1.5) .7 (1.5)
Deferred gain (loss).................. 7.5 -- 15.4 -- (6.1) --
Net amortization and deferral........... .8 -- .2 .1 1.8 .1
------ ----- ------ ----- ----- -----
Net periodic pension cost included in
the income statement.................. $ 9.2 $ 4.4 $ 5.7 $ 2.9 $10.0 $ 2.4
====== ===== ====== ===== ===== =====
</TABLE>

Significant assumptions used for the U.S. plan were as follows: weighted average
discount rate of 7.25% at December 31, 1996, 7.0% during 1996 (8.25% during 1995
and 7% during 1994); 5.5% rate of increase in future compensation levels (5.1%
for 1995 and 5.5% for 1994); and expected long-term rate of return on assets of
9%. Assumptions used for the Non-U.S. plans vary by country and are made in
accordance with local conditions, but do not vary materially from those used in
the U.S. plan. Plan assets consist principally of investments in stocks,
government bonds and other fixed income securities.

The provisions charged to income for the years ended December 31, 1996, 1995 and
1994 for all other pension plans were approximately (in millions) $6.7, $6.1 and
$6.0, respectively.

The provisions charged to income for the years ended December 31, 1996, 1995 and
1994 for the Hertz Income Savings Plan were approximately (in millions) $3.8,
$3.4 and $3.0, respectively.

F-17
<PAGE> 107

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 6 -- PENSION AND INCOME SAVINGS PLAN AND POSTRETIREMENT BENEFIT PLANS --
(CONTINUED)
The estimated cost for postretirement health care and life insurance benefits is
accrued on an actuarially determined basis. The following sets forth the plans'
status, reconciled with the amounts included in the consolidated balance sheet
and statement of income (in millions):

<TABLE>
<CAPTION>
------------
DECEMBER 31
ACTUARIAL PRESENT VALUE OF ACCUMULATED BENEFIT OBLIGATION -- 1996 1995
- ------------------------------------------------------------ ---- ----
<S> <C> <C>
Retirees.................................................. $1.8 $1.7
Active employees eligible to retire....................... 2.0 3.0
Other active employees.................................... 4.3 3.5
---- ----
Total accumulated benefit obligation................... 8.1 8.2
Unrecognized net gain....................................... 1.0 .3
---- ----
Accrued liability included in the balance sheet............. $9.1 $8.5
==== ====
</TABLE>

<TABLE>
<CAPTION>
--------------------
YEARS ENDED
DECEMBER 31
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Benefits attributed to employees' service................... $.3 $ .2 $ .2
Interest on accumulated benefit obligation.................. .5 .5 .4
Amortization of net gain.................................... -- (.1) (.3)
--- ---- ----
Net periodic postretirement benefit cost............... $.8 $ .6 $ .3
=== ==== ====
</TABLE>

The significant assumptions used for the postretirement benefit plans were as
follows: weighted average discount rate of 7.5% at December 31, 1996, 7.25%
during 1996 (8.75% in 1995 and 7.5% in 1994), 5.5% rate of increase in future
compensation levels (5.3% in 1995 and 5.5% in 1994), 7.5% weighted average
health care cost trend rate through 2001 (8.3% in 1995 and 9% in 1994), and 6.7%
weighted average trend rate in ten years (7.5% in 1995 and 8% in 1994). Changing
the assumed health care cost trend rates by one percentage point in each year
would change the accumulated postretirement benefit obligation as of December
31, 1996 by approximately $555,000, and the aggregate service and interest cost
components of net periodic postretirement benefit cost for 1996 by approximately
$90,000.

NOTE 7 -- REVENUE EARNING EQUIPMENT

Revenue earning equipment is used in the rental of cars and industrial and
construction equipment and the leasing of cars under closed-end leases where the
disposition of the cars upon termination of the lease is for the account of
Hertz. Revenue is recorded as earned under the terms of the rental or leasing
contract. Revenue on open contracts is accrued to the balance sheet date based
on the terms in the contracts. Expenses are recorded as incurred. Over the three
years ended December 31, 1996, on a weighted average basis, approximately 66% of
the cars acquired by the Company for its U.S. rental car fleet, and
approximately 33% of the cars acquired by the Company for its international
fleet, were manufactured by Ford. During 1996, approximately 64% of the cars
acquired by the Company domestically were manufactured by Ford. The percentage
of Ford cars acquired by the Company for its U.S. rental car fleet is expected
to remain at these or higher levels in the future. In 1996, approximately 28% of
the cars acquired by the Company for its international fleet were manufactured
by Ford, which represented the largest percentage of any automobile manufacturer
in that year.

Under operating leases, aggregate minimum future rentals for cars leased at
December 31, 1996 are receivable approximately as follows (in millions): $25 in
1997, $15 in 1998, $6 in 1999, and $1 in

F-18
<PAGE> 108

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 7 -- REVENUE EARNING EQUIPMENT -- (CONTINUED)
2000. Cars under lease at December 31, 1996 which are owned by Hertz amounted to
$95 million, net of accumulated depreciation of $25 million.

The average holding periods of cars and other revenue earning equipment are as
follows: cars used in the car rental business, 5 to 12 months; cars used in the
car leasing business, 36 months; and equipment used in the industrial and
construction equipment rental business, 24 to 60 months. At December 31, 1996,
the average ages of owned cars and other revenue earning equipment are as
follows: cars used in the car rental business, 7 months; cars used in the car
leasing business, 19 months; and equipment used in the industrial and
construction equipments rental business, 19.7 months. At December 31, 1996, the
Company was subject to residual risk with respect to 17% of all cars in its
worldwide car rental and leasing operations and 100% of the equipment in the
industrial and construction equipment rental business.

Depreciation of revenue earning equipment includes the following (in thousands
of dollars):

<TABLE>
<CAPTION>
--------------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Depreciation of revenue earning equipment.................. $904,504 $753,999 $651,413
Adjustment of depreciation upon disposal of the
equipment............................................. (23,221) (6,356) (22,983)
Rents paid for vehicles leased............................. 11,395 56,219 74,214
-------- -------- --------
Total................................................. $892,678 $803,862 $702,644
======== ======== ========
</TABLE>

Effective July 1, 1994, certain lives being used to compute the provision for
depreciation of revenue earning equipment used in the Company's industrial and
construction equipment rental business were increased to reflect changes in the
estimated residual values to be realized when the equipment is sold. As a result
of this change, depreciation of revenue earning equipment for the years 1995 and
1994 were decreased by $12.0 million and $9.6 million, respectively.

The adjustment of depreciation upon disposal of revenue earning equipment for
the years ended December 31, 1996, 1995, and 1994 included (in millions) net
gains of $20.7, $13.8 and $13.2, respectively, on the sale of industrial and
construction equipment, net gains of $2.5, net losses of $7.5 and net gains of
$9.8, respectively, on the sale of cars used in the car rental and car leasing
operations.

In view of the favorable market conditions in 1995 and 1996 for the sale of used
equipment in the industrial and construction equipment rental business,
effective January 1, 1997, certain estimated useful lives being used to compute
the provision for depreciation will be increased by approximately 10% (the new
depreciable lives will range between 3.3 years and 12.1 years) to reflect the
anticipated changes in the estimated residual values to be realized when the
equipment is sold. This should result in lower annual depreciation charges and
lower gains on the disposal of the used equipment than has been the case in 1996
and 1995.

As of December 31, 1996 and 1995, Ford owed the Company and its subsidiaries
$445.1 million and $358.6 million, respectively, in connection with various car
repurchase and warranty programs. As of December 31, 1996 and 1995, the Company
and its subsidiaries owed Ford $26.6 million and $9.4 million, respectively
(which amounts are included in Accounts Payable in the consolidated balance
sheet) in connection with cars purchased. These transactions were made and are
being paid in the ordinary course of business.

During the year ended December 31, 1996, the Company purchased Ford cars at a
cost of approximately $4.3 billion, and sold these cars to Ford or its
affiliates under various repurchase programs for approximately $3.2 billion.

F-19
<PAGE> 109

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 -- TAXES ON INCOME

The provision for taxes on income consists of the following (in thousands of
dollars):

<TABLE>
<CAPTION>
----------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Current:
Federal................................................... $31,360 $ 10,381 $38,797
Foreign................................................... 18,832 29,422 20,016
State and local........................................... 8,758 (1,165) 8,236
------- -------- -------
Total current........................................ 58,950 38,638 67,049
------- -------- -------
Deferred:
Federal................................................... 23,772 35,577 2,027
Foreign................................................... 6,228 (11,577) (127)
State and local........................................... 9,000 4,500 2,800
------- -------- -------
Total deferred....................................... 39,000 28,500 4,700
------- -------- -------
Total provision...................................... $97,950 $ 67,138 $71,749
======= ======== =======
</TABLE>

The principal items in the deferred tax provision (benefit) are as follows (in
thousands of dollars):

<TABLE>
<S> <C> <C> <C>
Difference between tax and book depreciation................ $ 64,176 $ 34,790 $ 9,234
Accrued and prepaid expense deducted for tax purposes when
paid or incurred.......................................... (39,427) 13,671 (14,517)
Tax operating loss utilized (carryforwards)................. (7,217) 1,507 (2,636)
Federal alternative minimum tax credit utilized
(carryforwards)........................................... 10,217 (10,217) 1,072
Foreign tax credit utilized (carryforwards)................. 11,251 (11,251) --
Investment tax credit utilized.............................. -- -- 11,547
-------- -------- --------
Total deferred provision............................... $ 39,000 $ 28,500 $ 4,700
======== ======== ========
</TABLE>

The principal items in the deferred tax liability at December 31, 1996 and 1995
are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
---------------------
1996 1995
--------- ---------
<S> <C> <C>
Difference between tax and book depreciation................ $ 309,368 $ 245,192
Accrued and prepaid expense deducted for tax purposes when
paid or incurred.......................................... (148,526) (109,099)
Tax operating loss carryforwards............................ (12,626) (5,409)
Foreign tax credit carryforwards............................ -- (11,251)
Federal alternative minimum tax credit carryforwards........ (31,416) (41,633)
--------- ---------
Total.................................................. $ 116,800 $ 77,800
========= =========
</TABLE>

The tax operating loss carryforwards at December 31, 1996 of $12.6 million
relate to certain foreign operations and have the following expiration dates (in
millions): $1.0 in 2001, $.2 in 2002, $.2 in 2006, and $11.2 with no expiration
dates. It is anticipated that such operations will become profitable in the
future and the carryforwards will be fully utilized.

As of December 31, 1996, the alternative minimum tax credit carryforwards of
$31.4 million (which have no expiration date) will be utilized upon reversal of
timing differences and against future taxable income.

F-20
<PAGE> 110

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 -- TAXES ON INCOME -- (CONTINUED)
The principal items accounting for the difference in taxes on income computed at
the U.S. statutory rate of 35% and as recorded are as follows (in thousands of
dollars):

<TABLE>
<CAPTION>
------------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Computed tax at statutory rate.............................. $ 89,799 $60,320 $56,991
State and local income taxes, net of Federal income tax
benefit................................................... 11,543 2,168 7,173
Tax effect on the amortization of the cost in excess of the
Company's net assets acquired by Park Ridge and UAL....... 5,762 5,764 5,760
Adjustments made to tax accruals in connection with tax
audit evaluations and the effects of prior years' tax
sharing arrangements between companies, UAL and RCA....... (13,945) -- (1,511)
Income taxes on foreign earnings at effective rates
different from the U.S. statutory rate, including the
anticipated realization of certain foreign tax benefits
and the effect of subsidiaries' gains and losses and
exchange adjustments with no tax effect................... 5,937 (3,890) 1,987
All other items, net, none of which exceeded 5% of computed
tax....................................................... (1,146) 2,776 1,349
-------- ------- -------
Total provision........................................ $ 97,950 $67,138 $71,749
======== ======= =======
</TABLE>

NOTE 9 -- LEASE AND CONCESSION AGREEMENTS

Hertz has various concession agreements which provide for payment of rents and a
percentage of revenue with a guaranteed minimum and real estate leases under
which the following amounts were expensed (in thousands of dollars):

<TABLE>
<CAPTION>
------------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Rents...................................................... $ 47,328 $ 49,903 $ 50,066
Concession fees:
Minimum fixed obligations................................ 123,014 121,632 114,920
Additional amounts, based on revenues.................... 131,904 121,461 107,685
-------- -------- --------
Total................................................. $302,246 $292,996 $272,671
======== ======== ========
</TABLE>

As of December 31, 1996, minimum obligations under existing agreements referred
to above are approximately as follows (in thousands of dollars):

<TABLE>
<CAPTION>
----------------------
RENTS CONCESSIONS
-------- -----------
<S> <C> <C>
Years ended December 31,
1997...................................................... $ 41,492 $90,128
1998...................................................... 36,638 66,049
1999...................................................... 30,726 45,970
2000...................................................... 26,363 29,577
2001...................................................... 23,178 13,187
Years after 2001............................................ 130,531 46,242
</TABLE>

F-21
<PAGE> 111

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9 -- LEASE AND CONCESSION AGREEMENTS -- (CONTINUED)
In addition to the above, Hertz has various leases on cars and office and
computer equipment under which the following amounts were expensed (in thousands
of dollars):

<TABLE>
<CAPTION>
---------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cars........................................................ $11,395 $56,219 $74,214
Office and computer equipment............................... 21,772 23,965 23,679
------- ------- -------
Total.................................................. $33,167 $80,184 $97,893
======= ======= =======
</TABLE>

As of December 31, 1996, minimum obligations under existing agreements referred
to above that have a maturity of more than one year are as follows (in
thousands): office and computer equipment 1997, $8,279; 1998, $4,784; 1999,
$1,514; 2000, $66; 2001, $8.

NOTE 10 -- SEGMENT INFORMATION

The Company's business consists of two significant segments: Rental and leasing
of automobiles and certain other activities ("car rental"); and rental of
industrial, construction and materials handling equipment ("industrial and
construction equipment rental"). The contributions of these segments to other
financial data are summarized as follows (in millions of dollars):

<TABLE>
<CAPTION>
-----------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues
Car rental................................................ $ 3,276 $ 3,068 $ 3,031
Industrial and construction equipment rental.............. 392 333 263
------- ------- -------
Total................................................... $ 3,668 $ 3,401 $ 3,294
======= ======= =======
Depreciation of revenue earning equipment
Car rental................................................ $ 815 $ 746 $ 663
Industrial and construction equipment rental.............. 78 58 40
------- ------- -------
Total................................................... $ 893 $ 804 $ 703
======= ======= =======
Depreciation of property and equipment
Car rental................................................ $ 71 $ 71 $ 61
Industrial and construction equipment rental.............. 11 9 8
------- ------- -------
Total................................................... $ 82 $ 80 $ 69
======= ======= =======
Amortization of intangibles
Car rental................................................ $ 18 $ 20 $ 19
Industrial and construction equipment rental.............. -- -- --
------- ------- -------
Total................................................... $ 18 $ 20 $ 19
======= ======= =======
Operating income (pre-tax income before interest)
Car rental................................................ $ 421 $ 356 $ 353
Industrial and construction equipment rental.............. 134 123 87
------- ------- -------
Total................................................... $ 555 $ 479 $ 440
======= ======= =======
Income before income taxes
Car rental................................................ $ 166 $ 87 $ 107
Industrial and construction equipment rental.............. 91 85 56
------- ------- -------
Total................................................... $ 257 $ 172 $ 163
======= ======= =======
Total assets at end of year
Car rental................................................ $ 6,779 $ 5,993 $ 6,023
Industrial and construction equipment rental.............. 870 664 498
------- ------- -------
Total................................................... $ 7,649 $ 6,657 $ 6,521
======= ======= =======
</TABLE>

F-22
<PAGE> 112

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- SEGMENT INFORMATION -- (CONTINUED)

<TABLE>
<CAPTION>
-----------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenue earning equipment, net, at end of year
Car rental................................................ $ 4,318 $ 3,627 $ 3,854
Industrial and construction equipment rental.............. 718 543 406
------- ------- -------
Total................................................... $ 5,036 $ 4,170 $ 4,260
======= ======= =======
Revenue earning equipment and property and equipment
Car rental
Expenditures............................................ $ 8,006 $ 7,144 $ 6,789
Proceeds from sale...................................... (6,386) (6,122) (4,718)
------- ------- -------
Net expenditures...................................... $ 1,620 $ 1,022 $ 2,071
======= ======= =======
Industrial and construction equipment rental
Expenditures............................................ $ 378 $ 290 $ 235
Proceeds from sale...................................... (104) (76) (65)
------- ------- -------
Net expenditures...................................... $ 274 $ 214 $ 170
======= ======= =======
</TABLE>

The Company operates in the United States and in foreign countries. The
operations within major geographic areas are summarized as follows (in millions
of dollars):

<TABLE>
<CAPTION>
-----------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenues
United States............................................. $ 2,723 $ 2,510 $ 2,258
Foreign operations (substantially Europe)................. 945 891 1,036
------- ------- -------
Total................................................... $ 3,668 $ 3,401 $ 3,294
======= ======= =======
Depreciation of revenue earning equipment
United States............................................. $ 789 $ 717 $ 540
Foreign operations (substantially Europe)................. 104 87 163
------- ------- -------
Total................................................... $ 893 $ 804 $ 703
======= ======= =======
Depreciation of property and equipment
United States............................................. $ 63 $ 60 $ 51
Foreign operations (substantially Europe)................. 19 20 18
------- ------- -------
Total................................................... $ 82 $ 80 $ 69
======= ======= =======
Amortization of intangibles
United States............................................. $ 17 $ 19 $ 18
Foreign operations (substantially Europe)................. 1 1 1
------- ------- -------
Total................................................... $ 18 $ 20 $ 19
======= ======= =======
Operating income (pre-tax income before interest)
United States............................................. $ 451 $ 357 $ 315
Foreign operations (substantially Europe)................. 104 122 125
------- ------- -------
Total................................................... $ 555 $ 479 $ 440
======= ======= =======
Income before income taxes
United States............................................. $ 196 $ 98 $ 94
Foreign operations (substantially Europe)................. 61 74 69
------- ------- -------
Total................................................... $ 257 $ 172 $ 163
======= ======= =======
Total assets at end of year
United States............................................. $ 5,805 $ 4,971 $ 4,762
Foreign operations (substantially Europe)................. 1,844 1,686 1,759
------- ------- -------
Total................................................... $ 7,649 $ 6,657 $ 6,521
======= ======= =======
Revenue earning equipment, net, at end of year
United States............................................. $ 3,997 $ 3,240 $ 3,119
Foreign operations (substantially Europe)................. 1,039 930 1,141
------- ------- -------
Total................................................... $ 5,036 $ 4,170 $ 4,260
======= ======= =======
</TABLE>

F-23
<PAGE> 113

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 10 -- SEGMENT INFORMATION -- (CONTINUED)

<TABLE>
<CAPTION>
-----------------------------
YEARS ENDED DECEMBER 31
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Revenue earning equipment and property and equipment
United States
Expenditures............................................ $ 6,011 $ 5,413 $ 5,226
Proceeds from sale...................................... (4,360) (4,452) (3,405)
------- ------- -------
Net expenditures...................................... $ 1,651 $ 961 $ 1,821
======= ======= =======
Foreign operations (substantially Europe)
Expenditures............................................ $ 2,373 $ 2,021 $ 1,798
Proceeds from sale...................................... (2,130) (1,746) (1,378)
------- ------- -------
Net expenditures...................................... $ 243 $ 275 $ 420
======= ======= =======
</TABLE>

NOTE 11 -- LITIGATION

In July 1996, the Company was sued in Harris County, Texas District Court in a
purported class action in which this plaintiff alleges that the Company's
practice of providing certain insurance products violates the Texas Insurance
Code because the Company did not obtain approval to sell insurance or obtain
regulatory approval of the premiums it charges. The complaint seeks restitution
of excessive premiums, equitable rescission of all insurance contracts entered
into by the class members, a declaratory judgment that the Company is selling
insurance illegally in Texas and injunctive relief. While it is possible that
the action could result in significant liability to the Company, the Company
does not expect the action to have a material adverse effect on the Company's
consolidated financial position or results of operations.

The U.S. Department of Labor has commenced an inquiry into the Company's
classification of certain employees as "exempt" for purposes of federal labor
laws and whether such employees have been improperly denied overtime pay. While
an adverse outcome of the inquiry could have an adverse effect on the Company's
results of operations for the quarter in which it occurs, the Company does not
believe that an adverse outcome would have a material adverse effect on the
Company's results of operations for a full year, or on the Company's
consolidated financial position.

Since 1992, in the Company's New York region (which includes parts of New Jersey
and Connecticut), the Company has been assessing higher rental rates for renters
who reside in the New York City boroughs of the Bronx, Brooklyn or Queens to
offset costs resulting from a higher incidence of accidents involving renters
residing in such boroughs. The City of New York passed an ordinance prohibiting
such pricing practice. The Company filed suit against The City of New York
claiming that such ordinance was in violation of federal anti-trust laws. The
Company's claim was rejected in U.S. District Court, and the Company appealed to
the U.S. Court of Appeals for the Second Circuit. That Court remanded the
proceeding to the U.S. District Court for trial. Pending the outcome of the
action in the U.S. District Court, the Court has stayed the ordinance,
permitting the Company to continue its pricing practice. If the Company is
ultimately unsuccessful in challenging the ordinance, the Company believes it
could take actions to mitigate the higher costs that would be experienced from
such rentals. Accordingly, the Company believes that an adverse outcome would
not have a material adverse effect on the Company's consolidated financial
position or results of operations.

F-24
<PAGE> 114

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- LITIGATION -- (CONTINUED)
liability in excess of related accruals is not expected to materially affect the
consolidated financial position or results of operations of the Company.

NOTE 12 -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

A summary of the quarterly operating results during 1996 and 1995 were as
follows (in thousands):

<TABLE>
<CAPTION>
----------------------------------------------------------
OPERATING INCOME INCOME (LOSS)
(PRETAX INCOME BEFORE INCOME NET INCOME
REVENUES BEFORE INTEREST) TAXES (LOSS)
-------- ---------------- ------------- ----------
<S> <C> <C> <C> <C>
1996
First quarter......................... $ 803,142 $ 82,487 $ 15,172 $ 8,788
Second quarter........................ 911,401 144,260 69,284 39,545
Third quarter......................... 1,060,028 219,943 138,249 74,208
Fourth quarter........................ 893,812 108,679 33,864 36,078
---------- -------- -------- --------
Total Year......................... $3,668,383 $555,369 $256,569 $158,619
========== ======== ======== ========
1995
First quarter......................... $ 735,679 $ 69,705 $ (646) $ (365)
Second quarter........................ 858,555 115,089 34,515 19,637
Third quarter......................... 989,756 194,070 109,584 65,092
Fourth quarter........................ 816,598 100,553 28,891 20,842
---------- -------- -------- --------
Total Year......................... $3,400,588 $479,417 $172,344 $105,206
========== ======== ======== ========
</TABLE>

The tax provision in the fourth quarter of 1996 includes credits of $13.9
million resulting from adjustments made to tax accruals in connection with tax
audit evaluations and the effects of prior years' tax sharing arrangements
between the Company and its former parent companies, UAL and RCA.

Effective July 1, 1994, certain lives being used to compute the provision for
depreciation of revenue earning equipment used in the industrial and
construction equipment rental business were increased to reflect changes in the
estimated residual values to be realized when the equipment is sold. As a result
of this change, pre-tax income before interest includes credit adjustments of
$10.8 million in the first quarter of 1995 and $1.2 million in the second
quarter of 1995 as a result of decreasing depreciation of revenue earning
equipment.

The tax provision in the fourth quarter of 1995 includes $6.5 million of credits
relating to foreign taxes paid which were offset against U.S. income tax
liabilities.

NOTE 13 -- FINANCIAL INSTRUMENTS

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash equivalents and trade receivables. The
Company places its cash equivalents with financial institutions and limits the
amount of credit exposure to any one financial institution. Concentrations of
credit risk with respect to trade receivables are limited due to the large
number of customers comprising the Company's customer base, and their dispersion
across different businesses and geographic areas. All borrowings by foreign
operations are either in the foreign operation's local

F-25
<PAGE> 115

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13 -- FINANCIAL INSTRUMENTS -- (CONTINUED)
currency or, if in non-local currency, on a fully hedged basis to minimize
foreign exchange exposure. As of December 31, 1996, the Company had no
significant concentration of credit risk.

Cash and Equivalents

Fair value approximates cost indicated on the balance sheet at December 31,
1996, because of the short-term maturity of these instruments.

Debt

Fair value is estimated based on quoted market rates as well as borrowing rates
currently available to the Company for loans with similar terms and average
maturities. Carrying value was used as fair value for borrowings with an initial
maturity of 92 days or less. The fair value of all debt at December 31, 1996
approximated $5.12 billion compared to carrying value of $5.09 billion.

Public Liability and Property Damage

Provisions for public liability and property damage on self-insured domestic
claims and reinsured foreign claims are made by charges to expense based upon
evaluations of estimated ultimate liabilities on reported and unreported claims.
These liabilities are anticipated to be paid in the future which range between
one and five years. The fair value of these liabilities at December 31, 1996
approximates $290 million compared to carrying value of $321 million. The fair
value was estimated using a 6.9% interest rate, which represents the long-term
borrowing rate available to the Company at December 31, 1996.

Financial Instruments

The Company and its subsidiaries have entered into arrangements to manage
exposure to fluctuations in interest rates. These arrangements consist of
interest-rate swap agreements ("swaps") and forward rate agreements ("FRAs").
The differential paid or received on these agreements is recognized as an
adjustment to interest expense. These agreements are not entered into for
trading purposes. The effect of these agreements is to make the Company less
susceptible to changes in interest rates by effectively converting certain
variable rate debt to fixed rate debt. Because of the relationship of current
market rates to historical fixed rates, the effect at December 31, 1996 of the
swap and FRA agreements is to give the Company an overall effective
weighted-average rate on debt of 6.53%, with 41% of debt effectively subject to
variable interest rates, compared to a weighted-average interest rate on debt of
6.48%, with 49% of debt subject to variable interest rates when not considering
the swap and FRA agreements. At December 31, 1996, these agreements expressed in
notional amounts aggregated $368.4 million swaps. Notional amounts are not
reflective of the Company's obligations under these agreements because the
Company is only obligated to pay the net amount of interest rate differential
between the fixed and variable rates specified in the contracts. The Company's
exposure to any credit loss in the event of non-performance by the
counterparties is further mitigated by the fact that all of these financial
instruments are with significant financial institutions that are rated "A" or
better by the major credit rating agencies. At December 31, 1996, the fair value
of all outstanding contracts, which is representative of the Company's
obligations under these contracts, assuming the contracts were terminated at
that date, was approximately a net payable of $4.0 million.

F-26
<PAGE> 116

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 13 -- FINANCIAL INSTRUMENTS -- (CONTINUED)
options. At December 31, 1996 the total notional amount of these instruments was
$23.5 million and the fair value of all outstanding contracts, which is
representative of the Company's obligations under these contracts, assuming the
contracts were terminated at that date, was approximately a net payable of $.1
million.

The fair value of the interest rate and foreign currency instruments were
estimated using market prices provided by financial institutions. The following
is the estimated fair value and notional amount of the outstanding instruments
at December 31, 1996 and their maturity dates (in millions):

<TABLE>
<CAPTION>
---------------------------------
FAIR NOTIONAL
MATURITY VALUE(A) AMOUNT(B)
-------- -------- ---------
<S> <C> <C> <C>
Interest Rate Instruments
1997 $240.7
- - Assets.................................................... $ --
- - Liabilities............................................... .5
1998 73.3
- - Assets.................................................... --
- - Liabilities............................................... 1.0
1999 43.4
- - Assets.................................................... (.1)
- - Liabilities............................................... 2.2
2000 10.7
- - Assets.................................................... --
- - Liabilities............................................... .2
2001 .2
- - Assets.................................................... --
- - Liabilities............................................... --
2002 .1
- - Assets.................................................... --
- - Liabilities............................................... --
----- ------
Total.................................................. $(4.0) $368.4
===== ======
Foreign Currency Instruments(c)
1997 $ 16.8
- - Assets.................................................... $ --
- - Liabilities............................................... .1
1998 6.7
- - Assets.................................................... --
- - Liabilities............................................... --
----- ------
Total.................................................. $ (.1) $ 23.5
===== ======
</TABLE>

- -------------------------
(a) Fair value is representative of the Company's obligation under the
contracts, assuming the contracts were terminated at December 31, 1996.

(b) The notional amount represents the contract amount and does not represent
the amount at risk.

(c) As of December 31, 1996, no one currency represented the majority of the
outstanding foreign currency instruments, except for the option to sell pound
sterling and buy U.S. dollars in the notional amount of $12.0 million.

F-27
<PAGE> 117

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14 -- SUBSEQUENT EVENTS

In February 1997, Ford extended to the Company a line of credit of $500 million,
expiring June 30, 1999. This line of credit has an evergreen feature that
provides on an annual basis for automatic one-year extensions of the expiration
date, unless timely notice is provided by Ford at least one year prior to the
then scheduled expiration date. At that time, the revolving loan agreement
between the Company and Ford dated June 8, 1994 was terminated.

On February 27, 1997, the Company issued to Ford 1,290 shares of its 5.11%
Cumulative Series C Preferred Stock having an aggregate liquidation preference
of $129 million for a purchase price equal to the aggregate liquidation
preference.

On February 27, 1997, the Company paid a dividend of $460 million on its common
stock to Ford in the form of a 5.475% promissory note, which was fully repaid by
March 10, 1997.

On February 28, 1997, the Company filed a Registration Statement on Form S-1 in
connection with the proposed initial public offering of less than 20% of the
Company's common stock (the "Offering"). Immediately following the Offering,
Ford will continue to own a controlling interest in the Company's common stock.

The Company and Ford have entered into a Car Supply Agreement which will
commence on September 1, 1997 for a period of ten years. Under the Car Supply
Agreement, Ford and the Company have agreed to negotiate in good faith on an
annual basis with respect to the supply of cars. Ford has agreed to supply to
the Company and the Company has agreed to purchase from Ford, for each car model
year during the term of the agreement (i.e., the 1998 model year through the
2007 model year), (a) the lesser of 150,000 cars or 55% of the Company's fleet
requirements for its car rental business conducted in the United States; (b) 35%
of the Company's fleet requirements for its car rental business conducted in
Europe; and (c) 55% of the Company's fleet requirements for its car rental
business conducted other than in the United States and Europe. For each model
year, at least 50% of the cars supplied by Ford are required to be non-risk
cars. The Car Supply Agreement also provides that, for each model year, Ford
must strive to offer car fleet programs to the Company on terms and conditions
that are competitive with terms and conditions for the supply of cars then being
offered by other automobile manufacturers to the Company and other daily car
rental companies. In addition, for each model year, Ford must supply cars to the
Company on terms and conditions that are no less favorable than those offered by
Ford to other daily car rental companies, excluding franchised Ford vehicle
dealers who rent cars.

The Company and Ford have entered into a Joint Advertising Agreement which will
commence on September 1, 1997 for a period of ten years. Under the Joint
Advertising Agreement, Ford has agreed to pay to the Company one-half of the
Company's advertising costs, up to a limit of $39 million for the first year
and, for each year thereafter, a limit equal to the prior year's limit adjusted
for inflation, subject to a ceiling. In addition, if for any year, one-half of
the Company's advertising costs exceed such limit and the Company has purchased
from Ford a percentage of its car fleet requirements for its car rental business
conducted in the United States for the corresponding model year (the "Ford
Vehicle Share") equal to 58% or more, then Ford will pay to the Company
additional amounts for such excess advertising costs. To be eligible for cost
reimbursement under the Joint Advertising Agreement, the advertising must meet
certain conditions, including the condition that it indicates that the Company
features Ford vehicles in a manner and with a prominence that is reasonably
satisfactory to Ford. The Joint Advertising Agreement further provides that if
the Ford Vehicle Share for any model year is less than 55%, Ford will not be
obligated to pay the Company any amount for its advertising costs for that year,
except to the extent that the Company's failure to achieve a 55% Ford Vehicle
Share is attributable to (a) Ford's failure to supply a sufficient quantity of
cars for the Company to achieve a

F-28
<PAGE> 118

THE HERTZ CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14 -- SUBSEQUENT EVENTS -- (CONTINUED)
55% Ford Vehicle Share or (b) the fact that the terms and conditions of Ford's
car fleet programs offered to the Company were not competitive with the terms
and conditions for the supply of cars offered by other automobile manufacturers
to the Company and other daily car rental companies. In no event, however, will
Ford be required to pay any amount for the Company's advertising costs for any
year if the Ford Vehicle Share for the corresponding model year is less than
40%.

F-29
<PAGE> 119

SCHEDULE II

THE HERTZ CORPORATION AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
--------------------------------------------------------------------
Additions Deductions
Balance at ---------- ----------------------
Beginning of Charged to Translation Balance at
Year Income Adjustments Other End of Year
Dollars in thousands ------------ ---------- ----------- ----- -----------
<S> <C> <C> <C> <C> <C>
1996
Allowance for doubtful accounts... $ 7,985 $ 9,912 $ 59 $ 5,570(a) $ 12,268
======== ======== ===== ======== ========
Public liability and property
damage.......................... $311,669 $133,417 $ 40 $123,928(b) $321,118
======== ======== ===== ======== ========
1995
Allowance for doubtful accounts... $ 10,026 $ 4,926 $(319) $ 7,286(a) $ 7,985
======== ======== ===== ======== ========
Public liability and property
damage.......................... $304,328 $134,926 $(229) $127,814(b) $311,669
======== ======== ===== ======== ========
1994
Allowance for doubtful accounts... $ 6,862 $ 6,813 $(521) $ 4,170(a) $ 10,026
======== ======== ===== ======== ========
Public liability and property
damage.......................... $264,158 $159,049 $ 403 $118,476(b) $304,328
======== ======== ===== ======== ========
</TABLE>

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

(a) Amounts written off, net of recoveries. The year 1995 includes $2 million,
which represents the balance at December 31, 1994 relating to the European Car
Leasing and Car Dealership operations sold by the Company effective January 1,
1995.

(b) Payments of claims and expenses.

F-30
<PAGE> 120

HERTZ LOGO
<PAGE> 121

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 145,528
NASD fee.................................................... 30,500
NYSE listing fee............................................ 242,975
Blue Sky fees and expenses.................................. 15,000
Printing expenses........................................... 1,100,000
Legal fees and expenses..................................... 600,000
Accounting fees............................................. 70,000
Miscellaneous............................................... 295,997
----------
Total.................................................. $2,500,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer or director
of such corporation, or is or was serving at the request of such corporation as
a director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the corporation's best interests, and, for criminal
proceedings, had no reasonable cause to believe his or her conduct was illegal.
A Delaware corporation may indemnify officers and directors against expenses
(including attorneys' fees) in connection with the defense or settlement of an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him or her against the
expenses which such officer or director actually and reasonably incurred.

In accordance with the Delaware Law, the Restated Certificate of Incorporation
of the Company contains a provision to limit the personal liability of the
directors of the Company for violations of their fiduciary duty. This provision
eliminates each director's liability to the Company or its stockholders for
monetary damages except (i) for any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware Law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions or (iv)
for any transaction from which a director derived an improper personal benefit.
The effect of this provision is to eliminate the personal liability of directors
for monetary damages for actions involving a breach of their fiduciary duty of
care, including any such actions involving gross negligence.

Pursuant to underwriting agreements filed as exhibits to registration statements
relating to underwritten offerings of securities, the underwriters parties
thereto have agreed to indemnify each officer and director of the Company and
each person, if any, who controls the Company within the meaning of the
Securities Act of 1933, against certain liabilities, including liabilities under
said Act.

The directors and officers of the Company are covered by directors' and
officers' insurance policies relating to Ford Motor Company and its
subsidiaries.

II-1
<PAGE> 122

The Restated Certificate of Incorporation of the Company provides for
indemnification of the officers and directors of the Company to the full extent
permitted by applicable law.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Within the past three years, the Company has issued and sold the following
unregistered securities:

1. On April 29, 1994, the Company issued 1,500,000 shares of its Variable Rate
Cumulative Series B Preferred Stock, par value $100 per share, to Ford Motor
Credit Company ("FMCC") in exchange for a $150 million subordinated promissory
note of the Company held by FMCC.

2. On February 27, 1997, the Company issued 1,290 shares of its 5.11% Cumulative
Series C Preferred Stock, par value $.01 per share, to Ford in exchange for U.S.
treasury securities having an aggregate fair market value at that time of $129
million.

The Company believes that the transactions described above were exempt from
registration under Section 4(2) of the Securities Act of 1933 because in each
case the subject securities were sold to a single sophisticated investor who was
purchasing for investment without a view to further distribution.

II-2
<PAGE> 123

ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

<TABLE>
<CAPTION>
EXHIBIT
NO.
- -------
<S> <C> <C>
1 -- Form of U.S. Underwriting Agreement*
3(a) -- Form of Restated Certificate of Incorporation of the
Company*
3(b) -- Form of By-laws of the Company**
4(a) -- Specimen Certificate of Class A Common Stock of the Company*
4(b) -- Indenture dated as of April 1, 1986 between the Company and
The Chase Manhattan Bank (formerly known as Chemical Bank),
as successor by merger to Manufacturers Hanover Trust
Company, as Trustee (incorporated herein by reference to
Exhibit 4 from the Company's Registration Statement No.
33-4725 on Form S-3 filed April 10, 1996)***
4(c) -- First Supplemental Indenture dated as of April 2, 1990
between the Company and The Chase Manhattan Bank (formerly
known as Chemical Bank), as successor by merger to
Manufacturers Hanover Trust Company, as Trustee*
4(d) -- Indenture dated as of June 1, 1989 between the Company and
The Bank of New York, as Trustee (incorporated herein by
reference to Exhibit 4 from the Company's Registration
Statement No. 33-29319 on Form S-3 filed June 14, 1989)***
4(e) -- Form of Indenture dated as of July 1, 1993 between the
Company and Citibank, N.A., as Trustee (incorporated herein
by reference to Exhibit 4(d) from the Company's Registration
Statement No. 33-62902 on Form S-3 filed July 6, 1993)***
4(f) -- Form of Indenture dated as of December 2, 1994 between the
Company and First Union National Bank (formerly known as
First Fidelity Bank, National Association), as Trustee
(incorporated herein by reference to Exhibit 4(e) from
Post-Effective Amendment No. 1 to the Company's Registration
Statement No. 33-54183 on Form S-3 filed December 2,
1994)***
5(a) -- Opinion and Consent of Simpson Thacher & Bartlett regarding
the legality of the Class A Common Stock****
10(a) -- Form of Corporate Agreement between the Company and Ford**
10(b) -- Car Supply Agreement between the Company and Ford*
10(c) -- Joint Advertising Agreement between the Company and Ford*+
10(d) -- Tax-Sharing Agreement between the Company and Ford*
10(e) -- The Hertz Corporation Benefit Equalization Plan*
10(f) -- The Hertz Corporation Supplemental Retirement and Savings
Plan, as amended*
10(g) -- The Hertz Corporation Executive Incentive Compensation Plan*
10(h) -- The Hertz Corporation Long Term Incentive Plan*
10(i) -- Form of The Hertz Corporation Special Supplemental Executive
Pension Benefit for Frank A. Olson and William Sider*
10(j) -- Employment Agreement between the Company and Frank A. Olson*
10(k) -- Employment Agreement between the Company and Craig R. Koch*
10(l) -- Employment Agreement between the Company and William Sider
(incorporated herein by reference to Exhibit 10(iii)(A)(c)
from the Company's Annual Report on Form 10-K for the year
ended December 31, 1992)***
10(m) -- Employment Agreement between Hertz International, Ltd. and
Antoine E. Cau*
10(n) -- Employment Agreement between the Company and Brian J.
Kennedy*
10(o) -- Employment Agreement between the Company and Daniel I.
Kaplan*
10(p) -- Form of The Hertz Corporation Long-Term Equity Compensation
Plan**
21 -- Subsidiaries of the Company*
23(a) -- Consent of Coopers & Lybrand L.L.P.**
23(b) -- Consent of Simpson Thacher & Bartlett (included in Exhibit
5(a))****
24 -- Power of Attorney*
27 -- Financial Data Schedule*
</TABLE>

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

* Previously filed.

** Filed herewith.

*** Incorporated by reference.

**** To be filed by amendment.
+ The Company has applied for confidential treatment of portions of this
Exhibit. Accordingly, portions thereof have been omitted and filed
separately.

II-3
<PAGE> 124

FINANCIAL STATEMENT SCHEDULES

All applicable financial statement schedule disclosure requirements are set
forth in the notes to the Company's consolidated financial statements.

ITEM 17. UNDERTAKINGS

The undersigned hereby undertakes that:

1. For purposes of determining any liability under the Securities Act
of 1933, 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 of 1933 shall be deemed to be part of
this registration statement as of the time it was declared effective.

2. For the purpose of determining any liability under the Securities
Act of 1933, 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.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities Act of
1933 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 Securities Act of 1933 and will be
governed by the final adjudication of such issue.

II-4
<PAGE> 125

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 2 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the Borough of Park
Ridge, State of New Jersey, on the 10th day of April, 1997.

THE HERTZ CORPORATION

By: /s/ WILLIAM SIDER
------------------------------------
Title: Executive Vice President
and
Chief Financial Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.

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

* Chairman of the Board, Chief Executive April 10, 1997
- ------------------------------------------ Officer and Director (Principal
(Frank A. Olson) Executive Officer)

* President, Chief Operating Officer and April 10, 1997
- ------------------------------------------ Director
(Craig R. Koch)

/s/ WILLIAM SIDER Executive Vice President, Chief April 10, 1997
- ------------------------------------------ Financial Officer and Director
(William Sider) (Principal Financial Officer)

* Controller (Principal Accounting April 10, 1997
- ------------------------------------------ Officer)
(Leo A. Massad, Jr.)

* Director April 10, 1997
- ------------------------------------------
(John M. Devine)

* Director April 10, 1997
- ------------------------------------------
(Peter J. Pestillo)

* /s/ WILLIAM SIDER Attorney-In-Fact April 10, 1997
----------------------------------------
(William Sider)
</TABLE>

II-5
<PAGE> 126

APPENDIX DESCRIBING GRAPHIC MATERIAL
PURSUANT TO RULE 304 OF REGULATION S-T

Inside Front cover

Picture 1.

Picture of Hertz #1 Club Gold canopied area.

Picture 2.

Picture of woman behind rental counter.

Picture 3.

Picture of various pieces of industrial and construction rental
equipment.

Picture 4 (gatefold).

Map of world indicating countries in which the Company operates and
countries in which the Company offers Hertz #1 Club Gold service.

Inside Back Cover

Picture of sign reading "Hertz Rent a Car" with globe in background.
<PAGE> 127

EXHIBIT INDEX

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

* Previously filed.

** Filed herewith.

*** Incorporated by reference.
**** To be filed by amendment.
+ The Company has applied for confidential treatment of portions of this
Exhibit. Accordingly, portions thereof have been omitted and filed
separately.

<PAGE> 1
EXHIBIT 3(b)

BY-LAWS

THE HERTZ CORPORATION
(THE "COMPANY")

ADOPTED _________, 1997

ARTICLE I.

OFFICES

The registered office of the Company shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Company may also have
one or more offices at such other places, either inside or outside of the State
of Delaware, as the Board of Directors may from time to time determine or as
the business of the Company may require. The books and records of the Company
may be kept (subject to the provisions of the laws of the State of Delaware) at
any place, either inside or outside of the State of Delaware, as from time to
time may be determined by the Board of Directors.

ARTICLE II.

STOCKHOLDERS

SECTION 1. PLACE OF MEETING.

Meetings of stockholders (whether annual or special) shall be held at
such place, either inside or outside of the State of Delaware, as the Board of
Directors shall from time to time determine.

SECTION 2. ANNUAL MEETING.

The annual meeting of stockholders shall be held on the last Thursday
of May of each year or at such other time as shall be determined by the Board
of Directors. Should said day be a legal holiday, such annual meeting shall be
held on the preceding regular business day. If, for any reason, the annual
meeting be not held at the time aforesaid, the directors shall fix another date
for such meeting.
<PAGE> 2
2

SECTION 3. SPECIAL MEETINGS.

Unless otherwise prescribed by law or by the Company's certificate of
incorporation, as amended from time to time (the "Charter"), special meetings
of stockholders may be held at any time on call of the Chairman of the Board of
Directors, a Vice Chairman of the Board of Directors, the President, or, at the
request in writing of a majority of the Board of Directors, any officer. Such
request shall state the purpose or purposes of the proposed meeting.

SECTION 4. NOTICE OF MEETINGS.

Except as otherwise provided by law, at least twenty (20) days' notice
of stockholders' meetings stating the time and place and the objects thereof
shall be given by the Chairman of the Board of Directors, a Vice Chairman of
the Board of Directors, the President, the Secretary or an Assistant Secretary
to each stockholder of record having voting power in respect of the business to
be transacted thereat. Subject to Section 5 of this Article II, no business
other than that stated in the notice shall be transacted at any meeting.

SECTION 5. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS.

(A) Annual Meetings of Stockholders. (1) Nominations of persons
for election to the Board of Directors and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders
(a) pursuant to the Company's notice of meeting delivered pursuant to Section 4
of this Article II, (b) by or at the direction of the Board of Directors or (c)
by any stockholder of the Company who is entitled to vote at the meeting, who
complied with the notice procedures set forth in paragraphs (A)(2) and (A)(3)
of this Section 5 and who was a stockholder of record at the time such notice
is delivered to the Secretary of the Company.

(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this Section 5, the stockholder must have given timely notice thereof
in writing to the Secretary of the Company and such business must be a proper
subject for stockholder action under the General Corporation Law of the State
of Delaware. To be timely, a stockholder's notice shall be delivered to the
Secretary at the principal executive offices of the Company not less than sixty
(60) days nor more than ninety (90) days prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than thirty (30) days or delayed
by more than sixty (60) days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the ninetieth
day prior to such annual meeting and not later than the close of business on
the later of the sixtieth day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934,
<PAGE> 3

as amended (the "Exchange Act"), (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on whose behalf
the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial
owner and (ii) the class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such beneficial owner. If
the stockholder or beneficial owner intends to solicit proxies in support of
any such nomination or proposal, such stockholder's notice shall also include a
representation to that effect.

(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 5 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Company at least seventy
(70) days prior to the first anniversary of the preceding year's annual
meeting, a stockholders's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Company not later than the close of business
on the tenth day following the day on which such public announcement is first
made by the Company.

(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Company's notice of meeting pursuant to
Section 4 of this Article II. Nominations of persons for election to the Board
of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the Company's notice of meeting (a) by
or at the direction of the Board of Directors or (b) by any stockholder of the
Company who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Section 5 and who is a stockholder of record at
the time such notice is delivered to the Secretary of the Company. Nominations
by stockholders of persons for election to the Board of Directors may be made
at such a special meeting of stockholders if the stockholder's notice required
by paragraph (A)(2) of this Section 5 shall be delivered to the Secretary at
the principal executive offices of the Company not earlier than the ninetieth
day prior to such special meeting and not later than the close of business on
the later of the sixtieth day prior to such special meeting or the tenth day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.

(C) General. (1) Only persons who are nominated in accordance
with the procedures set forth in this Section 5 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 5. Except as otherwise provided by
law, the Charter or these By-Laws, the chairman of the meeting shall

<PAGE> 4

have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made in accordance with this
Section 5 and, if any proposed nomination or business is not in compliance with
this Section 5, or if a stockholder or beneficial owner solicits proxies in
support of a nomination or proposal without having made the representation
required in paragraph (A)(2) of this Section 5, to declare that such proposal or
nomination shall be disregarded.

(2) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Company with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 5, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 5. Nothing in this Section 5 shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the Company's
proxy statement pursuant to Rule 14a- 8 under the Exchange Act.

SECTION 6. QUORUM.

At any meeting of stockholders, the number of shares the holders of
which shall be present or represented by proxy in order to constitute a quorum
for, and the votes that shall be necessary for, the transaction of any business
shall be as expressly provided in Article 4 of the Charter. At any meeting of
stockholders at which a quorum is not present, the person serving as chairman
of the meeting or the holders of shares entitled to cast a majority of all of
the votes which could be cast at such meeting by the holders of outstanding
shares of stock of the Company who are present in person or by proxy and who
are entitled to vote on every matter that is to be voted on without regard to
class at such meeting may adjourn the meeting from time to time.

SECTION 7. ORGANIZATION AND CONDUCT OF BUSINESS.

The Chairman of the Board of Directors shall act as chairman of
meetings of the stockholders. The Board of Directors may designate any other
officer or director of the Company to act as chairman of any meeting in the
absence of the Chairman of the Board of Directors, and the Board of Directors
may further provide for determining who shall act as chairman of any
stockholders' meeting in the absence of the Chairman of the Board of Directors
and such designee. The person serving as chairman of any meeting of
stockholders shall determine the order of business and the procedure at the
meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him or her in order.

The Secretary of the Company shall act as secretary of all meetings of
the stockholders, but in the absence of the Secretary the presiding officer may
appoint any other person to act as secretary of any meeting.

<PAGE> 5

SECTION 8. PROXIES AND VOTING.

At any meeting of stockholders, every stockholder entitled to vote may
vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure
established for the meeting. Any copy, facsimile telecommunication or other
reliable reproduction of the writing or transmission created pursuant to this
paragraph may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used, provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of the
entire original writing or transmission.

All voting, including on the election of directors but excepting where
otherwise required by law, may be a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.

SECTION 9. STOCK LISTS.

A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.

The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the
identity of the stockholders entitled to vote at the meeting and the number of
shares held by each of them.

SECTION 10. RATIFICATION.

Any transaction questioned in any stockholders' derivative suit, or
any other suit to enforce alleged rights of the Company or any of its
stockholders, on the ground of lack of authority, defective or irregular
execution, adverse interest of any director, officer or stockholder,
nondisclosure, miscomputation or the application of improper principles or
practices of accounting may be approved, ratified and confirmed before or after
judgment by the Board of Directors or by the holders of the Company's Class A
Common Stock, par value $.01 per share ("Class A Common Stock") and the holders
of the Company's Class B Common Stock, par value $.01 per share ("Class B
Common Stock") voting as provided in paragraph (g) of Article 4 of the Charter,
and, if so approved, ratified or confirmed, shall have the same force and
effect as if the questioned transaction had been originally duly authorized,
and said approval, ratification or confirmation shall be binding upon the
Company

<PAGE> 6

and all of its stockholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.

SECTION 11. INSPECTORS OF ELECTION.

The Board of Directors may, and to the extent required by law, shall,
in advance of any meeting of stockholders, appoint one or more inspectors to
act at the meeting, decide upon the qualification of voters, count the votes,
decide the results and make a written report thereof in accordance with the
General Corporation Law of the State of Delaware. The Board of Directors may
designate one or more persons as alternate inspectors to replace any inspector
who fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting may, and to the extent
required by law, shall, appoint one or more inspectors to act at the meeting.
Each inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. Every vote taken
by ballots shall be counted by an inspector or inspectors appointed by the
Board of Directors.

ARTICLE III.

BOARD OF DIRECTORS

SECTION 1. NUMBER, TERM OF OFFICE AND ELIGIBILITY.

Subject to any rights of holders of preferred stock to elect
additional directors under specified circumstances, the number of directors of
the Company shall be fixed from time to time exclusively by resolution of the
Board of Directors adopted by the affirmative vote of directors constituting
not less than a majority of the total number of directors that the Company
would have if there were no vacancies on the Company's Board of Directors, but
shall consist of not more than twelve (12) nor less than three (3) directors.
Each director shall be elected annually by ballot by the holders of Class A
Common Stock and the holders of Class B Common Stock voting as provided in
paragraph (g) of Article 4 of the Charter at the annual meeting of
stockholders, to serve until his or her successor shall have been elected and
shall have qualified, except as provided in this Section 1. No person may be
elected or re-elected a director of the Company if at the time of his or her
election or re-election he or she shall have attained the age of seventy years,
and the term of any director who shall have attained such age while serving as
a director shall terminate as of the time of the first annual meeting of
stockholders following his or her seventieth birthday; provided, however, that
the Board of Directors by resolution may waive such age limitation in any year
and from year to year with respect to any director or directors. Subject to
any rights of holders of preferred stock, and unless the Board of Directors
otherwise determines, any vacancy occurring in the Board of Directors caused by
death, resignation, increase in number of directors or otherwise may be filled
by the affirmative vote of a majority of the remaining members of the Board of
Directors, though less than a quorum, or by a sole remaining director, and
except as otherwise provided by law, any such vacancy may not be filled by the
stockholders of the Company,

<PAGE> 7

and any director so elected shall hold office until the next election of
directors and until his or her successor is duly elected and qualified, or
until his or her earlier death, resignation or removal.

SECTION 2. MEETINGS.

Meetings of the Board of Directors may be held at such place, either
inside or outside of the State of Delaware, as may from time to time be
designated by the Chairman of the Board of Directors, a Vice Chairman of the
Board of Directors, the President or resolution of the Board of Directors or as
may be specified in the call of any meeting. In the absence of any such
designation, the meetings shall be held at the principal executive office of
the Company in Park Ridge, New Jersey.

An annual meeting of the Board of Directors shall be held on the same
day as, and as soon as practicable following the annual meeting of stockholders
or at such other time or place as shall be determined by the Board of Directors
at its regular meeting next preceding said annual meeting of stockholders.
Regular meetings of the Board of Directors shall be held on the last Thursday
of February, May, August and November of each year or at such other time as
shall be determined by the Board of Directors. Should said day be a legal
holiday, such regular meeting shall be held on the next Thursday that is not a
legal holiday.

Special meetings of the Board of Directors may be held at any time on
the call of the Chairman of the Board of Directors, a Vice Chairman of the
Board of Directors, the President or the Board of Directors. Meetings may be
held at any time or place without notice if all the directors are present or if
those not present waive notice of the meeting in writing.

SECTION 3. NOTICE OF MEETINGS.

The Secretary or an Assistant Secretary shall give notice of the time
and place of meetings of the Board of Directors (excepting the annual meeting
of directors) by (i) mailing or sending via courier such notice not later than
during the second day preceding the day on which such meeting is to be held, or
(ii) by (a) sending a facsimile transmission or other form of electronic
communication containing such notice or (b) delivering such notice personally
or by telephone, in each case, not later than during the first day preceding
the day on which such meeting is to be held to each director. Unless otherwise
stated in the notice thereof any and all business may be transacted at any
meeting.

SECTION 4. QUORUM AND ORGANIZATION OF MEETINGS.

One-third of the total number of members of the Board of Directors as
constituted from time to time, but in no event less than three, shall
constitute a quorum for the transaction of business; but if at any meeting of
the Board of Directors there shall be less than a quorum present, a majority of
those present may adjourn the meeting from time to time, and the meeting may be
held as adjourned without further notice or waiver. Except as otherwise
provided by law or by the Charter or these By-Laws, a majority of the directors
present at any duly constituted meeting may decide any question brought before
such meeting.

<PAGE> 8

Meetings shall be presided over by the Chairman of the Board of Directors or,
in his or her absence, by such other person as the Board of Directors may
designate or the members present may select.

SECTION 5. POWERS.

In addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Board of Directors shall have and may exercise all
such powers of the Company and do all such lawful acts and things that are not
by statute, the Charter or these By-Laws directed or required to be exercised
or done by the stockholders. Without prejudice to or limitation of such
general powers and any other powers conferred by statute, the Charter or these
By-Laws, the Board of Directors shall have the following powers:
(1) To determine, subject to the requirements of law and
of paragraph (c)(2) of Article 4 of the Charter, what, if any,
dividends shall be declared and paid to the stockholders out of net
profits, current or accumulated, or out of surplus or other assets of
the Company available for dividends.

(2) To fix, and from time to time to vary, the amount of
working capital of the Company, and to set aside from time to time out
of net profits, current or accumulated, or surplus of the Company such
amount or amounts as they in their discretion may deem necessary and
proper as, or as a safeguard to the maintenance of, working capital,
as a reserve for contingencies, as a reserve for repairs, maintenance,
or rehabilitation, as a reserve for revaluation of profits of the
Company or for such other proper purpose as may in the opinion of the
directors be in the best interests of the Company; and in their sole
discretion to abolish or modify any such provision for working capital
or any such reserve, and to credit the amount thereof to net profits,
current or accumulated, or to the surplus of the Company.

(3) To purchase, or otherwise acquire for the Company,
any business, property, rights or privileges which the Company may at
the time be authorized to acquire, at such price or consideration and
generally on such terms and conditions as they think fit; and at their
discretion to pay therefor either wholly or partly in money, stock,
bonds, debentures or other securities of the Company.

(4) To create, make and issue mortgages, bonds, deeds of
trust, trust agreements or negotiable or transferable instruments or
securities, secured by mortgage or otherwise, and to do every other
act and thing necessary to effect the same.

(5) To appoint any person or corporation to accept and
hold in trust for the Company any property belonging to the Company,
or in which it is interested, or for any other purpose, and to execute
such deeds and do all things requisite in relation to any such trust.

<PAGE> 9

(6) To remove any officer of the Company with or without
cause, and from time to time to devolve the powers and duties of any
officer upon any other person for the time being.

(7) To confer upon any officer of the Company the power
to appoint, remove and suspend subordinate officers, agents and
employees.

(8) To determine who shall be authorized on the Company's
behalf, either generally or specifically, to make and sign bills,
notes, acceptances, endorsements, checks, releases, receipts,
contracts, conveyances and all other written instruments executed on
behalf of the Company.

(9) To make and change regulations, not inconsistent with
these By-Laws, for the management of the Company's business and
affairs.

(10) To adopt and, unless otherwise provided therein, to
amend and repeal, from time to time, bonus and supplemental
compensation plans for employees (including employees who are officers
or directors) of the Company or any subsidiary. Power to construe,
interpret, administer, modify or suspend any such plan shall be vested
in the Board of Directors or a committee thereof.

(11) To adopt a retirement plan, or plans, for the purpose
of making retirement payments to employees (including employees who
are officers or directors) of the Company or of any subsidiary
thereof; and to adopt a group insurance plan, or plans, for the
purpose of enabling employees (including employees who are officers or
directors) of the Company or of any subsidiary thereof to acquire
insurance protection; any such retirement plan or insurance plan,
unless otherwise provided therein, shall be subject to amendment or
revocation by the Board of Directors.

(12) To delegate any of the powers of the Board of
Directors in the course of the business of the Company to any officer,
employee or agent, and to appoint any person the agent of the Company,
with such powers (including the power to subdelegate) and upon such
terms as the Board of Directors may think fit.

SECTION 6. RELIANCE UPON BOOKS, REPORTS AND RECORDS.

Each director, each member of any committee designated by the Board of
Directors and each officer, in the performance of his or her duties, shall be
fully protected in relying in good faith upon such information, opinions,
reports or statements presented to the Company by any of its officers or
employees, or by committees of the Board of Directors, or by any other person,
as to matters such director, member or officer, as the case may be, reasonably
believes are within such person's professional or expert competence and who has
been selected with reasonable care by the Board of Directors or by any such
committee, or in relying in good faith upon other records of the Company.

<PAGE> 10

SECTION 7. COMPENSATION OF DIRECTORS.

Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as
directors, including, without limitation, services as members of committees of
the Board of Directors; provided, however, that nothing herein contained shall
be construed to preclude any director from serving the Company in any other
capacity and receiving compensation therefor.

SECTION 8. MEETINGS BY MEANS OF CONFERENCE TELEPHONE.

Unless otherwise provided by the Charter or these By-Laws, members of
the Board of Directors, or any committee designated by the Board of Directors,
may participate in a meeting of the Board of Directors or such committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this Section 8 shall constitute presence
in person at such meeting.

ARTICLE IV.

COMMITTEES

SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.

There are hereby established as committees of the Board of Directors
an Audit Committee, a Compensation Committee and a Nominating Committee, each
of which shall have the powers and functions set forth in Sections 2, 3 and 4
hereof, respectively, and such additional powers as may be delegated to it by
the Board of Directors. The Board of Directors may from time to time establish
additional standing committees or special committees of the Board of Directors,
each of which shall have such powers and functions as may be delegated to it by
the Board of Directors. The Board of Directors may abolish any committee
established by or pursuant to this Section 1 as it may deem advisable. Each
such committee shall consist of two or more directors, the exact number being
determined from time to time by the Board of Directors. Designations of the
chairman and members of each such committee, and, if desired, a vice chairman
and alternates for members, shall be made by the Board of Directors. In the
absence or disqualification of any member of any committee and any alternate
member in his or her place, the member or members of the committee present at
the meeting and not disqualified from voting whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member. Each committee shall have a secretary who shall be designated by its
chairman. A vice chairman of a committee shall act as the chairman of the
committee in the absence or disability of the chairman.

<PAGE> 11

SECTION 2. AUDIT COMMITTEE.

The Audit Committee shall select and engage, on behalf of the Company,
independent public accountants to (1) audit the books of account and other
corporate records of the Company and (2) perform such other duties as the Audit
Committee may from time to time prescribe. The Audit Committee shall transmit
financial statements certified by such independent public accountants to the
Board of Directors after the close of each fiscal year. The selection of
independent public accountants for each fiscal year shall be made in advance of
the annual meeting of stockholders in such fiscal year and shall be submitted
for ratification or rejection at such meeting. The Audit Committee shall
confer with such accountants and review and approve the scope of the audit of
the books of account and other corporate records of the Company. The Audit
Committee shall have the power to confer with and direct the officers of the
Company to the extent necessary to review the internal controls, accounting
practices, financial structure and financial reporting of the Company. From
time to time the Audit Committee shall report to and advise the Board of
Directors concerning the results of its consultation and review and such other
matters relating to the internal controls, accounting practices, financial
structure and financial reporting of the Company as the Audit Committee
believes merit review by the Board of Directors. The Audit Committee also
shall perform such other functions and exercise such other powers as may be
delegated to it from time to time by the Board of Directors.

SECTION 3. COMPENSATION COMMITTEE.

The Compensation Committee shall fix from time to time the salaries of
(i) members of the Board of Directors who are officers or employees of the
Company, (ii) the President, all Executive Vice Presidents and all Senior Vice
Presidents of the Company and (iii) Vice Presidents of the Company who are
elected officers of the Company. It also shall perform such functions as may
be delegated to it under the provisions of any bonus, supplemental
compensation, special compensation or stock option plan of the Company.

SECTION 4. NOMINATING COMMITTEE.

The Nominating Committee from time to time shall consider and make
recommendations to the Board of Directors with respect to nominations or
elections of directors and officers of the Company and the appointments of such
other employees of the Company as shall be referred to the Nominating
Committee.

The Nominating Committee from time to time shall consider the size and
composition of the Board of Directors and make recommendations to the Board of
Directors with respect to such matters. Prior to the annual meeting of
stockholders each year, and prior to any special meeting of stockholders at
which a director is to be elected, the Nominating Committee shall recommend to
the Board of Directors persons proposed to constitute the nominees whose
election at such meeting will be recommended by the Board of Directors.

<PAGE> 12

The authority vested in the Nominating Committee by this Section 4
shall not derogate from the power of individual members of the Board of
Directors to recommend or place in nomination persons other than those
recommended by the Nominating Committee.

The Nominating Committee also shall perform such other functions and
exercise such other powers as may be delegated to it from time to time by the
Board of Directors.

SECTION 5. OTHER COMMITTEES.

The Board of Directors, or any committee, officer or employee of the
Company, may establish additional standing committees or special committees to
serve in an advisory capacity or in such other capacities as may be permitted
by law, the Charter and these By-Laws. The members of any such committee need
not be members of the Board of Directors. Any committee established pursuant
to this Section 5 may be abolished by the Board of Directors or by the person
or body by whom it was established as he, she or it may deem advisable. Each
such committee shall consist of two or more members, the exact number being
determined from time to time by such person or body. Designations of members
of each such committee and, if desired, alternates for members, shall be made
by such person or body, at whose will all such members and alternates shall
serve. The chairman of each such committee shall be designated by such person
or body. Each such committee shall have a secretary who shall be designated by
the chairman.

SECTION 6. RULES AND PROCEDURES.

Each committee may fix its own rules and procedures and shall meet at
such times and places as may be provided by such rules, by resolution of the
committee or by call of the chairman or vice chairman. Notice of meeting of
each committee, other than of regular meetings provided for by its rules or
resolutions, shall be given to committee members. The presence of one-third of
its members, but not less than two, shall constitute a quorum of any committee,
and all questions shall be decided by a majority vote of the members present at
the meeting. All action taken at each committee meeting shall be recorded in
minutes of the meeting.

SECTION 7. APPLICATION OF ARTICLE.

Whenever any provision of any other document relating to any committee
of the Company named therein shall be in conflict with any provision of this
Article IV, the provisions of this Article IV shall govern, except that if such
other document shall have been approved by the stockholders, voting as provided
in the Charter, or by the Board of Directors, the provisions of such other
document shall govern.

<PAGE> 13

ARTICLE V.

OFFICERS
SECTION 1. OFFICERS.

The Officers of the Company shall include a Chairman of the Board of
Directors and may include one or more Vice Chairmen of the Board of Directors,
each of whom shall be chosen from among the directors, and a President, one or
more Executive Vice Presidents, one or more Senior Vice Presidents, one or more
Vice Presidents, a Treasurer, a Controller, a General Counsel and a Secretary,
each of whom shall be elected by the Board of Directors to hold office until
his or her successor shall have been chosen and shall have qualified. The
Board of Directors, the Chairman of the Board of Directors and the President
may elect or appoint one or more Assistant Vice Presidents, one or more
Assistant Treasurers, one or more Assistant Controllers, one or more Assistant
General Counsels, one or more Assistant Secretaries, and the Board of Directors
may elect or appoint such other officers as it may deem necessary, or
desirable, each of whom shall have such authority, shall perform such duties
and shall hold office for such term as may be prescribed by the Board of
Directors from time to time. Any person may hold at one time more than one
office, excepting that the duties of the President and Secretary shall not be
performed by one person.

SECTION 2. CHAIRMAN OF THE BOARD OF DIRECTORS.

The Chairman of the Board of Directors shall be the Chief Executive
Officer of the Company. Subject to the provisions of these By-Laws and to the
direction of the Board of Directors, he or she shall have ultimate authority
for decisions relating to the general management and control of the affairs and
business of the Company and shall perform all other duties and exercise all
other powers commonly incident to the position of Chief Executive Officer or
which are or from time to time may be delegated to him or her by the Board of
Directors, or which are or may at any time be authorized or required by law.
He or she shall preside at all meetings of the Board of Directors. He or she
may redelegate from time to time and to the full extent permitted by law, in
writing, to officers or employees of the Company any or all of such duties and
powers, and any such redelegation may be either general or specific. Whenever
he or she so shall delegate any of his or her authority, he or she shall file a
copy of the redelegation with the Secretary of the Company.
SECTION 3. VICE CHAIRMEN OF THE BOARD OF DIRECTORS.

Subject to the provisions of these By-Laws and to the direction of the
Board of Directors and of the Chief Executive Officer, the Vice Chairmen of the
Board of Directors shall have such powers and shall perform such duties as from
time to time may be delegated to them by the Board of Directors or by the Chief
Executive Officer, or which are or may at any time be authorized or required by
law.

<PAGE> 14

SECTION 4. PRESIDENT.

Subject to the provisions of these By-Laws and to the direction of the
Board of Directors and of the Chief Executive Officer, the President shall have
such powers and shall perform such duties as from time to time may be delegated
to him or her by the Board of Directors or by the Chief Executive Officer, or
which are or may at any time be authorized or required by law.

SECTION 5. EXECUTIVE VICE PRESIDENTS, SENIOR VICE PRESIDENTS AND
VICE PRESIDENTS.

Each of the Executive Vice Presidents, each of the Senior Vice
Presidents and each of the other Vice Presidents shall have such powers and
shall perform such duties as may be delegated to him or her by the Board of
Directors, the Chairman of the Board of Directors, the President or such other
officer or officers to whom he or she is directly responsible.

SECTION 6. TREASURER AND ASSISTANT TREASURER.

The Treasurer, subject to the direction of the Board of Directors,
shall have the care and custody of all funds and securities of the Company
which may come into his or her hands. When necessary or proper he or she shall
endorse on behalf of the Company, for collection, checks, notes and other
obligations, and shall deposit all funds of the Company in such banks or other
depositaries as may be designated by the Board of Directors or by such officers
or employees as may be authorized by the Board of Directors so to designate.
He or she shall perform all acts incident to the office of Treasurer, subject
to the control of the Board of Directors and such other officer or officers to
whom he or she is directly responsible. He or she may be required to give a
bond for the faithful discharge of his or her duties, in such sum and upon such
conditions as the Board of Directors may require.

At the request and direction of the Treasurer or, in the case of his
or her absence or inability to act, any Assistant Treasurer may act in his or
her place. In the case of the death of the Treasurer, or in the case of his or
her absence or inability to act without having designated an Assistant
Treasurer to act temporarily in his or her place, the Assistant Treasurer so to
perform the duties of the Treasurer shall be designated by the Board of
Directors, the Chairman of the Board of Directors or the President.

SECTION 7. SECRETARY AND ASSISTANT SECRETARY.

The Secretary shall keep full and accurate minutes of the meetings of
the stockholders and of the Board of Directors in the proper record book of the
Company provided therefor, and, when required, the minutes of meetings of the
committees, and shall be responsible for the custody of all such minutes.
Subject to the direction of the Board of Directors, the Secretary shall have
custody of the stock ledgers and documents of the Company. He or she shall
have custody of the corporate seal of the Company and shall affix and attest
such seal to

<PAGE> 15

any instrument whose execution under seal shall have been duly authorized. He
or she shall give due notice of meetings and, subject to the direction of the
Board of Directors, shall perform all other duties commonly incident to his or
her office or as properly required of him or her by the Chairman of the Board
of Directors and such other officer or officers to whom he or she is directly
responsible and shall enjoy all other powers commonly incident to his or her
office.

At the request and direction of the Secretary or, in the case of his
or her absence or inability to act, any Assistant Secretary may act in his or
her place. In the case of the death of the Secretary, or in the case of his or
her absence or inability to act without having designated an Assistant
Secretary to act temporarily in his or her place, the Assistant Secretary or
other person so to perform the duties of the Secretary shall be designated by
the Board of Directors, the Chairman of the Board of Directors or the
President.

SECTION 8. ASSISTANT VICE PRESIDENTS AND OTHER OFFICERS.

Each Assistant Vice President and other officers shall perform such
duties commonly incident to his or her office or as properly required of him or
her by the Chairman of the Board of Directors and such other officer or
officers to whom he or she is directly responsible.

SECTION 9. GENERAL COUNSEL.

The General Counsel shall have general supervision of all matters of a
legal nature concerning the Company. He or she shall perform all such duties
commonly incident to his or her office or as properly required of him or her by
the Chairman of the Board of Directors and such other officer or officers to
whom he or she is directly responsible.

SECTION 10. CONTROLLER.

The Controller shall keep and maintain the books of account of the
Company in such manner that they fairly present the financial condition of the
Company and its subsidiaries. The Controller shall have such powers and shall
perform such duties as may be delegated to him or her by the Board of
Directors, the Chairman of the Board of Directors, the President or the
appropriate Executive Vice President, Senior Vice President or Vice President
or such other officer or officers to whom he or she is directly responsible.

SECTION 11. SALARIES.

Salaries of officers, agents or employees shall be fixed from time to
time by the Board of Directors or by such committee or committees, or person or
persons, if any, to whom such power shall have been delegated by the Board of
Directors. An employment contract, whether with an officer, agent or employee,
if expressly approved or specifically authorized by the Board of Directors, may
fix a term of employment thereunder; and such contract, if so approved or
authorized, shall be valid and binding upon the Company in accordance with the

<PAGE> 16

terms thereof, provided that this provision shall not limit or restrict in any
way the right of the Company at any time to remove from office, discharge or
terminate the employment of any such officer, agent or employee prior to the
expiration of the term of employment under any such contract.

SECTION 12. VACANCIES.

A vacancy in any office filled by election of the Board of Directors
may be filled by the Board of Directors by the election of a new officer who
shall hold office, subject to the provisions of this Article V, until the
regular meeting of the directors following the next annual meeting of the
stockholders and until his or her successor is elected.

SECTION 13. REMOVAL OR DISCHARGE.

Any officer may be removed or discharged by the Chairman of the Board
of Directors at any time excepting an officer who is also a director. Any
officer who also is a director may be discharged at any time by the Board of
Directors.

ARTICLE VI.

RESIGNATIONS

Any director, officer or agent of the Company, or any member of any
committee, may resign at any time by giving written notice to the Board of
Directors, the Chairman of the Board of Directors, a Vice Chairman of the Board
of Directors, the President or the Secretary of the Company. Any such
resignation shall take effect at the time specified therein, or if the time be
not specified therein, then upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective.

<PAGE> 17

ARTICLE VII.

CAPITAL STOCK - DIVIDENDS - SEAL

SECTION 1. CERTIFICATES OF SHARES.

The certificates for shares of the capital stock of the Company shall
be in such form, not inconsistent with the Charter, as shall be approved by the
Board of Directors. The certificates shall be numbered and signed by the
Chairman of the Board of Directors, a Vice Chairman of the Board of Directors,
the President, an Executive Vice President, a Senior Vice President or a Vice
President, and also by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary. Any and all signatures may be facsimiles.

All certificates shall bear the name of the persons owning the shares
represented thereby, shall state the number of shares represented by such
certificate and the date of issue; and such information shall be entered in the
Company's original stock ledger.

SECTION 2. ADDRESSES OF STOCKHOLDERS.

It shall be the duty of every stockholder to notify the Company of
such stockholder's post office address and of any change therein. The latest
address furnished by each stockholder shall be entered on the original stock
ledger of the Company and the latest address appearing on such original stock
ledger shall be deemed conclusively to be the post office address and the
last-known post office address of such stockholder. If any stockholder shall
fail to notify the Company of such stockholder's post office address, it
shall be sufficient to send corporate notices to such stockholder at the
address, if any, understood by the Secretary to be such stockholder's post
office address, or in the absence of such address, to such stockholder, at
the General Post Office in the City of Wilmington, State of Delaware.

SECTION 3. LOST, DESTROYED OR STOLEN CERTIFICATE.

Any person claiming a stock certificate in lieu of one lost, destroyed
or stolen, shall give the Company an affidavit as to his, her or its ownership
of the certificate and of the facts which go to prove that it has been lost,
destroyed or stolen. If required by the Board of Directors, he, she or it also
shall give the Company a bond, in such form as may be approved by the Board of
Directors, sufficient to indemnify the Company against any claim that may be
made against it on account of the alleged loss of the certificate or the
issuance of a new certificate. A new certificate shall be issued upon receipt
of such an affidavit and, if required, upon the giving of such a bond.

SECTION 4. RECORD OF HOLDER OF SHARES.

The Company shall be entitled to treat the holder of record of any
share or shares as the holder in fact thereof, and accordingly shall not be
bound to recognize any equitable or other claims to or interest in such shares
on the part of any other person, whether or not it shall have express or other
notice thereof, save as expressly provided by the General

<PAGE> 18

Corporation Law of the State of Delaware. The Company shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends and to vote as such owner.

SECTION 5. RECORD DATE.

In order that the Company may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise
any rights in respect of any change, conversion or exchange of stock (other
than conversions or exchanges pursuant to Article 4 of the Charter) or for the
purpose of any other lawful action, the Board of Directors may fix a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of any meeting of
stockholders, nor more than sixty (60) days prior to the time for such other
action as hereinbefore described; provided, however, that if no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held, and, for determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of rights or
to exercise any rights of change, conversion or exchange of stock (other than
conversions or exchanges pursuant to Article 4 of the Charter) or for any other
purpose, the record date shall be at the close of business on the day on which
the Board of Directors adopts a resolution relating thereto.

A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.

If stockholders are entitled to consent to corporate action in writing
without a meeting in accordance with the General Corporation Law of the State
of Delaware and the Charter, in order that the Company may determine the
stockholders entitled to so consent, the Board of Directors may fix a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
be not more than ten (10) days after the date upon which the resolution fixing
the record date is adopted and if no record date has been fixed by the Board of
Directors and if no prior action by the Board of Directors is required by the
General Corporation Law of the State of Delaware, the record date shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Company in the manner prescribed by
Article 13 of the Charter. If stockholders are entitled to consent to
corporate action in writing without a meeting in accordance with the General
Corporation Law of the State of Delaware and the Charter, and no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law of the State of Delaware
with respect to the proposed action by written consent of the stockholders, the
record date for determining stockholders entitled to consent to corporate

<PAGE> 19

action in writing shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action.

SECTION 6. REGULATIONS.

The Board of Directors shall have power and authority to make all such
rules and regulations not inconsistent with any of the provisions of Article 4
of the Charter, as it may deem expedient, concerning the issue, transfer and
registration of certificates for shares of the stock of the Company.

SECTION 7. CORPORATE SEAL.

The corporate seal shall be in such form as shall from time to time be
approved by the Board of Directors. If and when so authorized by the Board of
Directors, a duplicate of the seal may be kept and used by the Secretary or
Treasurer or by any Assistant Secretary or Assistant Treasurer.

ARTICLE VIII.

EXECUTION OF CONTRACTS AND OTHER DOCUMENTS

SECTION 1. CONTRACTS, ETC.

Except as otherwise prescribed in these By-Laws, such officers,
employees or agents of the Company as shall be specified by the Board of
Directors shall sign, in the name and on behalf of the Company, all deeds,
bonds, contracts, mortgages and other instruments or documents, the execution
of which shall be authorized by the Board of Directors; and such authority may
be general or confined to specific instances. Except as otherwise provided
herein or as so authorized by the Board of Directors, no officer, agent or
employee of the Company shall have power or authority to bind the Company by
any contract or engagement or to pledge, mortgage, sell or otherwise dispose
of its credit or any of its property or to render it pecuniarily liable for any
purpose or in any amount.

SECTION 2. CHECKS, DRAFTS, ETC.

Except as otherwise provided in these By-Laws, all checks, drafts,
notes, bonds, bills of exchange or other orders, instruments or obligations for
the payment of money shall be signed by such officer or officers, employee or
employees, or agent or agents, as the Board of Directors shall by resolution
direct. The Board of Directors may, in its discretion, also provide by
resolution for the countersignature or registration of any or all such orders,
instruments or obligations for the payment of money.

<PAGE> 20

ARTICLE IX.

FISCAL YEAR

The fiscal year of the Company shall begin the first day of January in
each year.

ARTICLE X.

MISCELLANEOUS

SECTION 1. ORIGINAL STOCK LEDGER.

As used in these By-Laws and in the Charter, the words "original stock
ledger" shall mean the record maintained by the Secretary of the Company of the
name and address of each of the holders of shares of any class of stock of the
Company, and the number of shares and the numbers of the certificates for such
shares held by each of them, taking into account transfers at the time made by
and recorded on the transfer sheets of each of the Transfer Agents of the
Company although such transfers may not have been posted in the record
maintained by the Secretary.

SECTION 2. NOTICES AND WAIVERS THEREOF.

Whenever any notice whatever is required by these By-Laws, the Charter
or any of the laws of the State of Delaware to be given to any stockholder,
director or officer, such notice, except as otherwise provided by the laws of
the State of Delaware, may be given personally or by telephone or be given by
facsimile transmission or other form of electronic communication, addressed to
such stockholder at the address set forth as provided in Section 2 of Article
VII of these By-Laws, or to such director or officer at his or her Company
location, if any, or at such address as appears on the books of the Company, or
the notice may be given in writing by depositing the same in a post office, or
in a regularly maintained letter box, or by sending it via courier in a
postpaid, sealed wrapper addressed to such stockholder at the address set forth
in Section 2 of Article VII of these By-Laws, or to such director or officer at
his or her Company location, if any, or such address as appears on the books of
the Company.
Any notice given by facsimile transmission or other form of electronic
communication shall be deemed to have been given when it shall have been
transmitted. Any notice given by mail or courier shall be deemed to have been
given when it shall have been mailed or delivered to the courier.

A waiver of any such notice in writing, including by facsimile
transmission, signed or dispatched by the person entitled to such notice or by
his or her duly authorized attorney, whether before or after the time stated
therein, shall be deemed equivalent to the notice required to be given, and the
presence at any meeting of any person entitled to notice thereof shall be
deemed a waiver of such notice as to such person.

<PAGE> 21

SECTION 3. VOTING UPON STOCKS.

The Board of Directors (whose authorization in this connection shall
be necessary in all cases) may from time to time appoint an attorney or
attorneys or agent or agents of the Company, or may at any time or from time to
time authorize the Chairman of the Board of Directors, any Vice Chairman of the
Board of Directors, the President, any Executive Vice President, any Senior
Vice President, any Vice President, the Treasurer or the Secretary to appoint
an attorney or attorneys or agent or agents of the Company, in the name and on
behalf of the Company, to cast the votes which the Company may be entitled to
cast as a stockholder or otherwise in any other corporation or association, any
of the stock or securities of which may be held by the Company, at meetings of
the holders of the stock or other securities of such other corporation or
association, or to consent in writing to any action by any such other
corporation or association and the Board of Directors or any aforesaid officer
so authorized may instruct the person or persons so appointed as to the manner
of casting such votes or giving such consent, and the Board of Directors or any
aforesaid officer so authorized may from time to time authorize the execution
and delivery, on behalf of the Company and under its corporate seal, or
otherwise, of such written proxies, consents, waivers or other instruments as
may be deemed necessary or proper in the premises.

ARTICLE XI.

AMENDMENTS

These By-Laws may be altered, amended or repealed at any meeting of
the Board of Directors or of the stockholders, provided that notice of such
alteration, amendment or repeal be contained in the notice of such meeting of
the Board of Directors or stockholders (subject, in the case of meetings of
stockholders, to the provisions of Article II of these By-Laws), as the case
may be. All such amendments must be approved by the affirmative vote of the
holders of at least 75% of the total voting power of all classes of outstanding
capital stock, voting together as a single class (if effected by action of the
stockholders), or by the affirmative vote of directors constituting not less
than a majority of the total number of directors that the Company would have if
there were no vacancies on the Company's Board of Directors (if effected by
action of the Board of Directors).

<PAGE> 1
EXHIBIT 10(a)

CORPORATE AGREEMENT

THIS CORPORATE AGREEMENT ("Agreement") is entered into as of
_________, 1997 by and between FORD MOTOR COMPANY, a Delaware corporation
("Ford"), and THE HERTZ CORPORATION, a Delaware corporation ("Hertz").

RECITALS

A. Ford beneficially owns all of the issued and outstanding
Class A Common Stock, par value $.01 per share ("Class A Common Stock"), of
Hertz and owns all of the issued and outstanding Class B Common Stock, par
value $.01 per share ("Class B Common Stock"), of Hertz, and Hertz is a member
of Ford's "affiliated group" of corporations (the "Ford Group") for federal
income tax purposes.

B. The parties are contemplating the possibility that Hertz
will issue shares of Class A Common Stock in an initial public offering (the
"Initial Public Offering") registered under the Securities Act of 1933, as
amended.

C. The parties desire to enter into this Agreement to set
forth their agreement regarding (i) Ford's rights to purchase additional shares
of Class B Common Stock upon any issuance of certain classes of capital stock
of Hertz to any person to permit Ford to maintain its percentage ownership
interest in Hertz, (ii) Ford's rights to purchase shares of non-voting classes
of capital stock of Hertz to permit Ford to own 80 percent of each class of
such stock outstanding, (iii) certain registration rights with respect to Class
B Common Stock (and any other securities issued in respect thereof or in
exchange therefor) and (iv) certain representations, warranties, covenants and
agreements applicable so long as Hertz is a subsidiary of Ford.

AGREEMENTS

NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Ford and Hertz, for
themselves, their successors, and assigns, hereby agree as follows:

ARTICLE I
DEFINITIONS

1.1. Definitions. As used in this Agreement, the following
terms will have the following meanings, applicable both to the singular and the
plural forms of the terms described:
<PAGE> 2
2

"Affiliate" means, with respect to a given Person, any Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to vote a
majority of the securities having voting power for the election of directors
(or other Persons acting in similar capacities) of such Person or otherwise to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.

"Agreement" has the meaning ascribed thereto in the preamble
hereto, as such agreement may be amended and supplemented from time to time in
accordance with its terms.

"Applicable Stock" means at any time the (i) shares of Common
Stock owned by the Ford Entities that were owned on the date hereof, plus (ii)
shares of Class B Common Stock purchased by the Ford Entities pursuant to
Article II of this Agreement, plus (iii) shares of Common Stock that were
issued to Ford Entities in respect of shares described in either clause (i) or
clause (ii) in any reclassification, share combination, share subdivision,
share dividend, share exchange, merger, consolidation or similar transaction or
event.

"Class A Common Stock" has the meaning ascribed thereto in the
recitals to this Agreement.

"Class B Common Stock" has the meaning ascribed thereto in the
recitals to this Agreement.

"Class B Common Stock Option" has the meaning ascribed thereto
in Section 2.1(a).

"Class B Common Stock Option Notice" has the meaning ascribed
thereto in Section 2.2.

"Common Stock" means the Class B Common Stock, the Class A
Common Stock, any other class of Hertz' capital stock representing the right to
vote generally for the election of directors and, for so long as Hertz
continues to be a subsidiary corporation includable in a consolidated federal
income tax return of the Ford Group, any other security of Hertz treated as
stock for purposes of Section 1504 of the Internal Revenue Code of 1986, as
amended.

"Company Securities" has the meaning ascribed thereto in
Section 3.2(b).

"Disadvantageous Condition" has the meaning ascribed thereto
in Section 3.1(a).

<PAGE> 3

"Ford Entities" means Ford and Subsidiaries of Ford (other
than Subsidiaries that constitute Hertz Entities), and "Ford Entity" shall mean
any of the Ford Entities.

"Ford Ownership Reduction" means any decrease at any time in
the Ownership Percentage to less than 45%.

"Ford Transferee" has the meaning ascribed thereto in Section
3.9.

"Ford" has the meaning ascribed thereto in the preamble
hereto.

"Ford Group" has the meaning ascribed thereto in the recitals
to this Agreement.

"Hertz" has the meaning ascribed thereto in the preamble
hereto.

"Hertz Entities" means Hertz and its Subsidiaries, and "Hertz
Entity" shall mean any of the Hertz Entities.

"Holder" means Ford, the other Ford Entities and any
Transferee.

"Holder Securities" has the meaning ascribed thereto in
Section 3.2(b).

"Initial Public Offering" has the meaning ascribed thereto in
the recitals to this Agreement.

"Initial Public Offering Date" means the date of completion of
the initial sale of Class A Common Stock in the Initial Public Offering.

"Issuance Event" has the meaning ascribed thereto in Section
2.2.

"Issuance Event Date" has the meaning ascribed thereto in
Section 2.2.

"Market Price" of any shares of Class A Common Stock on any
date means (i) the average of the last sale price of such shares on each of the
five trading days immediately preceding such date on the New York Stock
Exchange, Inc. or, if such shares are not listed thereon, on the principal
national securities exchange or automated interdealer quotation system on which
such shares are traded or (ii) if such sale prices are unavailable or such
shares are not so traded, the value of such shares on such date determined in
accordance with agreed-upon procedures reasonably satisfactory to Hertz and
Ford.

<PAGE> 4

"Nonvoting Stock" means any class of Hertz' capital stock not
representing the right to vote generally for the election of directors.

"Nonvoting Stock Option" has the meaning ascribed thereto in
Section 2.1(c).

"Nonvoting Stock Option Notice" has the meaning ascribed
thereto in Section 2.2.

"Other Holders" has the meaning ascribed thereto in Section
3.2(c).

"Other Securities" has the meaning ascribed thereto in Section
3.2.

"Ownership Percentage" means, at any time, the fraction,
expressed as a percentage and rounded to the next highest thousandth of a
percent, whose numerator is the aggregate Value of the Applicable Stock and
whose denominator is the aggregate Value of the then-outstanding shares of
Common Stock of Hertz; provided, however, that any shares of Common Stock
issued by Hertz in violation of its obligations under Article II of this
Agreement shall not be deemed outstanding for the purpose of determining the
Ownership Percentage. For purposes of this definition, "Value" means, with
respect to any share of stock, the value of such share determined by Ford under
principles applicable for purposes of Section 1504 of the Internal Revenue Code
of 1986, as amended.

"Person" means any individual, partnership, limited liability
company, joint venture, corporation, trust, unincorporated organization,
government (and any department or agency thereof) or other entity.

"Registrable Securities" means shares of Class B Common Stock,
shares of Class A Common Stock and any stock or other securities into which or
for which such Common Stock may hereafter be changed, converted or exchanged
and any other shares or securities issued to Holders of such Common Stock (or
such shares or other securities into which or for which such shares are so
changed, converted or exchanged) upon any reclassification, share combination,
share subdivision, share dividend, share exchange, merger, consolidation or
similar transaction or event or pursuant to the Nonvoting Stock Option. As to
any particular Registrable Securities, such Registrable Securities shall cease
to be Registrable Securities when (i) a registration statement with respect to
the sale by the Holder thereof shall have been declared effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) they shall have been distributed to the
public in accordance with Rule 144, (iii) they shall have been otherwise
transferred, new certificates for them not bearing a legend restricting further
transfer shall have been

<PAGE> 5

delivered by Hertz and subsequent disposition of them shall not require
registration or qualification of them under the Securities Act or any state
securities or blue sky law then in effect or (iv) they shall have ceased to be
outstanding.

"Registration Expenses" means any and all expenses incident to
performance of or compliance with any registration of securities pursuant to
Article III, including, without limitation, (i) the fees, disbursements and
expenses of Hertz' counsel and accountants and the fees and expenses of counsel
selected by the Holders in accordance with this Agreement in connection with
the registration of the securities to be disposed of, such fees and expenses of
such counsel selected by the Holders to be reasonable in the reasonable
discretion of Hertz; (ii) all expenses, including filing fees, in connection
with the preparation, printing and filing of the registration statement, any
preliminary prospectus or final prospectus, any other offering document and
amendments and supplements thereto and the mailing and delivering of copies
thereof to any underwriters and dealers; (iii) the cost of printing or
producing any underwriting agreements and blue sky or legal investment
memoranda and any other documents in connection with the offering, sale or
delivery of the securities to be disposed of; (iv) all expenses in connection
with the qualification of the securities to be disposed of for offering and
sale under state securities laws, including the fees and disbursements of
counsel for the underwriters or the Holders of securities in connection with
such qualification and in connection with any blue sky and legal investment
surveys; (v) the filing fees incident to securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of
the securities to be disposed of; (vi) transfer agents' and registrars' fees
and expenses and the fees and expenses of any other agent or trustee appointed
in connection with such offering; (vii) all security engraving and security
printing expenses; (viii) all fees and expenses payable in connection with the
listing of the securities on any securities exchange or automated interdealer
quotation system or the rating of such securities, (ix) any other fees and
disbursements of underwriters customarily paid by the sellers of securities,
but excluding underwriting discounts and commissions and transfer taxes, if
any, and (x) other reasonable out-of-pocket expenses of Holders other than
legal fees and expenses referred to in clause (i) above.

"Rule 144" means Rule 144 (or any successor rule to similar
effect) promulgated under the Securities Act.

"Rule 415 Offering" means an offering on a delayed or
continuous basis pursuant to Rule 415 (or any successor rule to similar effect)
promulgated under the Securities Act.

"SEC" means the United States Securities and Exchange
Commission.

<PAGE> 6

"Securities Act" means the Securities Act of 1933, as amended,
or any successor statute.

"Selling Holder" has the meaning ascribed thereto in Section
3.4(e).

"Subsidiary" means, as to any Person, any corporation,
association, partnership, joint venture or other business entity of which more
than 50% of the voting capital stock or other voting ownership interests is
owned or controlled, directly or indirectly, by such Person or by one or more
of the Subsidiaries of such Person or by a combination thereof. "Subsidiary,"
when used with respect to Ford or Hertz, shall also include any other entity
affiliated with Ford or Hertz, as the case may be, that Ford and Hertz may
hereafter agree in writing shall be treated as a "Subsidiary" for the purposes
of this Agreement.

"Transferee" has the meaning ascribed thereto in Section 3.9.

1.2. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and
references to the parties shall mean the parties to this Agreement.

ARTICLE II
OPTIONS

2.1. Options. (a) Hertz hereby grants to Ford, on the terms
and conditions set forth herein, a continuing right (the "Class B Common Stock
Option") to purchase from Hertz, at the times set forth herein, such number of
shares of Class B Common Stock as is necessary to allow the Ford Entities to
maintain the percentage of the then-outstanding Common Stock of Hertz that is
equal to the Ownership Percentage. The Class B Common Stock Option shall be
assignable, in whole or in part and from time to time, by Ford to any Ford
Entity. The exercise price for the shares of Class B Common Stock purchased
pursuant to the Class B Common Stock Option shall be the Market Price of the
Class A Common Stock as of the date of first delivery of notice of exercise of
the Class B Common Stock Option by Ford (or its permitted assignee hereunder)
to Hertz.

(b) The provisions of Section 2.1(a) hereof notwithstanding,
the Class B Common Stock Option granted pursuant to Section 2.1(a) shall not
apply and shall not be exercisable in connection with the issuance by Hertz of
any shares of Common Stock pursuant to any stock option or other executive or
employee benefit or compensation plan maintained by Hertz, so long as, from and
after the date hereof and prior to the issuance of such shares, Hertz has
repurchased from shareholders and not subsequently reissued a number of shares
equal or greater to the number of shares to be issued in any such issuance.

<PAGE> 7

(c) Hertz hereby grants to Ford, on the terms and conditions
set forth herein, a continuing right (the "Nonvoting Stock Option" and,
together with the Class B Common Stock Option, the "Options") to purchase from
Hertz, at the times set forth herein, such number of shares of Nonvoting Stock
as is necessary to allow the Ford Entities to own 80 percent of each class of
outstanding Nonvoting Stock. The Nonvoting Stock Option shall be assignable,
in whole or in part and from time to time, by Ford to any Ford Entity. The
exercise price for the shares of Nonvoting Stock purchased pursuant to the
Nonvoting Stock Option shall be the price at which such Nonvoting Stock is then
being sold to third parties, or, if no Nonvoting Stock is being sold, the fair
market value thereof as determined in good faith by the Board of Directors of
Hertz.

2.2. Notice. At least 20 business days prior to the issuance
of any shares of Common Stock (other than in connection with the Initial Public
Offering, including the full exercise of all underwriters' over-allotment
options granted in connection therewith and other than issuances of Common
Stock to any Ford Entity) or the first date on which any event could occur
that, in the absence of a full or partial exercise of the Class B Common Stock
Option, would result in a reduction in the Ownership Percentage, Hertz will
notify Ford in writing (a "Class B Common Stock Option Notice") of any plans it
has to issue such shares or the date on which such event could first occur. At
least 20 business days prior to the issuance of any shares of Nonvoting Stock
(other than issuances of Nonvoting Stock to any Ford entity) or the first date
on which any event could occur that, in the absence of a full or partial
exercise of the Nonvoting Stock Option, would result in the Ford Entities
owning less than 80 percent of each class of outstanding Nonvoting Stock, Hertz
will notify Ford in writing (a "Nonvoting Stock Option Notice" and, together
with a Class B Common Stock Option Notice, an "Option Notice") of any plans it
has to issue such shares or the date on which such event could first occur.
Each Option Notice must specify the date on which Hertz intends to issue such
additional shares or on which such event could first occur (such issuance or
event being referred to herein as an "Issuance Event" and the date of such
issuance or event as an "Issuance Event Date"), the number of shares Hertz
intends to issue or may issue and the other terms and conditions of such
Issuance Event.

2.3. Option Exercise and Payment. The Class B Common Stock
Option may be exercised by Ford (or any Ford Entity to which all or any part of
the Class B Common Stock Option has been assigned) for a number of shares equal
to or less than the number of shares that are necessary for the Ford Entities
to maintain, in the aggregate, the percentage of the then-outstanding shares of
Common Stock of Hertz that is equal to the then-current Ownership Percentage.
The Nonvoting Stock Option may be exercised by Ford (or any Ford Entity to which
all or any part of the Nonvoting Stock Option has been assigned) for a number
of shares equal to or less than the number of shares that are necessary for the
Ford Entities to own, in the aggregate, 80 percent of each class of outstanding

<PAGE> 8

Nonvoting Stock. Each Option may be exercised at any time after receipt of an
applicable Option Notice and prior to the applicable Issuance Event Date by the
delivery to Hertz of a written notice to such effect specifying (i) the number
of shares of Class B Common Stock or Nonvoting Stock, as the case may be, to be
purchased by Ford, or any of the Ford Entities and (ii) a calculation of the
exercise price for such shares; provided, however, that if Hertz shall have
issued any shares of Common Stock in violation of its obligations under this
Article II, the Option may be exercised at any time by the delivery to Hertz of
a written notice to such effect specifying the information described in clauses
(i) and (ii) above. Upon any exercise of an Option, Hertz will promptly (and
in any event on or prior to the applicable Issuance Event Date) deliver to Ford
(or any Ford Entity designated by Ford), against payment therefor, certificates
(issued in the name of Ford or its permitted assignee hereunder or as directed
by Ford) representing the shares of Class B Common Stock or Nonvoting Stock, as
the case may be, being purchased upon such exercise. Payment for such shares
shall be made by wire transfer or intrabank transfer of immediately-available
funds to such account as shall be specified by Hertz, for the full purchase
price for such shares.

2.4. Effect of Failure to Exercise. Except as provided in
Section 2.6, any failure by Ford to exercise either Option, or any exercise for
less than all shares purchasable under either Option, in connection with any
particular Issuance Event shall not affect Ford's right to exercise the
relevant Option in connection with any subsequent Issuance Event.

2.5. Initial Public Offering. Notwithstanding the
foregoing, Ford shall not be entitled to exercise the Class B Common Stock
Option in connection with the Initial Public Offering of the Class A Common
Stock if, upon the completion of the Initial Public Offering, including the
full exercise of all underwriters' over-allotment options granted in connection
therewith, the Ownership Percentage would be no less than 80%.

2.6. Termination of Options. The Options shall terminate
upon the occurrence of any Issuance Event that, after considering Ford's
response thereto and to any other Issuance Events, results in the Ownership
Percentage being less than 20%, other than any Issuance Event in violation of
this Agreement. Each Option, or any portion thereof assigned to any Ford
Entity other than Ford, also shall terminate in the event that the Person to
whom such Option, or such portion thereof has been transferred, ceases to be a
Ford Entity for any reason whatsoever.

ARTICLE III
REGISTRATION RIGHTS

3.1. Demand Registration - Registrable Securities.
(a) Upon written notice provided at any time after the Initial Public Offering
Date from any Holder of Registrable Securities requesting that Hertz effect the
registration under the Securities Act of any or all of the Registrable
Securities held by such Holder, which notice shall specify the intended method
or

<PAGE> 9

methods of disposition of such Registrable Securities, Hertz shall use its best
efforts to effect the registration under the Securities Act and applicable
state securities laws of such Registrable Securities for disposition in
accordance with the intended method or methods of disposition stated in such
request (including in a Rule 415 Offering, if Hertz is then eligible to
register such Registrable Securities on Form S-3 (or a successor form) for such
offering); provided that:

(i) with respect to any registration statement filed,
or to be filed, pursuant to this Section 3.1, if Hertz shall furnish
to the Holders of Registrable Securities that have made such request a
certified resolution of the Board of Directors of Hertz (adopted by
the affirmative vote of a majority of the directors not designated by
the Ford Entities) stating that in the Board of Directors' good faith
judgment it would (because of the existence of, or in anticipation of,
any acquisition or financing activity, or the unavailability for
reasons beyond Hertz's reasonable control of any required financial
statements, or any other event or condition of similar significance to
Hertz) be significantly disadvantageous (a "Disadvantageous
Condition") to Hertz for such a registration statement to be
maintained effective, or to be filed and become effective, and setting
forth the general reasons for such judgment, Hertz shall be entitled
to cause such registration statement to be withdrawn and the
effectiveness of such registration statement terminated, or, in the
event no registration statement has yet been filed, shall be entitled
not to file any such registration statement, until such
Disadvantageous Condition no longer exists (notice of which Hertz
shall promptly deliver to such Holders). Upon receipt of any such
notice of a Disadvantageous Condition, such Holders shall forthwith
discontinue use of the prospectus contained in such registration
statement and, if so directed by Hertz, each such Holder will deliver
to Hertz all copies, other than permanent file copies then in such
Holder's possession, of the prospectus then covering such Registrable
Securities current at the time of receipt of such notice; provided,
that the filing of any such registration statement may not be delayed
for a period in excess of six months due to the occurrence of any
particular Disadvantageous Condition;

(ii) after any Ford Ownership Reduction, the Holders of
Registrable Securities may collectively exercise their rights under
this Section 3.1 (through notice delivered by Holders owning in the
aggregate a majority in economic interest of the Registrable
Securities then held by Holders) on not more than three occasions (it
being acknowledged that prior to any Ford Ownership Reduction, there
shall be no limit to the number of occasions on which such Holders
(other than any Ford Transferees and their Affiliates (other than Ford
Entities)) may exercise such rights);

<PAGE> 10

(iii) Except as otherwise provided herein, the Holders of
Registrable Securities shall not have the right to exercise
registration rights pursuant to this Section 3.1 within the 180-day
period following the registration and sale of Registrable Securities
effected pursuant to a prior exercise of the registration rights
provided in this Section 3.1; and

(iv) the Holders of Registrable Securities shall not have
the right to exercise registration rights pursuant to this Section 3.1
within the 180-day period following the effective date of the
Registration Statement in connection with the Initial Public Offering.

(b) Notwithstanding any other provision of this Agreement to
the contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 3.1 shall not be deemed to have been effected (and,
therefore, not requested for purposes of paragraph (a) above), (i) unless it
has become effective, (ii) if after it has become effective such registration
is interfered with by any stop order, injunction or other order or requirement
of the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder and, as a result thereof, the
Registrable Securities requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the
related registration statement or (iii) if the conditions to closing specified
in the purchase agreement or underwriting agreement entered into in connection
with such registration are not satisfied or waived other than by reason of some
act or omission by such Holder of Registrable Securities.

(c) In the event that any registration pursuant to this
Section 3.1 shall involve, in whole or in part, an underwritten offering, the
Holders of a majority of the Registrable Securities to be registered shall have
the right to designate an underwriter or underwriters reasonably acceptable to
Hertz as the lead or managing underwriters of such underwritten offering and,
in connection with each registration pursuant to this Section 3.1, such Holders
may select one counsel reasonably acceptable to Hertz to represent all such
Holders.

(d) Hertz shall have the right to cause the registration of
additional equity securities for sale for its account, the account of any Hertz
Entity or any existing or former directors, officers or employees of the Hertz
Entities in any registration of Registrable Securities requested by the Holders
pursuant to paragraph (a) above; provided, however, that if the registration
and sale of such additional equity securities would require Ford or any Ford
Entity to exercise the Options to maintain the then-current Ownership
Percentage or ownership of 80% of each class of outstanding Nonvoting Stock,
then the number of such additional equity securities shall be reduced so that

<PAGE> 11

exercise of the Options would not be necessary for Ford or any Ford Entity to
maintain such ownership levels and, provided, further, that if such Holders are
advised in writing (with a copy to Hertz) by a nationally recognized investment
banking firm selected by such Holders reasonably acceptable to Hertz (which
shall be the lead underwriter or a managing underwriter in the case of an
underwritten offering) that, in such firm's good faith view, all or a part of
such additional equity securities cannot be sold and the inclusion of such
additional equity securities in such registration would be likely to have an
adverse effect on the price, timing or distribution of the offering and sale of
the Registrable Securities then contemplated by any Holder, the registration of
such additional equity securities or part thereof shall not be permitted. The
Holders of the Registrable Securities to be offered may require that any such
additional equity securities be included in the offering proposed by such
Holders on the same conditions as the Registrable Securities that are included
therein. In the event that the number of Registrable Securities requested to
be included in a registration statement by the Holders thereof exceeds the
number which, in the good faith view of such investment banking firm, can be
sold without adversely affecting the price, timing, distribution or sale of
securities in the offering, the number shall be allocated pro rata among the
requesting Holders on the basis of the relative number of Registrable
Securities then held by each such Holder (provided that any number in excess of
a Holder's request may be reallocated among the remaining requesting Holders in
a like manner).

3.2. Piggyback Registration. In the event that Hertz at any
time after the Initial Public Offering Date proposes to register any of its
Common Stock, any other of its equity securities or securities convertible into
or exchangeable for its equity securities (collectively, including Common
Stock, "Other Securities") under the Securities Act, whether or not for sale
for its own account, in a manner that would permit registration of Registerable
Securities for sale for cash to the public under the Securities Act, it shall
at each such time give prompt written notice to each Holder of Registrable
Securities of its intention to do so and of the rights of such Holder under
this Section 3.2. Subject to the terms and conditions hereof, such notice
shall offer each such Holder the opportunity to include in such registration
statement such number of Registerable Securities as such Holder may request.
Upon the written request of any such Holder made within 15 days after the
receipt of Hertz' notice (which request shall specify the number of Registrable
Securities intended to be disposed of and the intended method of disposition
thereof), Hertz shall use its best efforts to effect, in connection with the
registration of the Other Securities, the registration under the Securities Act
of all Registerable Securities which Hertz has been so requested to register,
to the extent required to permit the disposition (in accordance with such
intended method of disposition thereof) of

<PAGE> 12

the Registrable Securities so requested to be registered; provided, that:

(a) if, at any time after giving such written notice of its
intention to register any Other Securities and prior to the effective date of
the registration statement filed in connection with such registration, Hertz
shall determine for any reason not to register the Other Securities, Hertz may,
at its election, give written notice of such determination to such Holders and
thereupon Hertz shall be relieved of its obligation to register such
Registrable Securities in connection with the registration of such Other
Securities, without prejudice, however, to the rights of the Holders of
Registrable Securities immediately to request that such registration be
effected as a registration under Section 3.1 to the extent permitted
thereunder;

(b) if the registration referred to in the first sentence of
this Section 3.2 is to be an underwritten registration on behalf of Hertz, and
a nationally recognized investment banking firm selected by Hertz advises Hertz
in writing that, in such firm's good faith view, all or a part of such
Registrable Securities cannot be sold and the inclusion of all or a part of
such Registrable Securities in such registration would be likely to have an
adverse effect upon the price, timing or distribution of the offering and sale
of the Other Securities then contemplated, Hertz shall include in such
registration: (i) first, all Other Securities Hertz proposes to sell for its
own account ("Company Securities"), (ii) second, up to the full number of
Registrable Securities held by Holders constituting Ford Entities that are
requested to be included in such registration (Registrable Securities that are
so held being sometimes referred to herein as "Holder Securities") in excess of
the number of Company Securities to be sold in such offering which, in the good
faith view of such investment banking firm, can be sold without adversely
affecting such offering (and (x) if such number is less than the full number of
such Holder Securities, such number shall be allocated by Ford among such Ford
Entities and (y) in the event that such investment banking firm advises that
less than all of such Holder Securities may be included in such offering, such
Ford Entities may withdraw their request for registration of their Registrable
Securities under this Section 3.2 and 90 days subsequent to the effective date
of the registration statement for the registration of such Other Securities
request that such registration be effected as a registration under Section 3.1
to the extent permitted thereunder), (iii) third, up to the full number of
Registrable Securities held by Holders (other than Ford Entities) of
Registrable Securities that are requested to be included in such registration
in excess of the number of Company Securities and Holder Securities to be sold
in such offering which, in the good faith view of such investment banking firm,
can be so sold without so adversely affecting such offering (and (x) if such
number is less than the full number of such Registrable

<PAGE> 13

Securities, such number shall be allocated pro rata among such Holders on the
basis of the number of Registrable Securities requested to be included therein
by each such Holder and (y) in the event that such investment banking firm
advises that less than all of such Registrable Securities may be included in
such offering, such Holders may withdraw their request for registration of
their Registrable Securities under this Section 3.2 and 90 days subsequent to
the effective date of the registration statement for the registration of such
Other Securities request that such registration be effected as a registration
under Section 3.1 to the extent permitted thereunder) and (iv) fourth, up to
the full number of the Other Securities (other than Company Securities), if
any, in excess of the number of Company Securities and Registrable Securities
to be sold in such offering which, in the good faith view of such investment
banking firm, can be so sold without so adversely affecting such offering (and,
if such number is less than the full number of such Other Securities, such
number shall be allocated pro rata among the holders of such Other Securities
(other than Company Securities) on the basis of the number of securities
requested to be included therein by each such Holder);

(c) if the registration referred to in the first sentence of
this Section 3.2 is to be an underwritten secondary registration on behalf of
holders of Other Securities (the "Other Holders"), and the lead underwriter or
managing underwriter advises Hertz in writing that in their good faith view,
all or a part of such additional securities cannot be sold and the inclusion of
such additional securities in such registration would be likely to have an
adverse effect on the price, timing or distribution of the offering and sale of
the Other Securities then contemplated, Hertz shall include in such
registration the number of securities (including Registrable Securities) that
such underwriters advise can be so sold without adversely affecting such
offering, allocated pro rata among the Other Holders and the Holders of
Registrable Securities on the basis of the number of securities (including
Registrable Securities) requested to be included therein by each Other Holder
and each Holder of Registrable Securities; provided, that if such registration
statement is to be filed at any time after a Ford Ownership Reduction, if such
Other Holders have requested that such registration statement be filed pursuant
to demand registration rights granted to them by Hertz, Hertz shall include in
such registration (i) first, Other Securities sought to be included therein by
the Other Holders pursuant to the exercise of such demand registration rights,
(ii) second, the number of Holder Securities sought to be included in such
registration in excess of the number of Other Securities sought to be included
in such registration by the Other Holders which in the good faith view of such
investment banking firm, can be so sold without so adversely affecting such
offering (and (x) if such number is less than the full number of such Holder
Securities, such number shall be allocated by Ford among such Ford Entities and
(y) in the event that such investment banking firm advises that less than all
of

<PAGE> 14

such Holder Securities may be included in such offering, such Ford Entities may
withdraw their request for registration of their Registrable Securities under
this Section 3.2 and 90 days subsequent to the effective date of the
registration statement for the registration of such Other Securities request
that such registration be effected as a registration under Section 3.1 to the
extent permitted thereunder) and (iii) third, the number of Registrable
Securities sought to be included in such registration by Holders (other than
Ford Entities) of Registrable Securities in excess of the number of Other
Securities and the number of Holder Securities sought to be included in such
registration which, in the good faith view of such investment banking firm, can
be so sold without so adversely affecting such offering (and (x) if such number
is less than the full number of such Registrable Securities, such number shall
be allocated pro rata among such Holders on the basis of the number of
Registrable Securities requested to be included therein by each such Holder and
(y) in the event that such investment banking firm advises that less than all
of such Registrable Securities may be included in such offering, such Holders
may withdraw their request for registration of their Registrable Securities
under this Section 3.2 and 90 days subsequent to the effective date of the
registration statement for the registration of such Other Securities request
that such registration be effected as a registration under Section 3.1 to the
extent permitted thereunder);

(d) Hertz shall not be required to effect any registration of
Registrable Securities under this Section 3.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock option or
other executive or employee benefit or compensation plans; and

(e) no registration of Registrable Securities effected under
this Section 3.2 shall relieve Hertz of its obligation to effect a registration
of Registrable Securities pursuant to Section 3.1.

3.3. Expenses. Except as provided herein, Hertz shall pay
all Registration Expenses with respect to a particular offering (or proposed
offering). Notwithstanding the foregoing, each Holder and Hertz shall be
responsible for its own internal administrative and similar costs, which shall
not constitute Registration Expenses.

3.4. Registration and Qualification. If and whenever Hertz
is required to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 3.1 or 3.2, Hertz shall as promptly as
practicable:

(a) prepare, file and use its reasonable best efforts to
cause to become effective a registration statement under the

<PAGE> 15

Securities Act relating to the Registrable Securities to be offered;

(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities until the earlier of (A) such
time as all of such Registrable Securities have been disposed of in accordance
with the intended methods of disposition set forth in such registration
statement and (B) the expiration of six months after such registration
statement becomes effective; provided, that such six-month period shall be
extended for such number of days that equals the number of days elapsing from
(x) the date the written notice contemplated by paragraph (f) below is given by
Hertz to (y) the date on which Hertz delivers to the Holders of Registrable
Securities the supplement or amendment contemplated by paragraph (f) below;

(c) furnish to the Holders of Registrable Securities and to
any underwriter of such Registrable Securities such number of conformed copies
of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and any summary prospectus), in conformity with the requirements of
the Securities Act, such documents incorporated by reference in such
registration statement or prospectus, and such other documents, as the Holders
of Registrable Securities or such underwriter may reasonably request, and upon
request a copy of any and all transmittal letters or other correspondence to or
received from, the SEC or any other governmental agency or self-regulatory body
or other body having jurisdiction (including any domestic or foreign securities
exchange) relating to such offering;

(d) use its reasonable best efforts to register or qualify
all Registrable Securities covered by such registration statement under the
securities or blue sky laws of such U.S. jurisdictions as the Holders of such
Registrable Securities or any underwriter to such Registrable Securities shall
request, and use its reasonable best efforts to obtain all appropriate
registrations, permits and consents in connection therewith, and do any and all
other acts and things which may be necessary or advisable to enable the Holders
of Registrable Securities or any such underwriter to consummate the disposition
in such jurisdictions of its Registrable Securities covered by such
registration statement; provided, that Hertz shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in any
such jurisdiction wherein it is not so qualified or to consent to general
service of process in any such jurisdiction;

<PAGE> 16

(e) (i) use its best efforts to furnish to each Holder of
Registrable Securities included in such registration (each, a "Selling Holder")
and to any underwriter of such Registrable Securities an opinion of counsel for
Hertz addressed to each Selling Holder and dated the date of the closing under
the underwriting agreement (if any) (or if such offering is not underwritten,
dated the effective date of the registration statement) and (ii) use its best
efforts to furnish to each Selling Holder a "cold comfort" letter addressed to
each Selling Holder and signed by the independent public accountants who have
audited the financial statements of Hertz included in such registration
statement, in each such case covering substantially the same matters with
respect to such registration statement (and the prospectus included therein) as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities and such other matters as the Selling Holders may reasonably request
and, in the case of such accountants' letter, with respect to events subsequent
to the date of such financial statements;

(f) as promptly as practicable, notify the Selling Holders in
writing (i) at any time when a prospectus relating to a registration pursuant
to Sections 3.1 or 3.2 is required to be delivered under the Securities Act of
the happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading and (ii) of any request by the SEC
or any other regulatory body or other body having jurisdiction for any
amendment of or supplement to any registration statement or other document
relating to such offering, and in either such case, at the request of the
Selling Holders prepare and furnish to the Selling Holders a reasonable number
of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading;

(g) if reasonably requested by the lead or managing
underwriters, use its best efforts to list all such Registrable Securities
covered by such registration on each securities exchange and automated
inter-dealer quotation system on which a class of common equity securities of
Hertz is then listed;

(h) to the extent reasonably requested by the lead or
managing underwriters, send appropriate officers of Hertz to attend any "road
shows" scheduled in connection with any such registration, with all
out-of-pocket costs and expense incurred

<PAGE> 17

by Hertz or such officers in connection with such attendance to be paid by
Hertz; and

(i) furnish for delivery in connection with the closing of
any offering of Registrable Securities pursuant to a registration effected
pursuant to Sections 3.1 or 3.2 unlegended certificates representing ownership
of the Registrable Securities being sold in such denominations as shall be
requested by the Selling Holders or the underwriters.

3.5. Conversion of Other Securities, Etc. In the event that
any Holder offers any options, rights, warrants or other securities issued by
it or any other Person that are offered with, convertible into or exercisable
or exchangeable for any Registrable Securities, the Registrable Securities
underlying such options, rights, warrants or other securities shall continue to
be eligible for registration pursuant to Sections 3.1 and 3.2.

3.6. Underwriting; Due Diligence. (a) If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant
to a registration requested under this Article III, Hertz shall enter into an
underwriting agreement with such underwriters for such offering, which
agreement will contain such representations and warranties by Hertz and such
other terms and provisions as are customarily contained in underwriting
agreements of Hertz to the extent relevant and as are customarily contained in
underwriting agreements generally with respect to secondary distributions to
the extent relevant, including, without limitation, indemnification and
contribution provisions substantially to the effect and to the extent provided
in Section 3.7, and agreements as to the provision of opinions of counsel and
accountants' letters to the effect and to the extent provided in Section
3.4(e). The Selling Holders on whose behalf the Registrable Securities are to
be distributed by such underwriters shall be parties to any such underwriting
agreement and the representations and warranties by, and the other agreements
on the part of, Hertz to and for the benefit of such underwriters, shall also
be made to and for the benefit of such Selling Holders. Such underwriting
agreement shall also contain such representations and warranties by such
Selling Holders and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
when relevant, including, without limitation, indemnification and contribution
provisions substantially to the effect and to the extent provided in Section
3.7.

(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act pursuant to this Article III, Hertz shall give the Holders of such
Registrable Securities and the underwriters, if any, and their respective
counsel and accountants, such reasonable and customary access to its books and
records and such opportunities to discuss the business of Hertz with its
officers and the independent public accountants

<PAGE> 18

who have certified the financial statements of Hertz as shall be necessary, in
the opinion of such Holders and such underwriters or their respective counsel,
to conduct a reasonable investigation within the meaning of the Securities Act.

3.7. Indemnification and Contribution. (a) In the case of
each offering of Registrable Securities made pursuant to this Article III,
Hertz agrees to indemnify and hold harmless, to the extent permitted by law,
each Selling Holder, each underwriter of Registrable Securities so offered and
each Person, if any, who controls any of the foregoing Persons within the
meaning of the Securities Act and the officers, directors, affiliates,
employees and agents of each of the foregoing, against any and all losses,
liabilities, costs (including reasonable attorney's fees and disbursements),
claims and damages, joint or several, to which they or any of them may become
subject, under the Securities Act or otherwise, including any amount paid in
settlement of any litigation commenced or threatened, insofar as such losses,
liabilities, costs, claims and damages (or actions or proceedings in respect
thereof, whether or not such indemnified Person is a party thereto) arise out
of or are based upon any untrue statement by Hertz or alleged untrue statement
by Hertz of a material fact contained in the registration statement (or in any
preliminary or final prospectus included therein) or in any offering memorandum
or other offering document relating to the offering and sale of such
Registrable Securities prepared by Hertz or at its direction, or any amendment
thereof or supplement thereto, or in any document incorporated by reference
therein, or any omission by Hertz or alleged omission by Hertz to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however that Hertz shall not be
liable to any Person in any such case to the extent that any such loss,
liability, cost, claim or damage arises out of or relates to any untrue
statement or alleged untrue statement, or any omission, if such statement or
omission shall have been made in reliance upon and in conformity with
information relating to a Selling Holder, another holder of securities included
in such registration statement or underwriter furnished to Hertz by or on
behalf of such Selling Holder, other holder or underwriter specifically for use
in the registration statement (or in any preliminary or final prospectus
included therein), offering memorandum or other offering document, or any
amendment thereof or supplement thereto. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of any
Selling Holder, any other holder or any underwriter and shall survive the
transfer of such securities. The foregoing indemnity agreement is in addition
to any liability that Hertz may otherwise have to each Selling Holder, other
holder or underwriter of the Registrable Securities or any controlling person
of the foregoing and the officers, directors, affiliates, employees and agents
of each of the foregoing; provided, further, that, in the case of an offering
with respect to which a Selling Holder has designated the lead or managing
underwriters (or a

<PAGE> 19

Selling Holder is offering Registrable Securities directly, without an
underwriter), this indemnity does not apply to any loss, liability, cost, claim
or damage arising out of or relating to any untrue statement or alleged untrue
statement or omission or alleged omission in any preliminary prospectus or
offering memorandum if a copy of a final prospectus or offering memorandum was
not sent or given by or on behalf of any underwriter (or such Selling Holder or
other holder, as the case may be) to such Person asserting such loss,
liability, cost, claim or damage at or prior to the written confirmation of the
sale of the Registrable Securities as required by the Securities Act and such
untrue statement or omission had been corrected in such final prospectus or
offering memorandum.

(b) In the case of each offering made pursuant to this
Agreement, each Selling Holder, by exercising its registration rights
hereunder, agrees to indemnify and hold harmless, and to cause each underwriter
of Registrable Securities included in such offering (in the same manner and to
the same extent as set forth in Section 3.7(a)) to agree to indemnify and hold
harmless, Hertz, each other underwriter who participates in such offering, each
other Selling Holder or other holder with securities included in such offering
and in the case of an underwriter, such Selling Holder or other holder, and
each Person, if any, who controls any of the foregoing within the meaning of
the Securities Act and the officers, directors, affiliates, employees and
agents of each of the foregoing, against any and all losses, liabilities, costs
(including reasonable attorney's fees and disbursements), claims and damages to
which they or any of them may become subject, under the Securities Act or
otherwise, including any amount paid in settlement of any litigation commenced
or threatened, insofar as such losses, liabilities, costs, claims and damages
(or actions or proceedings in respect thereof, whether or not such indemnified
Person is a party thereto) arise out of or are based upon any untrue statement
or alleged untrue statement by such Selling Holder or underwriter, as the case
may be, of a material fact contained in the registration statement (or in any
preliminary or final prospectus included therein) or in any offering memorandum
or other offering document relating to the offering and sale of such
Registrable Securities prepared by Hertz or at its direction, or any amendment
thereof or supplement thereto, or any omission by such Selling Holder or
underwriter, as the case may be, or alleged omission by such Selling Holder or
underwriter, as the case may be, of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that such untrue statement of a material fact is
contained in, or such material fact is omitted from information relating to
such Selling Holder or underwriter, as the case may be, furnished to Hertz by
or on behalf of such Selling Holder or underwriter, as the case may be,
specifically for use in such registration statement (or in any preliminary or
final prospectus included therein), offering memorandum or other offering
document, or any amendment thereof or supplement

<PAGE> 20

thereto. The foregoing indemnity is in addition to any liability which such
Selling Holder or underwriter, as the case may be, may otherwise have to Hertz,
or controlling persons and the officers, directors, affiliates, employees, and
agents of each of the foregoing; provided, however, that, in the case of an
offering made pursuant to this Agreement with respect to which Hertz has
designated the lead or managing underwriters (or Hertz is offering securities
directly, without an underwriter), this indemnity does not apply to any loss,
liability, cost, claim, or damage arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission in any
preliminary prospectus or offering memorandum if a copy of a final prospectus
or offering memorandum was not sent or given by or on behalf of any underwriter
(or Hertz, as the case may be) to such Person asserting such loss, liability,
cost, claim or damage at or prior to the written confirmation of the sale of
the Registrable Securities as required by the Securities Act and such untrue
statement or omission had been corrected in such final prospectus or offering
memorandum.

(c) Each party indemnified under paragraph (a) or
(b) above shall, promptly after receipt of notice of a claim or action against
such indemnified party in respect of which indemnity may be sought hereunder,
notify the indemnifying party in writing of the claim or action; provided, that
the failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified party on account of the indemnity
agreement contained in paragraph (a) or (b) above otherwise than under such
subsection. If any such claim or action shall be brought against an
indemnified party, and it shall have notified the indemnifying party thereof,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified party and indemnifying parties may exist in respect of
such claim, the indemnifying party shall be entitled to participate therein,
and, to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel satisfactory to
the indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party). After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 3.7 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation. If the indemnifying
party does not assume the defense of such claim or action, it is understood
that the indemnifying party shall not, in connection with any one such claim or
action or separate but substantially similar or related claims or actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to one separate firm of local attorneys in each
such jurisdiction) at any time for all such indemnified parties. Any
indemnifying

<PAGE> 21

party against whom indemnity may be sought under this Section 3.7 shall not be
liable to indemnify an indemnified party if such indemnified party settles such
claim or action without the consent of the indemnifying party, which consent
shall not be unreasonably withheld.

(d) If the indemnification provided for in this Section 3.7
shall for any reason be unavailable (other than in accordance with its terms)
to an indemnified party in respect of any loss, liability, cost, claim or
damage referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, cost, claim or
damage in such proportion as shall be appropriate to reflect (i) the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other hand or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law or if the indemnified party failed to give
the notice required under paragraph (c) above, the relative benefits and the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other with respect to the statements or omissions which resulted
in such loss, liability, cost, claim or damage as well as any other relevant
equitable considerations. The relative benefits received by the indemnifying
party and the indemnified party shall be deemed to be in the same respective
proportion as the net proceeds (before deducting expenses) of the offering
received by such party (or, in the case of an underwriter, such underwriter's
discounts and commissions) bear to the aggregate offering price of the
Registrable Securities or Other Securities. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the indemnifying party on the one hand or the
indemnified party on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission, but not by reference to any indemnified party's stock
ownership in Hertz. The amount paid or payable by an indemnified party as a
result of the loss, cost, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph (d) shall be deemed to include,
for purposes of this paragraph (d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.

(e) Indemnification and contribution similar to that
specified in the preceding paragraphs of this Section 3.7 (with appropriate
modifications) shall be given by Hertz, the Selling Holders and underwriters
with respect to any required

<PAGE> 22

registration or other qualification of securities under any state law or
regulation or governmental authority.

(f) The obligations of the parties under this Section 3.7
shall be in addition to any liability which any party may otherwise have to any
other party.

3.8. Rule 144 and Form S-3. Commencing 90 days after the
Initial Public Offering Date, Hertz shall use its best efforts to ensure that
the conditions to the availability of Rule 144 set forth in paragraph (c)
thereof shall be satisfied. Upon the request of any Holder of Registrable
Securities, Hertz will deliver to such Holder a written statement as to whether
it has complied with such requirements. Hertz further agrees to use its
reasonable efforts to cause all conditions to the availability of Form S-3 (or
any successor form) under the Securities Act of the filing of registration
statements under this Agreement to be met as soon as practicable after the
Initial Public offering Date. Notwithstanding anything contained in this
Section 3.8, Hertz may deregister under Section 12 of the Securities Exchange
Act of 1934, as amended, if it then is permitted to do so pursuant to said Act
and the rules and regulations thereunder.

3.9. Transfer of Registration Rights. Any Holder may
transfer all or any portion of its rights under Article III to any transferee
of a number of Registrable Securities owned by such Holder exceeding three
percent (3%) of the outstanding class or series of such securities at the time
of transfer (each transferee that receives such minimum number of Registrable
Securities, a "Transferee"); provided, that each Transferee of Registrable
Securities (other than Ford Entities) to which Registrable Securities are
transferred, sold or assigned directly by a Ford Entity (such Transferee, a
"Ford Transferee"), together with any Affiliate of such Ford Transferee (and
any subsequent direct or indirect Transferees of Registrable Securities from
such Ford Transferee and any Affiliates thereof) shall be entitled to request
the registration of Registrable Securities pursuant to this Section 3.9 only
once prior to a Ford Ownership Reduction and thereafter shall only be entitled
to request the registration of Registrable Securities pursuant to Section
3.1(a)(ii) and, provided, further, that no Transferee shall be entitled to
request registration pursuant to this Section 3.9 for an amount of Registrable
Securities equal to less than $50,000,000. Any transfer of registration rights
pursuant to this Section 3.9 shall be effective upon receipt by Hertz of (i)
written notice from such Holder stating the name and address of any Transferee
and identifying the number of Registrable Securities with respect to which the
rights under this Agreement are being transferred and the nature of the rights
so transferred and (ii) a written agreement from such Transferee to be bound by
the terms of this Article III and Sections 5.3, 5.4, 5.9, 5.10, and 5.12 of
this Agreement. The Holders may exercise their rights hereunder in such
priority as they shall agree upon among themselves.

<PAGE> 23

3.10. Holdback Agreement. If any registration pursuant to
this Article III shall be in connection with an underwritten public offering of
Registrable Securities, each Selling Holder agrees not to effect any public
sale or distribution, including any sale under Rule 144, of any equity security
of Hertz or any security convertible into or exchangeable or exercisable for
any equity security of Hertz, in the case of Registrable Securities (otherwise
than through the registered public offering then being made), within 7 days
prior to or 90 days (or such lesser period as the lead or managing underwriters
may permit) after the effective date of the registration statement (or the
commencement of the offering to the public of such Registrable Securities in
the case of Rule 415 offerings). Hertz hereby also so agrees; provided, that,
subject to Section 3.6(a) hereof, Hertz shall not be so restricted from
effecting any public sale or distribution of any security in connection with
any merger, acquisition, exchange offer, subscription offer, dividend
reinvestment plan or stock option or other executive or employee benefit or
compensation plan.

3.11. Registration of Preferred Stock. Hertz agrees that it
shall from time to time enter into one or more agreements with Ford and/or the
Class B Transferee, if any, in form and substance reasonably satisfactory to
the parties thereto, granting to Ford or the Class B Transferee, as the case
may be, registration rights for the registration of any shares of preferred
stock of Hertz that may hereafter be owned, directly or indirectly, by Ford or
the Class B Transferee, as the case may be, substantially upon the same terms
and conditions as those contained in Article III for the benefit of Ford.

ARTICLE IV
CERTAIN COVENANT AND AGREEMENTS

4.1. No Violations. (a) For so long as the Ownership
Percentage is equal to or greater than 50%, Hertz covenants and agrees that it
will not take any action or enter into any commitment or agreement which may
reasonably be anticipated to result, with or without notice and with or without
lapse of time or otherwise, in a contravention or event of default by any Ford
Entity of (i) any provisions of applicable law or regulation, including but not
limited to provisions pertaining to the Internal Revenue Code of 1986, as
amended, or the Employee Retirement Income Security Act of 1974, as amended,
(ii) any provision of Ford's or Ford Holdings, Inc.'s certificate of
incorporation or bylaws, (iii) any credit agreement or other material
instrument binding upon Ford or Ford Holdings, Inc. or (iv) any judgment, order
or decree of any governmental body, agency or court having jurisdiction over
Ford or Ford Holdings, Inc. or any of their respective assets.

(b) Hertz and Ford agree to provide to the other any
information and documentation requested by the other for the

<PAGE> 24

purpose of evaluating and ensuring compliance with Section 4.1(a) hereof.

(c) Notwithstanding the foregoing Sections 4.1(a) and 4.1(b),
nothing in this Agreement is intended to limit or restrict in any way Ford's
rights as a shareholder of Hertz.

4.2. Confidentiality. Except as required by law, regulation
or legal or judicial process, Ford agrees that neither it nor any Ford Entity
nor any of their respective directors, officers or employees will without the
prior written consent of Hertz disclose to any Person any material, non-public
information concerning the business or affairs of Hertz acquired from any
director, officer or employee of Hertz (including any director, officer or
employee of Hertz who is also a director, officer or employee of Ford).

ARTICLE V
MISCELLANEOUS

5.1. Limitation of Liability. Neither Ford nor Hertz shall
be liable to the other for any special, indirect, incidental or consequential
damages of the other arising in connection with this Agreement.

5.2. Subsidiaries. Ford agrees and acknowledges that Ford
shall be responsible for the performance by each Ford Entity of the obligations
hereunder applicable to such Ford Entity.

5.3. Amendments. This Agreement may not be amended or
terminated orally, but only by a writing duly executed by or on behalf of the
parties hereto. Any such amendment shall be validly and sufficiently
authorized for purposes of this Agreement if it is signed on behalf of Ford and
Hertz by any of their respective presidents or vice presidents.

5.4. Term. This Agreement shall remain in effect until all
Registrable Securities held by Holders have been transferred by them to Persons
other than Transferees; provided, that the provisions of Section 3.7 shall
survive any such expiration.

5.5. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement or such provision
of the application of such provision to such party or circumstances, other than
those to which it is so determined to be invalid, illegal or unenforceable,
shall remain in full force and effect to the fullest extent permitted by law
and shall not be affected thereby, unless such a construction would be
unreasonable.

<PAGE> 25

5.6. Notices. All notices and other communications required
or permitted hereunder shall be in writing, shall be deemed duly given upon
actual receipt, and shall be delivered (a) in person, (b) by registered or
certified mail, postage prepaid, return receipt requested or (c) by facsimile
or other generally accepted means of electronic transmission (provided that a
copy of any notice delivered pursuant to this clause (c) shall also be sent
pursuant to clause (b)), addressed as follows:

(a) if to Hertz, to:

The Hertz Corporation
225 Brae Boulevard
Park Ridge, New Jersey 07656
Attention: General Counsel
Telecopy No.: 201-307-2748

(b) If to Ford, to:

Ford Motor Company
The American Road
Dearborn, Michigan 48121
Attention: Secretary
Telecopy No.: 313-337-9591

or to such other addresses or telecopy numbers as may
be specified by like notice to the other parties.

5.7. Further Assurances. Ford and Hertz shall execute,
acknowledge and deliver, or cause to be executed,
acknowledged and delivered, such instruments and take such
other action as may be necessary or advisable to carry out
their obligations under this Agreement and under any exhibit,
document or other instrument delivered pursuant hereto.

5.8. Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be
deemed an original instrument, but all of which together shall
constitute but one and the same agreement.

5.9. Governing Law. This Agreement and the
transactions contemplated hereby shall be construed in
accordance with, and governed by, the laws of the State of
Delaware.

5.10. Entire Agreement. This Agreement constitutes
the entire understanding of the parties hereto with
respect to the subject matter hereof.

5.11. Class B Transferee. Hertz agrees that it shall
enter into an agreement with the Class B Transferee (as
defined in Hertz' Restated Certificate

<PAGE> 26

of Incorporation), if any, in form and substance reasonably
satisfactory to the Class B Transferee and Hertz (i) granting
to the Class B Transferee options for the purchase of
Class B Common Stock and Nonvoting Stock substantially upon the
same terms and conditions as those contained in Article II,
(ii) granting to the Class B Transferee registration rights for
the registration of Registrable Securities substantially upon
the same terms and conditions as those contained in Article III
for the benefit of Ford and (iii) containing other covenants
and agreement for the benefit of the Class B Transferee that
are substantially similar to the other covenants and agreements
contained in this Agreement for the benefit of Ford; provided,
that such agreement shall contain terms (including covenants
and agreements of the Class B Transferee) for the benefit of
Hertz that are substantially similar to the terms (including
the covenants and agreements of Ford) for the benefit of Hertz
contained herein.

5.12. Successors. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns. Nothing
contained in this Agreement, express or implied, is intended to
confer upon any other person or entity any benefits, rights or
remedies.

5.13. Specific Performance. The parties hereto
acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or
were otherwise breached. Accordingly, it is agreed that they
shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of
competent jurisdiction in the United States or any state
thereof, in addition to any other remedy to which they may be
entitled at law or equity.

<PAGE> 27

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.

Ford Motor Company

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

The Hertz Corporation

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

<PAGE> 1

EXHIBIT 10(p)

THE HERTZ CORPORATION

LONG-TERM EQUITY COMPENSATION PLAN

<PAGE> 2

CONTENTS

PAGE

Article 1. Establishment, Objectives, and Duration 1

Article 2. Definitions 1

Article 3. Administration 4

Article 4. Shares Subject to the Plan and Maximum Awards 5

Article 5. Eligibility and Participation 6

Article 6. Stock Options 6

Article 7. Stock Appreciation Rights 8

Article 8. Restricted Stock 10

Article 9. Performance Units and Performance Shares 11

Article 10. Performance Measures 13

Article 11. Beneficiary Designation 14

Article 12. Deferrals 14

Article 13. Rights of Employees 14

Article 14. Amendment, Modification, Termination, and Adjustments 14

Article 15. Payment of Plan Awards and Conditions Thereon 15

Article 16. Withholding 16

Article 17. Indemnification 16

Article 18. Successors 17

Article 19. Legal Construction 17

(i)
<PAGE> 3

THE HERTZ CORPORATION
LONG-TERM EQUITY COMPENSATION PLAN

ARTICLE 1. ESTABLISHMENT, OBJECTIVES, AND DURATION

1.1. ESTABLISHMENT OF THE PLAN. The Hertz Corporation, a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes an
incentive compensation plan to be known as the "The Hertz Corporation Long-Term
Equity Compensation Plan" (hereinafter referred to as the "Plan"), as set forth
in this document. The Plan permits the grant of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares, and Performance Units.

Subject to approval by the Company's stockholders, the Plan shall become
effective as of April 29, 1997 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.

1.2. OBJECTIVES OF THE PLAN. The objectives of the Plan are to optimize
the profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.

The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who make
significant contributions to the Company's success and to allow Participants to
share in the success of the Company.

1.3. DURATION OF THE PLAN. The Plan shall commence on the Effective Date,
as described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 15 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award be granted under the Plan on or after April 29, 2007.

ARTICLE 2. DEFINITIONS

Whenever used in the Plan, the following terms shall have the meanings set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized:

2.1. "AFFILIATE" shall have the meaning ascribed to such term in Rule
12b-2 of the General Rules and Regulations of the Exchange Act.

1
<PAGE> 4

2.2. "AWARD" means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares, or Performance Units.

2.3. "AWARD AGREEMENT" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under this Plan.

2.4. "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.

2.5. "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.

2.6. "CODE" means the Internal Revenue Code of 1986, as amended from time
to time.

2.7. "COMMITTEE" means any committee appointed by the Board to administer
the Plan, as specified in Article 3 herein.

2.8. "COMPANY" means The Hertz Corporation, a Delaware corporation,
including any and all Subsidiaries and Affiliates, and any successor thereto as
provided in Article 18 herein.

2.9. "COVERED EMPLOYEE" means a Participant who, as of the date of vesting
and/or payout of an Award, as applicable, is one of the group of "covered
employees," as defined in the regulations promulgated under Code Section
162(m), or any successor statute.

2.10. "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company or any Subsidiary or Affiliates.

2.11. "DISABILITY" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan, or if no such plan exists,
at the discretion of the Committee.

2.12. "EFFECTIVE DATE" shall have the meaning ascribed to such term in
Section 1.1 hereof.

2.13. "EMPLOYEE" means any full-time, active employee of the Company or
its Subsidiaries or Affiliates. Directors who are not employed by the Company
shall not be considered Employees under this Plan.

2.14. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.

2
<PAGE> 5

2.15. "FAIR MARKET VALUE" shall be determined on the basis of the closing
sale price at which Shares have been sold regular way on the principal
securities exchange on which the Shares are traded or, if there is no such sale
on the relevant date, then on the last previous day on which there was such a
sale, provided that Fair Market Value for any initial grants made under the
Plan concurrent with or contingent upon the consummation of the initial public
offering of Shares in 1997 will be at a price equal to the initial public
offering price of Shares covered by such initial public offering.

2.16. "FREESTANDING SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.

2.17. "INCENTIVE STOCK OPTION" or "ISO" means an option to purchase Shares
granted under Article 6 herein and which is designated as an Incentive Stock
Option and which is intended to meet the requirements of Code Section 422.

2.18. "INSIDER" shall mean an individual who is, on the relevant date, an
officer, director, or ten percent (10%) beneficial owner of any class of the
Company's equity securities that is registered pursuant to Section 12 of the
Exchange Act, all as defined under Section 16 of the Exchange Act.

2.19. "NONEMPLOYEE DIRECTOR" shall mean a Director who is not also an
Employee.

2.20. "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to purchase
Shares granted under Article 6 herein and which is not intended to meet the
requirements of Code Section 422.

2.21. "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.

2.22. "OPTION PRICE" means the price at which a Share may be purchased by
a Participant pursuant to an Option.

2.23. "PARTICIPANT" means an Employee who has been selected to receive an
Award or who has outstanding an Award granted under the Plan.

2.24. "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).

2.25. "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 9 herein.

3
<PAGE> 6

2.26. "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 9 herein.

2.27. "PERIOD OF RESTRICTION" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the passage of
time, the achievement of performance goals, or upon the occurrence of other
events as determined by the Committee, at its discretion), and the Shares are
subject to a substantial risk of forfeiture, as provided in Article 8 herein.

2.28. "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.

2.29. "RESTRICTED STOCK" means an Award granted to a Participant pursuant
to Article 8 herein.

2.30. "RETIREMENT" shall have the meaning ascribed to such term in the
Company's tax-qualified retirement plan.

2.31. "SHARES" means the shares of Class A common stock of the Company.

2.32. "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone or
in connection with a related Option, designated as an SAR, pursuant to the
terms of Article 7 herein.

2.33. "SUBSIDIARY" means any corporation, partnership, joint venture, or
other entity in which the Company has a majority voting interest (including all
divisions, affiliates, and related entities).

2.34. "TANDEM SAR" means an SAR that is granted in connection with a
related Option pursuant to Article 7 herein, the exercise of which shall
require forfeiture of the right to purchase a Share under the related Option
(and when a Share is purchased under the Option, the Tandem SAR shall similarly
be canceled).

ARTICLE 3. ADMINISTRATION

3.1. THE COMMITTEE. The Plan shall be administered by a committee
appointed by the Board. After the initial public offering of Shares in 1997,
the Plan shall be administered by the Compensation Committee of the Board
consisting of not less than two (2) Directors who meet the "outside director"
requirements of Code Section 162(m), or by any other committee appointed by the
Board, provided the members of such committee meet such requirements.

3.2. AUTHORITY OF THE COMMITTEE. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the

4
<PAGE> 7

provisions herein, the Committee shall have full power to select Employees who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and conditions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 15 herein)
amend the terms and conditions of any outstanding Award to the extent such
terms and conditions are within the discretion of the Committee as provided in
the Plan. Further, the Committee shall make all other determinations which may
be necessary or advisable for the administration of the Plan. As permitted by
law, the Committee may delegate its authority as identified herein.

3.3. DECISIONS BINDING. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive, and binding on all
persons, including the Company, its stockholders, Employees, Participants, and
their estates and beneficiaries.

ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS

4.1. NUMBER OF SHARES AVAILABLE FOR GRANTS. Subject to Sections 4.2 and
4.3 herein, the maximum number of Shares with respect to which Awards may be
granted to Participants under the Plan shall be seven and one-half percent
(7.5%) of the Company's total outstanding shares of all classes of common stock
of the Company as of the tenth (10th) day following the first day that the
Company issues Shares pursuant to its initial public offering. Shares issued
under the Plan may be either authorized but unissued Shares (subject to a
maximum of [747,845] Shares), treasury Shares, or any combination thereof.

Unless and until the Committee determines that an Award to a Covered
Employee shall not be designed to comply with the Performance-Based Exception,
the following rules shall apply to grants of such Awards under the Plan,
subject to Sections 4.2 and 4.3.

(a) STOCK OPTIONS AND SARS: The maximum aggregate number of Shares
that may be subject to Stock Options, with or without Tandem SARs, or
Freestanding SARs, granted in any one fiscal year to any one
Participant shall be five hundred thousand (500,000).

(b) RESTRICTED STOCK: The maximum aggregate grant with respect to
Awards of Restricted Stock which are intended to qualify for the
Performance-Based Exception, and which are granted in any one fiscal
year to any one Participant shall be three hundred thousand (300,000)
Shares.

5
<PAGE> 8
(c) PERFORMANCE SHARES/PERFORMANCE UNITS: The maximum aggregate
payout (determined as of the end of the applicable performance
period) with respect to Awards of Performance Shares or Performance
Units which are intended to comply with the Performance-Based
Exception, and which are granted in any one fiscal year to any one
Participant shall be equal to the Fair Market Value of three hundred
thousand (300,000) Shares.

4.2. LAPSED AWARDS. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available for the grant of an
Award under the Plan.

4.3. ADJUSTMENTS. In the event of any change in corporate capitalization
such as a stock split, or a corporate transaction such as any merger,
consolidation, separation, including a spin-off, or other distribution of stock
or property of the Company, any reorganization (whether or not such
reorganization comes within the definition of such term in Code Section 368) or
any partial or complete liquidation of the Company, such adjustment shall be
made in the number and class of Shares which may be delivered under Section
4.1, in the number and class of and/or price of Shares subject to outstanding
Awards granted under the Plan, and in the Award limits set forth in subsections
4.1(a), 4.1(b), and 4.1(c), as may be determined to be appropriate and
equitable by the Committee, in its sole discretion, to prevent dilution or
enlargement of rights; provided, however, that the number of Shares subject to
any Award shall always be a whole number.

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

5.1. ELIGIBILITY. Persons eligible to participate in this Plan include
officers and certain key salaried Employees of the Company with potential to
contribute to the success of the Company or its Subsidiaries, including
Employees who are members of the Board.

5.2. ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom Awards shall be granted, and shall determine the nature and amount of each
Award.

ARTICLE 6. STOCK OPTIONS

6.1. GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.

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<PAGE> 9

6.2. AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Code Section 422, or an
NQSO, whose grant is intended not to fall under the provisions of Code Section
422.

6.3. OPTION PRICE. The Option Price for each grant of an Option under this
Plan shall be at least equal to one hundred percent (100%) of the Fair Market
Value of a Share on the date the Option is granted.

6.4. DURATION OF OPTIONS. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, that no Option shall be exercisable later than the tenth
(10th) anniversary date of its grant.

6.5. EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.

6.6. PAYMENT. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.

The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent; or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered must have been held by the Participant for at least six (6) months
prior to their tender to satisfy the Option Price); or (c) by a combination of
(a) and (b).

The Committee may also allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.

Subject to any governing rules or regulations, as soon as practicable
after receipt of a written notification of exercise and full payment, the
Company shall deliver to the Participant, in the Participant's name, Share
certificates in an appropriate amount based upon the number of Shares purchased
under the Option(s).

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<PAGE> 10

6.7. RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, restrictions under applicable federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, and under any blue sky or state securities laws
applicable to such Shares.

6.8. TERMINATION OF EMPLOYMENT. Each Participant's Option Award Agreement
shall set forth the extent to which the Participant shall have the right to
exercise the Option following termination of the Participant's employment with
the Company. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for termination of
employment.

6.9. NONTRANSFERABILITY OF OPTIONS.

(a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant or the Participant's legal representative (to the extent
permitted under Code Section 422).

(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6
may be sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a
Participant's Award Agreement, all NQSOs granted to a Participant
under this Article 6 shall be exercisable during his or her lifetime
only by such Participant or the Participant's legal representative.

ARTICLE 7. STOCK APPRECIATION RIGHTS

7.1. GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SAR.

The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.

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<PAGE> 11

The grant price of a Freestanding SAR shall equal the Fair Market
Value of a Share on the date of grant of the SAR. The grant price of Tandem
SARs shall equal the Option Price of the related Option.

7.2. EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.

Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than one
hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem
SAR may be exercised only when the Fair Market Value of the Shares subject to
the ISO exceeds the Option Price of the ISO.

7.3. EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon them.

7.4. SAR AGREEMENT. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.

7.5. TERM OF SARS. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.

7.6. PAYMENT OF SAR AMOUNT. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:

(a) The difference between the Fair Market Value of a Share on the
date of exercise over the grant price; by

(b) The number of Shares with respect to which the SAR is
exercised.

At the discretion of the Committee, the payment upon SAR exercise may be
in cash, in Shares of equivalent value, or in some combination thereof. The
Committee's determination regarding the form of SAR payout shall be set forth
in the Award Agreement pertaining to the grant of the SAR.

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<PAGE> 12

7.7. TERMINATION OF EMPLOYMENT. Each SAR Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and/or
its subsidiaries. Such provisions shall be determined in the sole discretion of
the Committee, shall be included in the Award Agreement entered into with
Participants, need not be uniform among all SARs issued pursuant to the Plan,
and may reflect distinctions based on the reasons for termination of
employment.

7.8. NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant or the Participant's legal representative.

ARTICLE 8. RESTRICTED STOCK

8.1. GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the
Plan, the Committee, at any time and from time to time, may grant Shares of
Restricted Stock to Participants in such amounts as the Committee shall
determine.

8.2. RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the
Period(s) of Restriction, the number of Shares of Restricted Stock granted, and
such other provisions as the Committee shall determine.

8.3. TRANSFERABILITY. Except as provided in this Article 8, the Shares of
Restricted Stock granted under the Plan may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified in
the Restricted Stock Award Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Committee in its sole discretion and set forth
in the Restricted Stock Award Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant or the Participant's legal
representative.

8.4. OTHER RESTRICTIONS. Subject to Article 11 herein, the Committee shall
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock, restrictions based upon the achievement of
specific performance goals (Company-wide, divisional, and/or individual),
time-based restrictions on vesting following the attainment of the performance
goals, and/or restrictions under applicable federal or state securities laws.

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<PAGE> 13

The Company may retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.

Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock grant made under the Plan shall become freely
transferable by the Participant after the last day of the applicable Period of
Restriction.

8.5. VOTING RIGHTS. Participants holding Shares of Restricted Stock
granted hereunder may be granted the right to exercise full voting rights with
respect to those Shares during the Period of Restriction.

8.6. DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate. Without limiting the generality
of the preceding sentence, if the grant or vesting of Restricted Shares granted
to a Covered Employee is designed to comply with the requirements of the
Performance-Based Exception, the Committee may apply any restrictions it deems
appropriate to the payment of dividends declared with respect to such
Restricted Shares, such that the dividends and/or the Restricted Shares
maintain eligibility for the Performance-Based Exception.

8.7. TERMINATION OF EMPLOYMENT. Each Restricted Stock Award Agreement
shall set forth the extent to which the Participant shall have the right to
receive unvested Restricted Shares following termination of the Participant's
employment with the Company. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all Shares of Restricted
Stock issued pursuant to the Plan, and may reflect distinctions based on the
reasons for termination of employment; provided, however, that except in the
cases of terminations by reason of death or Disability, the vesting of Shares
of Restricted Stock which qualify for the Performance-Based Exception and which
are held by Covered Employees shall occur at the time they otherwise would
have, but for the employment termination.

ARTICLE 9. PERFORMANCE UNITS AND PERFORMANCE SHARES

9.1. GRANT OF PERFORMANCE UNITS/SHARES. Subject to the terms of the Plan,
Performance Units and/or Performance Shares may be granted to Participants in
such amounts and upon such terms, and at any time and from time to time, as
shall be determined by the Committee.

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<PAGE> 14

9.2. VALUE OF PERFORMANCE UNITS/SHARES. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant.
Each Performance Share shall have an initial value equal to the Fair Market
Value of a Share on the date of grant. The Committee shall set performance
goals in its discretion which, depending on the extent to which they are met,
will determine the number and/or value of Performance Units/Shares that will be
paid out to the Participant. For purposes of this Article 9, the time period
during which the performance goals must be met shall be called a "Performance
Period."

9.3. EARNING OF PERFORMANCE UNITS/SHARES. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number and
value of Performance Units/Shares earned by the Participant over the
Performance Period, to be determined as a function of the extent to which the
corresponding performance goals have been achieved.

9.4. FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/SHARES. Payment of
earned Performance Units/Shares shall be made in a single lump sum following
the close of the applicable Performance Period. Subject to the terms of this
Plan, the Committee, in its sole discretion, may pay earned Performance
Units/Shares in the form of cash or in Shares (or in a combination thereof)
which have an aggregate Fair Market Value equal to the value of the earned
Performance Units/Shares at the close of the applicable Performance Period.
Such Shares may be granted subject to any restrictions deemed appropriate by
the Committee. The determination of the Committee with respect to the form of
payout of such Awards shall be set forth in the Award Agreement pertaining to
the grant of the Award.

At the discretion of the Committee, Participants may be entitled to
receive any dividends declared with respect to Shares which have been earned in
connection with grants of Performance Units and/or Performance Shares, but not
yet distributed to Participants (such dividends shall be subject to the same
accrual, forfeiture, and payout restrictions as apply to dividends earned with
respect to Shares of Restricted Stock, as set forth in Section 8.6 herein). In
addition, Participants may, at the discretion of the Committee, be entitled to
exercise their voting rights with respect to such Shares.

9.5. TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT.
Unless determined otherwise by the Committee and set forth in the Participant's
Award Agreement, in the event the employment of a Participant is terminated by
reason of death, Disability, or Retirement during a Performance Period, the
Participant shall receive a payout of the Performance Units/Shares which is
prorated, as specified by the Committee in its discretion.

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<PAGE> 15

Payment of earned Performance Units/Shares shall be made at a time
specified by the Committee in its sole discretion and set forth in the
Participant's Award Agreement. Notwithstanding the foregoing, with respect to
Covered Employees who retire during a Performance Period, payments shall be
made at the same time as payments are made to Participants who did not
terminate employment during the applicable Performance Period.

9.6. TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a
Participant's employment terminates for any reason other than those reasons set
forth in Section 9.5 herein, all Performance Units/Shares shall be forfeited by
the Participant to the Company unless determined otherwise by the Committee, as
set forth in the Participant's Award Agreement.

9.7. NONTRANSFERABILITY. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by will
or by the laws of descent and distribution. Further, except as otherwise
provided in a Participant's Award Agreement, a Participant's rights under the
Plan shall be exercisable during the Participant's lifetime only by the
Participant or the Participant's legal representative.

ARTICLE 10. PERFORMANCE MEASURES

Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth in
this Article 10, the attainment of which may determine the degree of payout
and/or vesting with respect to Awards to Covered Employees which are designed
to qualify for the Performance-Based Exception, the performance measure(s) to
be used for purposes of such grants shall be chosen from among net income
either before or after taxes, market share, customer satisfaction, profits,
share price, earnings per share, total shareholder return, return on assets,
return on equity, operating income, return on capital or investments, or
economic value added (including, but not limited to, any or all of such
measures in comparison to the Company's competitors, the industry, or some
other comparator group).

The Committee shall have the discretion to adjust the determinations of
the degree of attainment of the preestablished performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception, and which are held by Covered Employees, may not be adjusted upward
(the Committee shall retain the discretion to adjust such Awards downward).

In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have sole

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<PAGE> 16

discretion to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards which shall not qualify for the Performance-Based Exception, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).

ARTICLE 11. BENEFICIARY DESIGNATION

Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.

ARTICLE 12. DEFERRALS

The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares. If any such deferral election is required or
permitted, the Committee shall, in its sole discretion, establish rules and
procedures for such payment deferrals.

ARTICLE 13. RIGHTS OF EMPLOYEES

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

13.2. PARTICIPATION. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be selected
to receive a future Award.

ARTICLE 14. AMENDMENT, MODIFICATION, TERMINATION, AND ADJUSTMENTS

14.1. AMENDMENT, MODIFICATION, AND TERMINATION. Subject to the terms of
the Plan, the Board, upon recommendation of the Committee, may at any time and
from time to time, alter, amend, suspend or terminate the Plan in whole or in
part.

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<PAGE> 17

14.2. ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual
or nonrecurring events (including, without limitation, the events described in
Section 4.3 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting
principles, whenever the Committee determines that such adjustments are
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan; provided that
unless the Committee determines otherwise, no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan or Awards meeting the requirements of Section 162(m) of the Code, as from
time to time amended.

14.3. AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of
the Plan to the contrary (but subject to Section 14.3 hereof), no termination,
amendment, or modification of the Plan shall adversely affect in any material
way any Award previously granted under the Plan without the written consent of
the Participant holding such Award.

14.4. COMPLIANCE WITH CODE SECTION 162(M). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m); provided, however, that in the event the
Committee determines that such compliance is not desired with respect to any
Award or Awards available for grant under the Plan, then compliance with Code
Section 162(m) will not be required. In addition, in the event that changes are
made to Code Section 162(m) to permit greater flexibility with respect to any
Award or Awards available under the Plan, the Committee may, subject to this
Article 14, make any adjustments it deems appropriate.

ARTICLE 15. PAYMENT OF PLAN AWARDS AND CONDITIONS THEREON

15.1. EFFECT OF COMPETITIVE ACTIVITY. Anything contained in the Plan to
the contrary notwithstanding, if the employment of any Participant shall
terminate, for any reason other than death, while any Award to such Participant
is outstanding hereunder, and such Participant has not yet received the Shares
covered by such Award or otherwise received the full benefit of such Award,
such Participant, if otherwise entitled thereto, shall receive such Shares or
benefit only if, during the entire period from the date of such Participant's
termination to the date of such receipt, such Participant shall have earned out
such Award by (i) making himself or herself available, upon request, at
reasonable times and upon a reasonable basis, to consult with, supply
information to, and otherwise cooperate with the Company or any Subsidiary or
Affiliate thereof with respect to any matter that shall have been handled by
him or her or under his or her supervision while he or she was in the employ of
the Company or of any Subsidiary or Affiliate thereof; and (ii) refraining from
engaging in any activity

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<PAGE> 18

that is directly or indirectly in competition with any activity of the Company
or any Subsidiary or Affiliate thereof.

15.2. NONFULFILLMENT OF COMPETITIVE ACTIVITY CONDITIONS; WAIVERS UNDER THE
PLAN. In the event of a Participant's nonfulfillment of any condition set forth
in Section 15.1 hereof, such Participant's rights under any Award shall be
forfeited and canceled forthwith; provided, however, that the nonfulfillment of
such condition may at any time (whether before, at the time of, or subsequent
to termination of employment) be waived by the Committee upon its determination
that in its sole judgment there shall not have been and will not be any
substantial adverse effect upon the Company or any Subsidiary or Affiliate
thereof by reason of the nonfulfillment of such condition.

15.3. EFFECT OF INIMICAL CONDUCT. Anything contained in the Plan to the
contrary notwithstanding, all rights of a Participant under any Award shall
cease on and as of the date on which it has been determined by the Committee
that such Participant at any time (whether before or subsequent to termination
of such Participant's employment) acted in manner inimical to the best
interests of the Company or any Subsidiary or Affiliate thereof.

ARTICLE 16. WITHHOLDING

16.1. TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign,
required by law or regulation to be withheld with respect to any taxable event
arising as a result of this Plan.

16.2. SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards granted
hereunder, Participants may elect, subject to the approval of the Committee, to
satisfy the withholding requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction. All such elections shall be irrevocable, made in writing, and
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.

ARTICLE 17. INDEMNIFICATION

Each person who is or shall have been a member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit, or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and

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against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided
he or she shall give the Company an opportunity, at its own expense, to handle
and defend the same before he or she undertakes to handle and defend it on his
or her own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such persons may be
entitled under the Company's Articles of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to indemnify them
or hold them harmless.

ARTICLE 18. SUCCESSORS

All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the
business and/or assets of the Company.

ARTICLE 19. LEGAL CONSTRUCTION

19.1. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural
shall include the singular, and the singular shall include the plural.

19.2. SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

19.3. REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.

19.4. SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.

19.5. GOVERNING LAW. To the extent not preempted by federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of New Jersey.

<PAGE> 1

EXHIBIT 23(A)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this Amendment No. 2 to the registration
statement on Form S-1 (File No. 333-22517) of our report dated January 24, 1997,
except for Note 14, as to which the date is March 13, 1997, on our audits of the
consolidated financial statements and financial statement schedule of The Hertz
Corporation. We also consent to the reference to our firm under the caption
"Experts."

/s/ COOPERS & LYBRAND L.L.P.
--------------------------------------
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey

April 7, 1997