AGREEMENT

                                       AND

                                 PLAN OF MERGER

                                  by and among

                              CENDANT CORPORATION,

                                PHH CORPORATION,

                             AVIS ACQUISITION CORP.

                                       and

                            AVIS GROUP HOLDINGS, INC.


                          dated as of November 11, 2000




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<TABLE>

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                                TABLE OF CONTENTS

                                                                                                 PAGE

                              ARTICLE I THE MERGER

         <S>      <C>                                                                               <C>


         1.1      The Merger........................................................................2
         1.2      Effective Time....................................................................2
         1.3      Closing of the Merger.............................................................3
         1.4      Effects of the Merger.............................................................3
         1.5      Certificate of Incorporation and By-laws..........................................3
         1.6      Directors.........................................................................3
         1.7      Officers..........................................................................4
         1.8      Subsequent Actions................................................................4

                         ARTICLE II CONVERSION OF SHARES

         2.1      Conversion of Shares..............................................................4
         2.2      Delivery of Merger Consideration..................................................5
         2.3      Dissenting Shares.................................................................7
         2.4      Treatment of Company Options......................................................8
         2.5      Adjustments.......................................................................9
         2.6      Stockholders Meeting..............................................................9

            ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY


         3.1      Organization.....................................................................12
         3.2      Authority Relative to this Agreement.............................................12
         3.3      Vote Required....................................................................13
         3.4      State Takeover Statutes..........................................................13
         3.5      Capitalization...................................................................13
         3.6      Subsidiaries.....................................................................15
         3.7      No Conflict; Required Filings and Consents.......................................15
         3.8      SEC Documents and Financial Statements...........................................16
         3.9      No Undisclosed Liabilities.......................................................17
         3.10     Absence of Certain Changes.......................................................17
         3.11     Proxy Statement..................................................................17
         3.12     Litigation.......................................................................17
         3.13     Taxes............................................................................18
         3.14     Employee Benefit Plans...........................................................19
         3.15     Compliance with Applicable Laws..................................................21
         3.16     Material Contracts...............................................................22
         3.17     Environmental Laws...............................................................23
         3.18     Intellectual Property............................................................25
         3.19     Labor Matters....................................................................26
         3.20     Brokers or Finders...............................................................27

               ARTICLE IVREPRESENTATIONS AND WARRANTIES OF PARENT,
                               PHH AND MERGER SUB

         4.1      Organization.....................................................................27
         4.2      Authority Relative to this Agreement.............................................27
         4.3      No Conflict; Required Filings and Consents.......................................28
         4.4      Proxy Statement..................................................................29
         4.5      Litigation.......................................................................29
         4.6      Financing........................................................................29
         4.7      Brokers or Finders...............................................................29

                                          ARTICLE V COVENANTS

         5.1      Conduct of Business by the Company Pending
                  the Merger.......................................................................30
         5.2      No Solicitation..................................................................33
         5.3      Access to Information; Confidentiality...........................................36
         5.4      Consents; Approvals..............................................................37
         5.5      Indemnification and Insurance....................................................37
         5.6      Employee Benefits................................................................40
         5.7      Note Tender Offer................................................................41
         5.8      Notification of Certain Matters..................................................42
         5.9      Further Action...................................................................42
         5.10     Public Announcements.............................................................42
         5.11     Transfer Taxes...................................................................43
         5.12     Financial Statements.............................................................43
         5.13     Section 16 Matters...............................................................43

                                                                                                 PAGE

                       ARTICLE VI CONDITIONS TO THE MERGER


         6.1      Conditions to Each Party's Obligation to Effect
                  the Merger.......................................................................43
         6.2      Conditions to Obligations of the Company to Effect
                  the Merger.......................................................................44
         6.3      Conditions to Obligations of Parent and Merger Sub to
                  Effect the Merger................................................................45

                                        ARTICLE VII TERMINATION

         7.1      Termination......................................................................46
         7.2      Effect of Termination............................................................48
         7.3      Fees and Expenses................................................................49

                                    ARTICLE VIII GENERAL PROVISIONS

         8.1      Nonsurvival of Representations, Warranties and Agreements........................50
         8.2      Notices..........................................................................50
         8.3      Assignment; Binding Effect.......................................................52
         8.4      Entire Agreement.................................................................53
         8.5      Amendment........................................................................53
         8.6      Governing Law; Consent to Jurisdiction...........................................53
         8.7      Counterparts.....................................................................53
         8.8      Headings.........................................................................54
         8.9      Interpretation...................................................................54
         8.10     Waivers..........................................................................54
         8.11     Incorporation of Annex and Disclosure Letters....................................55
         8.12     Severability.....................................................................55
         8.13     Enforcement of Agreement.........................................................55
         8.14     Waiver of Jury Trial.............................................................55
         8.15     Execution........................................................................56
         8.16     Date for any Action..............................................................56
         8.17     Parties in Interest..............................................................56
         8.18     Certain Definitions..............................................................56

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<PAGE>



                          AGREEMENT AND PLAN OF MERGER


          This  AGREEMENT  AND PLAN OF MERGER  (this  "Agreement"),  dated as of
November 11, 2000, is by and among Cendant  Corporation,  a Delaware corporation
("Parent"), PHH Corporation, a Maryland corporation and an indirect wholly owned
Subsidiary  (as defined  below) of Parent  ("PHH"),  Avis  Acquisition  Corp., a
Delaware  corporation and a wholly owned  Subsidiary of PHH ("Merger Sub"),  and
Avis Group Holdings, Inc., a Delaware corporation (the "Company").


                                    RECITALS

          WHEREAS,  Cendant Car Holdings,  Inc., a Delaware  corporation  and an
indirect,  wholly owned Subsidiary of Parent ("Car Holdings"), is the beneficial
owner of 5,535,800  shares of class A common stock, par value $.01 per share, of
the Company (the "Company Common Stock"),  which represents  approximately 17.8%
of the outstanding shares of Company Common Stock;

          WHEREAS,   Parent  and  PHH  have   proposed  that  PHH  acquire  (the
"Acquisition")  all of the issued and outstanding shares of Company Common Stock
not beneficially owned (within the meaning of Rule 13d-3 of the Exchange Act (as
defined below)) by Parent,  PHH, Merger Sub, Car Holdings or any other direct or
indirect  Subsidiary of Parent  (collectively,  the  "Acquisition  Group") (such
outstanding  shares of Company Common Stock not owned by the  Acquisition  Group
being referred to herein as the "Shares");

          WHEREAS, in furtherance of the Acquisition, it is proposed that Merger
Sub shall be merged with and into the Company,  with the Company  continuing  as
the  surviving  corporation  (the  "Merger"),  in  accordance  with the  General
Corporation  Law of the State of  Delaware  (the  "DGCL") and upon the terms and
subject to the conditions set forth herein;

          WHEREAS,  a special committee of the board of directors of the Company
(the "Board"), consisting entirely of nonmanagement directors of the Company who
are not Affiliates (as defined below) of the Acquisition Group (the "Independent
Committee"),   was  established  for,  among  other  purposes,  the  purpose  of
evaluating the Acquisition and making a recommendation  to the Board with regard
to the Acquisition;

          WHEREAS, the Independent  Committee has received the opinion of Morgan
Stanley  &  Co.,  Incorporated  ("Morgan  Stanley"),  financial  advisor  to the
Independent  Committee,  that, as of the date hereof,  the  consideration  to be
received by the holders of Shares pursuant to the Merger is fair to such holders
from a financial point of view;

          WHEREAS,  the  Board,  based on the  unanimous  recommendation  of the
Independent Committee,  has, in light of and subject to the terms and conditions
set forth herein,  (i) determined that (x) the Merger  Consideration (as defined
below),  is fair to the holders of Shares and (y) the Merger is advisable and in
the best interests of the Company and the holders of Shares; (ii) approved,  and
declared the  advisability  of, this Agreement and (iii) determined to recommend
that the stockholders of the Company vote to adopt this Agreement;

          WHEREAS,  the respective boards of directors of Parent, PHH and Merger
Sub have  approved  this  Agreement;  the board of  directors  of Merger Sub has
declared the advisability of the Agreement;  and PHH, as the sole stockholder of
Merger Sub, has adopted this Agreement; and

          WHEREAS,  the  Company,  Parent,  PHH and  Merger  Sub  desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and the other transactions  contemplated  hereby  (collectively,  the
"Transactions") and also to prescribe various conditions to the Merger.

          NOW,  THEREFORE,  in  consideration  of the premises and of the mutual
covenants,  representations,  warranties and agreements  contained  herein,  the
parties hereto agree as follows:


                                    ARTICLE I
                                   THE MERGER

          1.1 The Merger. At the Effective Time (as defined below), and upon the
terms and subject to the conditions of this Agreement and in accordance with the
DGCL,  Merger  Sub  shall be merged  with and into the  Company.  Following  the
Merger, the Company shall continue as the surviving  corporation (the "Surviving
Corporation")  and as a  wholly  owned  subsidiary  of  PHH,  and  the  separate
corporate existence of Merger Sub shall cease in accordance with the DGCL.

          1.2 Effective Time.  Subject to the provisions of this Agreement,  the
parties  shall cause the Merger to be  consummated  by filing a  certificate  of
merger (the "Certificate of Merger") with the Secretary of State of the State of
Delaware  in such form as required  by, and  executed in  accordance  with,  the
relevant  provisions of the DGCL as soon as  practicable on or after the Closing
Date (as defined below).  The Merger shall become  effective upon such filing or
at such time thereafter as is agreed by Parent and the Independent Committee and
provided in the  Certificate  of Merger (the  "Effective  Time," and the date of
such effectiveness shall be the "Effective Date").

          1.3 Closing of the Merger.  The closing of the Merger (the  "Closing")
shall take place at the offices of  Skadden,  Arps,  Slate,  Meagher & Flom LLP,
Four Times Square,  New York, New York, at 10:00 a.m.  (local time) on a date to
be specified by the  parties,  which shall be no later than the second  Business
Day after  satisfaction or waiver (as permitted by this Agreement and applicable
law) of all of the  conditions  set forth in Article VI hereof (other than those
conditions that by their nature are to be satisfied at the Closing,  but subject
to the fulfillment or waiver of those  conditions) (the "Closing Date"),  unless
another time, date or place is agreed by Parent and the Independent Committee in
writing.

          1.4 Effects of the Merger. The Merger shall have the effects set forth
in Section 259 of the DGCL.  Without  limiting the  generality of the foregoing,
and subject thereto, at the Effective Time, all properties,  rights, privileges,
powers and  franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.

          1.5 Certificate of Incorporation  and By-laws.  At the Effective Time,
the Amended and Restated  Certificate of  Incorporation  of the Company shall be
amended and  restated in its entirety to read as set forth in Annex A and, as so
amended,  shall be the certificate of incorporation of the Surviving Corporation
until   thereafter   amended  as  provided  by  law  and  such   certificate  of
incorporation,  subject to the  provisions of Section 5.5. The by-laws of Merger
Sub, as in effect  immediately prior to the Effective Time, shall be the by-laws
of the Surviving  Corporation  until  thereafter  amended in accordance with its
terms,  and as provided by applicable law, and the certificate of  incorporation
of the Surviving Corporation, subject to the provisions of Section 5.5.

          1.6 Directors. The directors of Merger Sub at the Effective Time, from
and  after  the  Effective  Time,  shall  be  the  directors  of  the  Surviving
Corporation,  each  to  hold  office  in  accordance  with  the  certificate  of
incorporation  and by-laws of the Surviving  Corporation  until such  director's
successor is duly elected and qualified in the manner  provided in the Surviving
Corporation's certificate of incorporation and by-laws, or as otherwise provided
by applicable law.

          1.7 Officers.  The officers of the Company at the Effective Time, from
and after the Effective Time, shall be the officers of the Surviving Corporation
until such officer's successor is duly elected or appointed and qualified in the
manner provided in the Surviving Corporation's  certificate of incorporation and
by-laws, or as otherwise provided by applicable law.

          1.8 Subsequent Actions.  If, at any time after the Effective Time, the
Surviving  Corporation  shall  determine or be advised that any deeds,  bills of
sale,  assignments,  assurances  or any other actions or things are necessary or
desirable to vest,  perfect or confirm of record or  otherwise in the  Surviving
Corporation  its right,  title or  interest  in, to or under any of the  rights,
properties or assets of the Company  acquired or to be acquired by the Surviving
Corporation  as a result of, or in connection  with,  the Merger or otherwise to
carry  out  this  Agreement,   the  officers  and  directors  of  the  Surviving
Corporation  shall be  authorized  to execute  and  deliver,  in the name and on
behalf of either  the  Company or Merger  Sub,  all such  deeds,  bills of sale,
instruments of conveyance, assignments and assurances and to take and do, in the
name and on behalf of the  Company,  Merger  Sub or  otherwise,  all such  other
actions and things as may be necessary or desirable to vest,  perfect or confirm
any and all right,  title and interest in, to and under such rights,  properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.


                                   ARTICLE II
                              CONVERSION OF SHARES

          2.1  Conversion  of Shares.  At the  Effective  Time, by virtue of the
Merger, and without any action on the part of the holder thereof:

          (a)  subject  to  Section  2.3,  each  Share  issued  and  outstanding
immediately  prior to the  Effective  Time shall be converted  into the right to
receive an amount in cash, without interest, equal to thirty-three United States
Dollars ($33.00) (the "Merger  Consideration") in the manner provided in Section
2.2 hereof;

          (b) each Share  issued and held in the  Company's  treasury or held by
any Subsidiary of the Company  immediately prior to the Effective Time shall, by
virtue of the Merger, cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor;

          (c) each  share of  Company  Common  Stock  held by any  member of the
Acquisition  Group  immediately  prior to the Effective  Time shall be converted
into and become one fully paid and  nonassessable  share of common  stock of the
Surviving Corporation; and

          (d) each share of common  stock,  par value $.01 per share,  of Merger
Sub ("Merger Sub Common Stock") issued and outstanding  immediately prior to the
Effective   Time  shall  be  converted  into  and  become  one  fully  paid  and
nonassessable share of common stock of the Surviving Corporation.

          2.2 Delivery of Merger Consideration.

          (a)  Immediately  prior to the  Effective  Time,  Parent and PHH shall
deposit or cause to be  deposited  in trust (the  "Payment  Fund") with an agent
designated by Parent and reasonably  satisfactory to the  Independent  Committee
(the  "Payment   Agent")  for  the  benefit  of  the  holders  of   certificates
representing  the  Shares  issued  and  outstanding  as of  the  Effective  Time
(collectively, "Certificates"), the aggregate Merger Consideration to be paid in
respect of the Shares. The Payment Fund shall not be used for any other purpose.
The Payment  Fund shall be invested  by the  Payment  Agent,  as directed by the
Surviving Corporation, in (i) obligations of or guaranteed by the United States,
and (ii)  certificates  of deposit,  bank  repurchase  agreements  and  bankers'
acceptances  of any bank or trust company  organized  under federal law or under
the law of any state of the United  States or of the  District of Columbia  that
has capital,  surplus and  undivided  profits of at least $1 billion or in money
market  funds which are  invested  substantially  in such  investments.  Any net
earnings with respect thereto shall be paid to the Surviving  Corporation as and
when requested by the Surviving Corporation.

          (b) As soon as reasonably practicable after the Effective Time, Parent
shall  instruct  the  Payment  Agent to mail to each  holder of record of Shares
immediately prior to the Effective Time (excluding any Shares cancelled pursuant
to Section 2.1 hereof):

               (i) a letter of transmittal (the "Letter of Transmittal")  (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates  shall pass, only upon delivery of such Certificates to the Payment
Agent  and  shall be in such  form and have  such  other  provisions  as  Parent
reasonably specifies), and

               (ii)  instructions  for use in  effecting  the  surrender of each
Certificate in exchange for the Merger Consideration with respect to each of the
Shares formerly represented thereby.

          (c) Parent and the Surviving Corporation shall cause the Payment Agent
to pay to the holders of a Certificate,  as soon as practicable after receipt of
any Certificate (or in lieu of any such Certificate  which has been lost, stolen
or  destroyed,  an affidavit of lost,  stolen or  destroyed  share  certificates
(including  customary  indemnity  or bond  against  loss) in form and  substance
reasonably satisfactory to Parent) together with the Letter of Transmittal, duly
executed,  and such other  documents as Parent or the Payment  Agent  reasonably
request,  in  exchange  therefor  a check  in the  amount  equal  to the  Merger
Consideration   multiplied  by  the  number  of  Shares   represented   by  such
Certificate.  No interest  shall be paid or accrued on any cash payable upon the
surrender of any Certificate.  Each  Certificate  surrendered in accordance with
the provisions of this Section 2.2(c) shall be cancelled forthwith.

          (d) In the event of a transfer  of  ownership  of Shares  which is not
registered in the transfer records of the Company,  the Merger Consideration may
be paid to the transferee only if (i) the Certificate  representing  such Shares
surrendered  to the Payment  Agent in accordance  with Section  2.2(c) hereof is
properly  endorsed for transfer or is accompanied  by  appropriate  and properly
endorsed  stock powers and is otherwise in proper form to effect such  transfer,
(ii) the Person  requesting such transfer pays to the Payment Agent any transfer
or other  taxes  payable  by  reason  of such  transfer  or  establishes  to the
satisfaction  of the  Payment  Agent  that such  taxes have been paid or are not
required  to be paid,  and  (iii)  such  Person  establishes  to the  reasonable
satisfaction  of Parent that such  transfer  would not  violate  any  applicable
federal or state securities laws.

          (e) Subject to Section  2.3,  at and after the  Effective  Time,  each
holder  of  a  Certificate  that  represented   issued  and  outstanding  Shares
immediately  prior to the  Effective  Time  shall  cease to have any rights as a
stockholder  of the  Company,  except  for the  right  to  surrender  his or her
Certificate in exchange for the Merger Consideration multiplied by the number of
Shares  represented  by such  Certificate.  At the  Effective  Time,  the  stock
transfer books of the Company shall be closed,  except as otherwise  provided by
applicable  law, and no transfer of Shares  shall be made on the stock  transfer
books of the Surviving Corporation.  If, after the Effective Time,  Certificates
are presented to the Surviving  Corporation or the Payment Agent for any reason,
they shall be cancelled  and exchanged as provided in this Article II, except as
otherwise provided by applicable law.

          (f) The Merger  Consideration  paid in the Merger  shall be net to the
holder of Shares in cash,  and without  interest  thereon,  subject to reduction
only for any applicable withholding Taxes (as defined below).

          (g) Promptly  following the date which is 180 days after the Effective
Date,  the Payment  Agent shall deliver to the  Surviving  Corporation  all cash
(including any interest received with respect  thereto),  Certificates and other
documents in its possession  relating to the transactions  contemplated  hereby,
and the Payment  Agent's duties shall  terminate.  Thereafter,  each holder of a
Certificate (other than Certificates  representing Dissenting Shares (as defined
below)) may surrender such Certificate to the Surviving Corporation and (subject
to any  applicable  abandoned  property,  escheat  or  similar  law)  receive in
consideration  therefor  (and only as general  creditors  thereof) the aggregate
Merger   Consideration   relating   thereto,   without  any  interest   thereon.
Notwithstanding  the  foregoing,  no member of the  Acquisition  Group,  nor the
Surviving  Corporation,  the Company or the  Payment  Agent shall be liable to a
holder of a Certificate  for any Merger  Consideration  properly  delivered to a
public  official  pursuant  to any  applicable  abandoned  property,  escheat or
similar law.

          (h) Any  portion of the Merger  Consideration  made  available  to the
Payment Agent pursuant to Section  2.2(a) to pay for Shares for which  appraisal
rights have been perfected shall be returned to Parent or PHH upon demand.

          2.3 Dissenting Shares.  Notwithstanding  anything in this Agreement to
the  contrary,  Shares that are issued and  outstanding  immediately  before the
Effective Time and that are held by stockholders  who have not voted in favor of
the  adoption of this  Agreement  or  consented  thereto in writing and who have
properly  exercised  appraisal  rights with respect  thereto in accordance  with
Section  262 of the DGCL shall not be  converted  into the right to receive  the
Merger  Consideration  as provided in Section  2.1,  unless such holders fail to
perfect or  withdraw  or  otherwise  lose their  rights to  appraisal.  Instead,
ownership  of such  Shares  shall  entitle  the holder  thereof  to receive  the
consideration determined pursuant to Section 262 of the DGCL; provided, however,
that if such holder  fails to perfect or  effectively  withdraws  such  holder's
right to  appraisal  and  payment  under the  DGCL,  each of such  Shares  shall
thereupon be deemed to have been  converted,  at the  Effective  Time,  into the
right to receive the Merger  Consideration,  without any interest thereon,  upon
surrender of the  Certificate or  Certificates in the manner provided in Section
2.2 hereof.  The Company  shall give Parent (i) prompt notice of any demands (or
withdrawals  of demands)  for  appraisal  of any Shares  received by the Company
pursuant  to the  applicable  provisions  of the DGCL and any other  instruments
served pursuant to the DGCL and received by the Company and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. The Company shall not,  except with the prior written consent of
Parent, make any payment with respect to any such demands for appraisal or offer
to settle, or settle, any such demands.

          2.4 Treatment of Company Options.

          (a)  Subject  to Section  2.4(b),  the  Company  shall take all action
necessary so that each option to purchase  shares of Company Common Stock (each,
an  "Option")  granted  under the  Company's  1997  Stock  Option  Plan and 2000
Incentive  Compensation  Plan  (collectively,  the "Assumed  Option  Plans" and,
individually,  an "Assumed Option Plan") outstanding and unexercised immediately
prior  to the  Effective  Time  shall  be  cancelled  immediately  prior  to the
Effective  Time in exchange  for the right to receive an amount in cash equal to
the product of (i) the number of shares of Company  Common Stock subject to such
Option  immediately  prior to the Effective Time and (ii) the excess, if any, of
the Merger Consideration over the per share exercise price of such Option, to be
delivered by the Surviving  Corporation  promptly  following the Effective Time.
All applicable  withholding  taxes  attributable  to the payments made hereunder
shall  be  deducted   from  the  amounts   payable   under  this   Section  2.4.
Notwithstanding  the foregoing,  or Section 2.4(b),  any Option with an exercise
price greater than the Merger  Consideration  immediately prior to the Effective
Time shall be automatically  converted into an Assumed Option in accordance with
Section  2.4(c),  whether or not the holder  thereof shall have made a Retention
Election  with respect to such Option in  accordance  with Section  2.4(b).  The
Company shall use its commercially  reasonable  efforts to obtain the consent of
each holder of Options to the foregoing  treatment of such Options to the extent
required  under the Assumed  Option  Plans  pursuant to which such  Options were
granted.

          (b) Notwithstanding the provisions of Section 2.4(a), each person who,
on or  prior  to  the  Effective  Date,  is the  holder  of an  outstanding  and
unexercised Option shall be entitled, with respect to all or any portion of such
holder's Option, to make an unconditional  election to the Company in writing (a
"Retention  Election") on or prior to the Effective Date, to convert,  as of the
Effective  Time,  such  portion  of their  Options as may be  specified  in such
Retention  Election into options to purchase  shares of common stock,  par value
$.01 per share, of Parent ("Cendant  Common Stock"),  as set forth in subsection
(c) below, in lieu of receiving a cash payment, if any, in consideration for the
cancellation of such portion of their Options in the manner described in Section
2.4(a).

          (c) Any portion of an Option with respect to which a timely  Retention
Election has been delivered to the Company (the "Elected Portion") shall, at the
Effective Time, become and represent an option to purchase Cendant Common Stock;
and Parent  shall  assume each such option  (hereinafter,  an "Assumed  Option")
subject to the terms of the  applicable  Assumed  Option  Plan,  in each case as
heretofore amended or restated, as the case may be, and the agreement evidencing
the grant thereunder of such Assumed Option;  provided,  however,  that from and
after the  Effective  Time,  (i) the  number of shares of Cendant  Common  Stock
purchasable upon exercise of such Assumed Option shall be equal to the number of
shares of Company Common Stock that were  purchasable  under such Assumed Option
immediately  prior to the Effective  Time  multiplied by the Exchange  Ratio (as
defined below),  and rounded up or down to the nearest whole share, and (ii) the
per share  exercise  price under each such  Assumed  Option shall be adjusted by
dividing  the per  share  exercise  price of each  such  Assumed  Option  by the
Exchange  Ratio,  and rounding up or down to the nearest  whole cent;  provided,
however, that in the case of any Options intended to qualify as "incentive stock
options" under Section 422 of the Code, the adjustments pursuant to this Section
2.4(c) shall be determined  in order to comply with Section  424(a) of the Code.
The terms of the Assumed Option shall be the same as the original  Option except
that all  references  to the Company shall be deemed to be references to Parent.
The terms of each Assumed Option shall, to the extent provided in the applicable
Assumed Option Plan, be subject to further  adjustment as appropriate to reflect
any stock split, stock dividend,  recapitalization  or other similar transaction
with respect to Cendant Common Stock on or subsequent to the Effective Time. The
"Exchange  Ratio" shall be equal to the ratio obtained by dividing the amount of
the Merger  Consideration  by the average  closing price of one share of Cendant
Common Stock on the New York Stock Exchange for the ten (10) consecutive trading
days immediately preceding the Effective Date.

          (d) The parties  acknowledge  that each  Option to purchase  shares of
Company  Common  Stock under the Assumed  Option Plans shall become fully vested
and exercisable in connection with consummation of the Merger in accordance with
and subject to the terms of such Option and the relevant Assumed Option Plan.

          2.5  Adjustments.  If,  during  the  period  between  the date of this
Agreement and the Effective  Time,  any change in the  outstanding  Shares shall
occur in accordance with the terms of this Agreement, including by reason of any
reclassification,  recapitalization,  stock  split or  combination,  exchange or
readjustment of Shares, or stock dividend thereon with a record date during such
period, the cash payable pursuant to the Offer, the Merger Consideration and any
other  amounts  payable  pursuant  to  this  Agreement  shall  be  appropriately
adjusted.

          2.6 Stockholders Meeting.

          (a) The Company,  acting through the Board,  shall, in accordance with
and to the extent permitted by applicable law:

               (i) as promptly as practicable after the date hereof,  call, give
notice  of,  convene  and  hold  a  special  meeting  of its  stockholders  (the
"Stockholders  Meeting") for the purpose of  considering  and taking action upon
the adoption of this Agreement;

               (ii) prepare and file with the Securities and Exchange Commission
(the "SEC") a preliminary  proxy  statement  relating to this  Agreement and the
Merger  as  promptly  as  practicable  after  the  date  hereof,   and  use  its
commercially  reasonable efforts to obtain and furnish the information  required
to be included in such proxy  statement  and,  after  consultation  with Parent,
respond  promptly to any comments  made by the SEC and its staff with respect to
the preliminary proxy statement and cause a definitive proxy statement  relating
to this  Agreement and the Merger (such proxy  statement,  together with any and
all amendments or supplements  thereto,  the "Proxy  Statement") to be mailed to
its stockholders at the earliest practicable time;

               (iii) include in the Proxy Statement the  recommendations  of the
Independent  Committee  and the Board that  stockholders  of the Company vote in
favor of the adoption of this Agreement (as the same may be amended, modified or
withdrawn in accordance with Section 5.2(d) hereof); and

               (iv) use its  reasonable  best efforts to solicit from holders of
Shares  proxies in favor of the  adoption of this  Agreement  and take all other
action  necessary or  advisable  to secure,  at the  Stockholders  Meeting,  the
affirmative  vote of (A) the holders of a majority of the outstanding  shares of
Company  Common Stock  (voting as one class,  with each share of Company  Common
Stock  having one vote) and (B) the  holders of a majority  of the votes cast at
the  Stockholders  Meeting by holders of Shares in favor of the adoption of this
Agreement  (the  "Company  Stockholder  Approval").  The Company shall cause all
Shares for which valid  proxies have been  submitted and not revoked to be voted
at the Stockholders Meeting in accordance with the instructions on such proxies.

          (b) Once the  Stockholders  Meeting has been called and  noticed,  the
Company shall not postpone or adjourn the  Stockholders  Meeting (other than for
the absence of a quorum) without the prior written consent of Parent.

          (c) Parent,  PHH and Purchaser  agree to promptly  provide the Company
with the information  concerning  Parent, PHH and Purchaser and their respective
Affiliates  required to be included in the Proxy Statement.  At the Stockholders
Meeting,  Parent, PHH and Purchaser shall vote, or cause to be voted, all shares
of Company Common Stock  beneficially  owned by them or any of their  respective
Subsidiaries in favor of the adoption of this Agreement.

          (d)  Notwithstanding  anything  to  the  contrary  contained  in  this
Agreement,   in  the  event  that  the   Independent   Committee   changes   its
recommendation  of this  Agreement  and the Merger in  accordance  with  Section
5.2(d) hereof and this Agreement has not been terminated pursuant to Article VII
hereof,   then,   without  limiting  the  Company's   ability  to  disclose  the
recommendations  of the  Board  and  the  Independent  Committee  in  the  Proxy
Statement:

               (i) in  performing  its  obligations  under this Section 2.6, the
Company  shall not be obligated  to solicit  from  holders of Shares  proxies in
favor of the  adoption  of this  Agreement  or to take all action  necessary  or
advisable  to secure,  at the  Stockholders  Meeting,  the Company  Stockholders
Approval,  but instead shall be obligated to solicit impartially from holders of
Shares proxies to be voted at the  Stockholders  Meeting (making no instructions
to vote in favor or against, but merely to return a completed proxy card) and to
take all action necessary or advisable to maximize, at the Stockholders Meeting,
the number of proxies submitted by holders of Shares;

               (ii) the Company shall remain  obligated to vote all  unspecified
but executed proxies  submitted by holders of Shares in favor of the adoption of
this Agreement;

          (iii) Parent and its affiliates and agents shall have the right,  as a
participant in the Company's  solicitation of proxies,  to communicate  with and
solicit from holders of Shares the submission of Company proxies in favor of the
adoption of this  Agreement  and to take all actions  necessary  or advisable to
secure,  at the  Stockholders  Meeting,  the Company  Stockholders  Approval and
otherwise to act as a participant in the Company's solicitation; and

               (iv) The Company shall  cooperate with Parent in connection  with
any  actions  taken by it pursuant  to clause  (d)(ii)  above and shall make any
filings under Federal securities laws required in connection therewith.


                                   ARTICLE III
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company represents and warrants to Parent, PHH and Merger
Sub as of the date of this Agreement as follows:

                  3.1  Organization.  The Company and each of its Subsidiaries
is a corporation or other entity duly  organized,  validly  existing and in good
standing under the laws of the jurisdiction of its incorporation or organization
and has all requisite  corporate or other power and authority to own,  lease and
operate  its  properties  and to  carry  on  its  business  as it is  now  being
conducted.  The  Company  and  each of its  Subsidiaries  is duly  qualified  or
licensed and in good standing to do business in each  jurisdiction  in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary where the failure to be so
duly  qualified or licensed or in good standing  would,  individually  or in the
aggregate,  result in a Material  Adverse  Effect (as  defined  below).  As used
herein,  the term "Material  Adverse Effect" means a material adverse change in,
or effect on, the  business,  condition  (financial  or otherwise) or results of
operations of the Company and its  Subsidiaries  taken as a whole, but shall not
include  any  change,  event,  effect,  occurrence  or  circumstance  arising in
connection  with or as a result of (i) the  announcement  or  performance of the
Transactions  contemplated  by this  Agreement,  in and of  themselves,  or (ii)
Parent's  announcement  or  other  communication  of  Parent  of  the  plans  or
intentions  of Parent with respect to any conduct of any business of the Company
or any of its Subsidiaries.

          3.2 Authority Relative to this Agreement.

          (a) The Company has the  requisite  corporate  power and  authority to
execute  and  deliver  this  Agreement  and  to  consummate  the   Transactions,
including,  without  limitation,  the Merger. The execution and delivery of this
Agreement  by the  Company,  and  the  consummation  of the  Transactions  to be
consummated by it, have been duly authorized by the Board and no other corporate
proceedings  on the part of the Company are required to authorize this Agreement
or to consummate the  Transactions  to be  consummated  by it, other than,  with
respect to the Merger, (i) the Company Stockholder  Approval and (ii) the filing
and  recordation of the  Certificate of Merger in accordance with the DGCL. This
Agreement  has been duly executed and delivered by the Company and (assuming due
authorization,  execution  and  delivery  hereof by Parent,  PHH and Merger Sub)
constitutes a valid and binding  agreement of the Company,  enforceable  against
the Company in accordance with its terms,  except that (i) such  enforcement may
be subject to applicable bankruptcy, insolvency,  reorganization,  moratorium or
other similar laws,  now or hereafter in effect,  relating to creditors'  rights
generally and (ii) equitable remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable  defenses and to the
discretion of the court before which any proceeding therefor may be brought.

          (b)  The  Company   hereby   represents  and  warrants  that  (i)  the
Independent Committee has been duly authorized and constituted;  (ii) the Board,
based on the  recommendation  of the  Independent  Committee  at a meeting  duly
called and held, has (A) determined that (x) the Merger Consideration is fair to
the holders of Shares and (y) the Merger is advisable and in the best  interests
of the  Company  and the  holders of  Shares,  (B)  approved  and  declared  the
advisability  of,  this  Agreement  and (C)  determined  to  recommend  that the
stockholders  of the Company vote to adopt this Agreement in accordance with the
provisions of the DGCL.  The  Independent  Committee and the Board have received
the written  opinion (the  "Fairness  Opinion") of Morgan  Stanley to the effect
that, as of the date hereof, the Merger  Consideration to be paid to the holders
of Shares is fair to such holders from a financial point of view, and, as of the
date  hereof,  such  Fairness  Opinion has not been  withdrawn.  The Company has
delivered a true, correct and complete copy of the Fairness Opinion to Parent.

          3.3 Vote Required.  The affirmative  vote of the holders of a majority
of the outstanding shares of Company Common Stock is the only vote of holders of
any class or series of the  Company's  capital  stock  required  to approve  the
Merger  and adopt this  Agreement  under the DGCL,  the  Company's  Amended  and
Restated  Certificate of  Incorporation  and the Company's  Amended and Restated
By-Laws.

          3.4  State  Takeover  Statutes.  The  Company  has  elected  not to be
governed by Section 203 of the DGCL in accordance with the provisions of Section
203(b) of the DGCL.  The  restrictions  on business  combinations  contained  in
Section 203 of the DGCL do not apply to the Merger or the other Transactions nor
shall  they  apply to any  member of the  Acquisition  Group as a result of this
Agreement or the Transactions.

          3.5 Capitalization.

          (a)  The  authorized   capital  stock  of  the  Company   consists  of
100,000,000 shares of Company Common Stock,  15,000,000 shares of class B common
stock,  par value $.01 per share of the Company (the "Class B Common Stock") and
20,000,000  shares of preferred  stock, par value $.01 per share, of the Company
("Preferred Stock"). As of October 31, 2000, there were (i) 31,156,172 shares of
Company Common Stock issued and  outstanding,  (ii) 4,768,828  shares of Company
Common Stock held in the Company's  treasury,  (iii) 9,000,000 shares of Company
Common Stock  reserved for issuance  upon the exercise of  outstanding  Options,
(iv) no shares of Company Common Stock reserved for issuance upon the conversion
of the Class B Common Stock, (v) no shares of Class B Common Stock issued,  (vi)
no shares of Class B Common Stock  reserved for issuance upon  conversion of the
series A preferred  stock,  par value $.01 per share,  of Avis Fleet Leasing and
Management Corporation, a Texas corporation and a subsidiary of the Company (the
"Avis  Fleet")  and series B preferred  stock,  par value $.01 per share of Avis
Fleet, and (vii) no shares of Preferred Stock issued. All issued and outstanding
shares of Company  Common  Stock are,  and all  shares of Company  Common  Stock
issuable  upon  exercise of Options or  conversion  of the Class B Common  Stock
shall be, when issued in accordance  with the  respective  terms  thereof,  duly
authorized  and  validly  issued,  fully  paid  and  nonassessable,  and free of
preemptive rights.

          (b) Except as set forth in subsection  (a) above or in Section  3.5(b)
of the  disclosure  letter  delivered  by the  Company  to  Parent  prior to the
execution of this Agreement (the "Company Disclosure Letter"),  the Company does
not have any shares of its capital stock issued or outstanding  and there are no
outstanding  subscriptions,  options,  warrants,  calls, convertible securities,
rights or other agreements or commitments (i) to which the Company or any of its
Subsidiaries  is a party of any  character  relating  to the issued or  unissued
capital  stock  or  other  equity  interests  of  the  Company  or  any  of  its
Subsidiaries, or (ii) obligating the Company or any Subsidiary of the Company to
(A)  issue,  transfer  or sell any  shares  of  capital  stock  or other  equity
interests  of  the  Company  or any  Subsidiary  of the  Company  or  securities
convertible into or exchangeable for such shares or equity interests, (B) grant,
extend or enter into any such subscription,  option,  warrant, call, convertible
securities or other right,  agreement,  arrangement or commitment to repurchase,
(C) redeem or otherwise acquire any such shares of capital stock or other equity
interests  or (D)  provide a material  amount of funds to, or make any  material
investment (in the form of a loan,  capital  contribution  or otherwise) in, any
Person.

          (c) Neither the Company nor any of its  Subsidiaries  has  outstanding
bonds,  debentures,  notes or other  obligations,  the holders of which have the
right to vote (or which  are  convertible  into or  exercisable  for  securities
having  the  right  to  vote)  with  the  stockholders  of the  Company  or such
Subsidiary on any matter.  Except as set forth in Section  3.5(c) of the Company
Disclosure   Letter,   there  are  no  voting  trusts  or  other  agreements  or
understandings  to which the Company or any of its  Subsidiaries is a party with
respect to the  voting of the  capital  stock or other  equity  interest  of the
Company or any of its Subsidiaries.

          3.6 Subsidiaries.

          (a)  Section  3.6(a) of the  Company  Disclosure  Letter  sets forth a
complete  and accurate  list of each  Subsidiary  of the Company.  Except as set
forth in Section 3.6 of the Company  Disclosure  Letter,  all outstanding equity
securities or other equity  interests in each  Subsidiary of the Company (i) are
owned of record and  beneficially  by the  Company  or another of the  Company's
wholly owned Subsidiaries,  free of all liens, claims,  charges or encumbrances,
and (ii) have been duly  authorized,  and are  validly  issued,  fully  paid and
nonassessable,  and free of  preemptive  rights.  Section  3.6(a) of the Company
Disclosure Letter sets forth all debt securities in excess of $500,000 issued by
the Company or any Subsidiary of the Company.

          (b) Except as set forth in Section  3.6(b) of the  Company  Disclosure
Letter,  neither the Company nor any Subsidiary of the Company owns, directly or
indirectly,  a  material  amount  of  any  capital  stock,  interest  or  equity
investment or debt security in any corporation,  partnership,  limited liability
company, joint venture,  business, trust or other entity other than interests in
another Subsidiary of the Company.

          3.7 No Conflict; Required Filings and Consents.

          (a)  Except  for (i)  applicable  requirements  of (A) the  Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (B) the Hart-Scott-Rodino
Antitrust  Improvements Act of 1976, as amended (the "HSR Act"), and any similar
foreign competition laws applicable hereto, and (C) any state securities or blue
sky laws applicable  hereto,  (ii) the filing and recordation of the Certificate
of Merger,  as required by the DGCL, and (iii) as set forth in Section 3.7(a) of
the Company  Disclosure  Letter,  neither  the  execution  and  delivery of this
Agreement by the Company nor the consummation by the Company of the Transactions
contemplated  hereby shall require on the part of the Company or any  Subsidiary
of the Company any filing  with,  or  obtaining  of, any permit,  authorization,
consent or  approval  of, or any notice  to, any court,  tribunal,  legislative,
executive or regulatory authority or agency (a "Governmental Entity"), where the
failure to so file or obtain would, individually or in the aggregate,  result in
a Material  Adverse Effect or would materially  impair the Company's  ability to
consummate the Transactions.

          (b) Except as set forth in Section  3.7(b) of the  Company  Disclosure
Letter,  neither the execution and delivery of this Agreement by the Company nor
the  consummation by the Company of the  Transactions  will (i) conflict with or
result in any breach of any provision of the Amended and Restated Certificate of
Incorporation  of the Company or the Amended and Restated By-laws of the Company
or equivalent  organizational  documents of any Subsidiary of the Company,  (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse  of  time  or  both) a  default  under,  or  give  rise  to any  right  of
termination,  cancellation,  suspension,  modification  or  acceleration  of any
obligation  under, or result in the creation of a lien under,  any of the terms,
conditions or provisions  of, or otherwise  require the consent or waiver of, or
notice to, any other party under, any bond,  note,  mortgage,  indenture,  other
evidence of  indebtedness,  guarantee,  license,  agreement or other contract or
instrument ("Contract") to which the Company or any Subsidiary of the Company is
a party or by which any of them or any of their respective  properties or assets
is bound,  (iii)  violate  any law,  statute,  rule,  regulation,  order,  writ,
injunction or decree applicable to the Company, any Subsidiary of the Company or
any of their respective properties or assets, or (iv) require the Company to pay
any existing indebtedness where such violations,  breaches,  defaults or rights,
in the case of clause (ii) or (iii),  would,  individually  or in the aggregate,
result in a Material  Adverse  Effect or would  materially  impair the Company's
ability to consummate the Transactions.

          3.8 SEC Documents and Financial Statements.

          (a) The Company has filed all forms, reports and documents required to
be filed with the SEC  pursuant  to the  Exchange  Act since  December  31, 1998
(collectively,  the "Company SEC Reports"). The Company SEC Reports, as of their
respective  filing dates, (i) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements  therein,  in light of the  circumstances  under
which they were made, not misleading, and (ii) complied in all material respects
with the then applicable requirements of the Exchange Act, the Securities Act of
1933, as amended (the "Securities Act") and the applicable rules and regulations
thereunder.  No Subsidiary of the Company is required to file any forms, reports
or other documents with the SEC.

          (b) The  consolidated  financial  statements  (including  all  related
notes)  included  in the Company SEC  Reports  fairly  present the  consolidated
financial  position of the Company and its  consolidated  Subsidiaries as of the
respective dates thereof,  and the results of operations and the changes in cash
flows  of the  Company  and its  consolidated  Subsidiaries  for the  respective
periods  set  forth  therein.  Each  of the  consolidated  financial  statements
(including  all  related  notes)  included  in the  Company SEC Reports has been
prepared  in  accordance   with   generally   accepted   accounting   principles
consistently  applied ("GAAP"),  except as otherwise noted therein, and subject,
in the case of interim financial  statements,  to normal and recurring  year-end
audit adjustments.

          3.9 No Undisclosed Liabilities.  Except as and to the extent disclosed
in Section 3.9 of the Company Disclosure Letter or reflected or reserved against
in the  Company's  consolidated  balance  sheets  included  in the  Company  SEC
Reports,  and except for liabilities  and  obligations  incurred in the ordinary
course of  business,  consistent  with past  practice  since  December 31, 1999,
neither the Company nor any  Subsidiary  of the Company has any  liabilities  or
obligations of any nature, whether or not accrued, contingent or otherwise, that
would be required by GAAP to be reflected on a consolidated balance sheet of the
Company and its Subsidiaries (or in the notes thereto).

          3.10  Absence  of  Certain  Changes.  Except as  contemplated  by this
Agreement  or set forth in Section 3.10 of the Company  Disclosure  Letter or in
the Form 10-Q of the Company  filed with  respect to the quarter  ended June 30,
2000,  since  June  30,  2000,  (a)  the  businesses  of  the  Company  and  its
Subsidiaries have been conducted in the ordinary course of business,  consistent
with past  practice,  (b) neither the Company nor any  Subsidiary of the Company
has taken any  action  which,  if taken  after the date  hereof,  would  violate
Section 5.1 hereof if taken  without the  approval of Parent,  and (c) there has
not  occurred  any event,  circumstance  or  condition  which,  individually  or
together  with all such events,  circumstances  or  conditions,  has resulted or
would result in a Material Adverse Effect.

          3.11 Proxy Statement.  None of the information supplied by the Company
for inclusion or incorporation by reference in the Proxy Statement shall, at the
time it is filed with the SEC, at the time it is first  mailed to the  Company's
stockholders,  or at the time of the  Stockholders  Meeting,  contain any untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary in order to make the statements therein, in light of
the  circumstances  under which they are made,  not  misleading,  except that no
representation or warranty is made by the Company as to any information supplied
by Parent,  PHH or Merger Sub to the Company for inclusion or  incorporation  by
reference in the Proxy Statement. The Proxy Statement shall comply as to form in
all material  respects with the  requirements  of the Exchange Act and the rules
and regulations promulgated thereunder.

          3.12 Litigation.  Except as specifically  disclosed in the Company SEC
Reports or set forth in Section 3.12 of the Company Disclosure Letter,  there is
no  action,  suit,  proceeding,  inquiry  or  investigation  pending  or, to the
knowledge of the Company,  threatened against or involving the Company or any of
its  Subsidiaries,  at law or in equity,  by or before any  Governmental  Entity
which (i), as of the date hereof,  questions or challenges  the validity of this
Agreement  or which (ii),  if adversely  determined,  would result in a Material
Adverse Effect or would materially impair or delay the ability of the Company to
consummate the Transactions to be consummated by it.

          3.13  Taxes.  Except  as set  forth  in  Section  3.13 of the  Company
Disclosure Letter:

          (a) Each of the Company and its  Subsidiaries  has (i) duly and timely
filed  (or  there  has  been  filed  on  their  behalf)  with  the   appropriate
Governmental Entities all material Tax Returns (as defined below) required to be
filed by it and all such  material Tax Returns are true,  correct and  complete;
(ii) duly paid in full (or there has been duly paid on its behalf) all Taxes (as
defined  below) shown on such Tax Returns  that are due and  payable;  and (iii)
made adequate provision, in accordance with GAAP (or adequate provision has been
made on its behalf), for the payment of all current Taxes not yet due.

          (b) Each of the  Company  and its  Subsidiaries  has  complied  in all
material  respects with all applicable laws,  rules and regulations  relating to
the payment  and  withholding  of Taxes and has,  within the time and the manner
prescribed by law, withheld and paid over the proper  Governmental  Entities all
material amounts required to be so withheld and paid over.

          (c) Neither the Company nor any of its  Subsidiaries  has requested an
extension  of time within  which to file any material Tax Return in respect of a
taxable  year  which has not since  been  filed and no  outstanding  waivers  or
comparable consents regarding the application of the statute of limitations with
respect to material Taxes or material Tax Returns has been given by or on behalf
of the Company or any of its Subsidiaries.

          (d) No material federal, state, local or foreign audits,  examinations
or other  administrative  court  proceedings  have  been  commenced  or,  to the
Company's  knowledge,  are  threatened  with  regard  to any  material  Taxes or
material  Tax  Returns  of the  Company or any of its  Subsidiaries.  No written
notification  has been received by the Company or any of its  Subsidiaries  that
such an audit,  examination  or other  proceeding is pending or threatened  with
respect to any material Taxes due from or with respect to or attributable to the
Company or any of its  Subsidiaries  or any material Tax Return filed by or with
respect to the Company or any of its Subsidiaries.

          (e) Neither the Company nor any of its  Subsidiaries is a party to any
agreement, plan, contract or arrangement that could result, separately or in the
aggregate,  in a payment  of (i) any  "excess  parachute  payments"  within  the
meaning of Section  280G of the Internal  Revenue Code of 1986,  as amended (the
"Code"), or (ii) any amount that would not be deductible under Section 162(m) of
the Code.

          (f) Neither the Company nor any of its  Subsidiaries is a party to any
material tax sharing, tax indemnity or other agreement or arrangement.

          (g) There are no  material  liens  for  Taxes  upon the  assets of the
Company  or any of its  Subsidiaries  except  liens  for  Taxes  not yet due and
payable.

          (h) For  purposes of this  Agreement,  "Taxes"  shall mean any and all
taxes,  charges,  fees, levies or other  assessments,  including  income,  gross
receipts,  excise,  real  or  personal  property,  sales,  withholding,   social
security,  occupation,  use,  service,  service use, value added,  license,  net
worth,  payroll,  franchise,  transfer and  recording  taxes,  fees and charges,
imposed by the United States Internal  Revenue Service (the "IRS") or any taxing
authority  (whether  domestic or foreign  including any state,  local or foreign
government  or any  subdivision  or taxing  agency  thereof  (including a United
States  possession)),  whether  computed on a separate,  consolidated,  unitary,
combined or any other basis; and such term shall include any interest, penalties
or additional amounts  attributable to, or imposed upon, or with respect to, any
such taxes,  charges,  fees, levies or other  assessments.  For purposes of this
Agreement, "Tax Return" shall mean any report, return, document,  declaration or
other  information or filing required to be supplied to any taxing  authority or
jurisdiction (foreign or domestic) with respect to Taxes.

          3.14 Employee Benefit Plans.

          (a) Each material  employee  benefit  plan,  program,  arrangement  or
agreement, including each "employee benefit plan," within the meaning of Section
3(3)  of the  Employee  Retirement  Income  Security  Act of  1974,  as  amended
("ERISA"),  in each case,  maintained by the Company or any of its Subsidiaries,
or to which the Company or any of its Subsidiaries contributes or is required to
contribute (each, a "Plan"; collectively,  "Plans") is listed in Section 3.14(a)
of the Company Disclosure Letter. None of the Company or any of its Subsidiaries
has any commitment or formal plan to create any additional employee benefit plan
or modify or change any  existing  Plan  (except as  required  to  maintain  the
tax-qualified status of any Plan intended to qualify under Section 401(a) of the
Code).

          (b) Except as disclosed in the Company SEC Reports or Section  3.14(b)
of the  Company  Disclosure  Letter  or to the  extent  that any  breach  of the
representations  set forth in this  sentence  would not have a Material  Adverse
Effect:  (i) each  Plan  (other  than any Plan that is a  "multiemployer  plan,"
within the meaning of Section  4001(a)(3) of ERISA (a "Multiemployer  Plan")) is
in compliance with applicable law and has been  administered and operated in all
respects  in  accordance  with  its  terms;  (ii)  each  Plan  (other  than  any
Multiemployer  Plan) which is intended to be  "qualified"  within the meaning of
Section  401(a) of the Internal  Revenue Code of 1986,  as amended (the "Code"),
has received a favorable determination letter regarding its tax-qualified status
from the IRS and the  Company  is not  aware  of any  circumstances  that  could
reasonably  be expected to result in the  revocation  of such letter;  (iii) the
actuarial present value of the accumulated plan benefits (whether or not vested)
under each Plan covered by Title IV of ERISA (other than any Multiemployer Plan)
as of the close of its most  recent  plan year did not  exceed the fair value of
the assets allocable  thereto;  (iv) no Plan covered by Title IV of ERISA (other
than any  Multiemployer  Plan) has been terminated and no proceedings  have been
instituted to terminate or appoint a trustee to administer any such plan; (v) no
"reportable  event"  (as  defined in Section  4043 of ERISA) has  occurred  with
respect to any Plan covered by Title IV of ERISA  (other than any  Multiemployer
Plan); (vi) no Plan (other than any  Multiemployer  Plan) subject to Section 412
of the Code or Section 302 of ERISA nor any such employee benefit plan sponsored
or maintained by any entity that,  together with the Company,  would be deemed a
"single  employer"  within the  meaning  of Section  4001(b) of ERISA (an "ERISA
Affiliate") has incurred any accumulated  funding  deficiency within the meaning
of Section 412 of the Code or Section 302 of ERISA,  or obtained a waiver of any
minimum  funding  standard or an  extension  of any  amortization  period  under
Section  412 of the Code or Section  303 or 304 of ERISA;  (vii) the Company and
each Subsidiary of the Company have made all contributions to each Plan required
by the terms of each such Plan or any collectively  bargained agreement;  (viii)
neither  the  Company  nor  any  Subsidiary  of the  Company  has  incurred  any
unsatisfied withdrawal liability under Part 1 of Subtitle E of Title IV of ERISA
to  any   Multiemployer   Plan;  (ix)  no  Plan  provides   medical,   surgical,
hospitalization,  death  or  similar  benefits  (whether  or  not  insured)  for
employees  or former  employees  of the Company or any of its  Subsidiaries  for
periods extending beyond their retirement or other termination of service, other
than (1)  coverage  mandated by  applicable  law, (2) death  benefits  under any
"pension  plan," or (3)  benefits the full cost of which is borne by the current
or former employee (or his or her beneficiary);  (x) neither the Company nor any
of  its  Subsidiaries   nor,  to  the  knowledge  of  the  Company,   any  other
"disqualified  person" or "party in interest" (as defined in Section  4975(e)(2)
of the Code and  Section  3(14)  of  ERISA,  respectively)  has  engaged  in any
transactions  in connection with any Plan that would result in the imposition of
a penalty  pursuant to Section 502(i) of ERISA or a tax pursuant to Section 4975
of the Code;  (xi) there has been no  failure  of a Plan that is a group  health
plan (as defined in Section  5000(b)(1) of the Code) to meet the requirements of
Section 4980B(f) of the Code with respect to a qualified beneficiary (as defined
in  Section  4980B(g)  of the  Code);  (xii)  there are not  pending  or, to the
Company's  knowledge,  threatened,  claims by or on  behalf of any Plan,  by any
employee or beneficiary  covered under any such Plan or otherwise  involving any
such Plan  (other  than  routine  claims for  benefits  payable in the  ordinary
course, and appeals of denied claims); and (xiii) no liability under Title IV or
Section 302 of ERISA has been  incurred  by the  Company or any ERISA  Affiliate
that  has not been  satisfied  in  full,  and no  condition  exists  that  could
reasonably  be expected  to present a material  risk to the Company or any ERISA
Affiliate of incurring any such liability, other than liability for premiums due
the Pension  Benefit  Guaranty  Corporation  (which premiums have been paid when
due).

          (c) The Company has  heretofore  delivered or made available to Parent
true and complete  copies of each Plan and any amendments  thereto,  any related
trust or other funding vehicle,  any summaries required under ERISA or the Code,
the  most  recent  annual  reports  filed  with the  IRS,  and the  most  recent
determination letter received from the IRS with respect to each Plan intended to
qualify under Section 401(a) of the Code.

          (d) Except as set forth in Section  3.14(d) of the Company  Disclosure
Letter,  the  consummation  of the  Transactions  shall not,  either alone or in
combination  with another event,  (i) entitle any current or former  employee or
officer of the Company or any of its Subsidiaries to severance pay, unemployment
compensation  or any other payment or benefit,  except as expressly  provided in
this Agreement,  or (ii) accelerate the time of payment or vesting,  or increase
the amount of compensation due any such employee or officer.

          3.15 Compliance with Applicable  Laws.  Except as set forth in Section
3.15 of the Company Disclosure Letter, each of the Company and its Subsidiaries,
and their respective properties, assets and operations, are in compliance in all
material  respects  with all  applicable  statutes,  laws,  rules,  regulations,
judgments, decrees, orders, arbitration awards, franchises,  permits or licenses
or other  governmental  authorizations  or  approvals  which are material to the
business and operations of the Company or its Subsidiaries.  Except as set forth
in  Section  3.15  of  the  Company  Disclosure  Letter,  the  Company  and  its
Subsidiaries hold all licenses, franchises, ordinances, authorizations, permits,
certificates,   variances,  exemptions,  concessions,  leases,  rights  of  way,
easements,  instruments,  orders and approvals, domestic or foreign ("Permits"),
required for the ownership of the assets and operation of the  businesses of the
Company  and its  Subsidiaries  where  the  failure  of  which  to  hold  would,
individually or in the aggregate, result in a Material Adverse Effect. Except as
set forth in Section 3.15 of the Company  Disclosure  Letter, all Permits of the
Company and its Subsidiaries required under any statute, law, rule or regulation
of any Governmental  Entity are in full force and effect where the failure to be
in full force and effect would have a Material Adverse Effect.

          3.16 Material Contracts.

          (a) Except as set forth in Section  3.16(a) of the Company  Disclosure
Letter,  neither the Company nor any Subsidiary of the Company is a party to, or
bound by, any  Contract  which is material to the Company and its  Subsidiaries,
taken as a whole (a "Company Material Contract"). Notwithstanding the foregoing,
each of the following  Contracts shall be a Company Material  Contract and shall
be set forth in Section 3.16 of the Disclosure Schedule:

               (i) any  contracts or  agreements  under which the Company or any
Subsidiary  of the  Company  has any  outstanding  indebtedness,  obligation  or
liability for borrowed  money or the deferred  purchase price of property or has
the right or obligation to incur any such indebtedness,  obligation or liability
in excess of $500,000;

               (ii) any bonds or agreements of guarantee or  indemnification  in
which the Company or any Subsidiary of the Company acts as surety,  guarantor or
indemnitor  with respect to any  obligation  (fixed or  contingent) in excess of
$500,000,  other than any such  guarantees of the  obligations of the Company or
any Subsidiary of the Company;

               (iii)  any  noncompete  agreements  to  which  the  Company,  any
Subsidiary of the Company or any Affiliate thereof is a party;

               (iv) any partnership and joint venture agreements; and

               (v) any Contract  that  provides for the payment of any amount or
entitles any Person to receive any other  benefit or exercise any other right as
a result of the execution,  delivery or performance  of this  Agreement,  or the
consummation of the Transactions, including the Merger.

          (b) Neither the Company nor any Subsidiary of the Company is in breach
of or default under the terms of any Company Material Contract where such breach
or  default  would have a  Material  Adverse  Effect.  To the  knowledge  of the
Company,  no other  party to any  Company  Material  Contract is in breach of or
default under the terms of any Company  Material  Contract  where such breach or
default would have a Material Adverse Effect.  Each Company Material Contract is
a valid and binding  obligation of the Company or the  Subsidiary of the Company
which is party thereto and, to the knowledge of the Company, of each other party
thereto,  and is in full force and effect,  except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency,  reorganization,  moratorium or
other similar laws,  now or hereafter in effect,  relating to creditors'  rights
generally and (ii) equitable remedies of specific performance and injunctive and
other forms of equitable relief may be subject to equitable  defenses and to the
discretion of the court before which any proceeding therefor may be brought.

          3.17 Environmental Laws.

          (a) Except as set forth in Section  3.17(a) of the Company  Disclosure
Letter,  each of the Company and its  Subsidiaries  is (i) in  compliance in all
material  respects with all applicable  Environmental  Laws (as defined  below),
which compliance  includes the possession by the Company and its Subsidiaries of
all Permits and other  governmental  authorizations  required  under  applicable
Environmental Laws, and (ii) in compliance with the terms and conditions of such
Permits  where the failure to be in  compliance  would  result in a liability or
obligation of the Company or any of its  Subsidiaries of any nature,  whether or
not  accrued,   contingent  or  otherwise,   in  an  amount  exceeding  $500,000
individually,  and $5,000,000 in the  aggregate.  Except as set forth in Section
3.17(a) of the  Company  Disclosure  Letter,  neither the Company nor any of its
Subsidiaries has received any  communication  or written notice,  whether from a
Governmental Entity,  citizens group,  employee or otherwise,  that alleges that
the Company or any of its  Subsidiaries  is not in  compliance  with  applicable
Environmental  Laws,  where the failure to be in  compliance  would  result in a
liability or obligation of the Company or any of its Subsidiaries of any nature,
whether or not accrued, contingent or otherwise, in an amount exceeding $500,000
individually,  and $5,000,000 in the aggregate and, to the best knowledge of the
Company and its Subsidiaries after due inquiry,  there are no circumstances that
may prevent or interfere with such  compliance in the future,  where the failure
to be in compliance  would result in a liability or obligation of the Company or
any of its  Subsidiaries  of any nature,  whether or not accrued,  contingent or
otherwise,  in an amount exceeding $500,000 individually,  and $5,000,000 in the
aggregate.

          (b) Except as set forth in Section  3.17(b) of the Company  Disclosure
Letter,  there is no Environmental  Claim (as defined below) which, if adversely
determined,  would result in a liability or  obligation of the Company or any of
its Subsidiaries,  whether or not accrued, contingent or otherwise, in an amount
exceeding  $500,000  individually,  and $5,000,000 in the aggregate,  pending or
threatened  against  the  Company  or any of its  Subsidiaries  or,  to the best
knowledge of the Company and its  Subsidiaries  after due  inquiry,  against any
person or entity whose liability for any Environmental  Claim the Company or any
of its Subsidiaries has or may have retained or assumed either  contractually or
by operation of law which, if adversely determined,  would result in a liability
or obligation of the Company or any of its Subsidiaries, whether or not accrued,
contingent or  otherwise,  in an amount  exceeding  $500,000  individually,  and
$5,000,000 in the aggregate.

          (c) Except as set forth in Section  3.17(c) of the Company  Disclosure
Letter,  there  are no  past  or  present  actions,  activities,  circumstances,
conditions, events or incidents, including the Release (as defined below) of any
Hazardous  Materials  (as  defined  below),  that  could  form the  basis of any
material  Environmental  Claim (as defined  below) against the Company or any of
its  Subsidiaries  or, to the best knowledge of the Company and its Subsidiaries
after due inquiry, against any Person or entity whose liability for any material
Environmental  Claim  the  Company  or any of its  Subsidiaries  has or may have
retained or assumed either contractually or by operation of law.

          (d)  Without in any way  limiting  the  generality  of the  foregoing,
except as set forth in Section  3.17(d) of the Company  Disclosure  Letter,  all
underground  storage tanks owned,  operated,  or leased by the Company or any of
its  Subsidiaries and which are subject to regulation under the federal Resource
Conservation  and  Recovery  Act (or  equivalent  state or local law  regulating
underground storage tanks) meet the technical  standards  prescribed at Title 40
Code of Federal  Regulations Part 280 which became  effective  December 22, 1998
(or any applicable state or local law requirements which are more stringent than
such technical  standards or which became  effective before such date) where the
failure to meet such  standards or  requirements  would result in a liability or
obligation of the Company or any Subsidiary,  whether or not accrued, contingent
or otherwise,  in an amount exceeding $500,000  individually,  and $5,000,000 in
the aggregate.

          (e) The Company has provided to Parent true and correct  copies of all
material assessments,  reports and investigations or audits in the possession of
the Company or its Subsidiaries  regarding  environmental matters pertaining to,
or the  environmental  condition of, any property  currently or formerly  owned,
operated or leased by the Company or its  Subsidiaries,  or the  compliance  (or
noncompliance)  by the Company or any of its Subsidiaries with any Environmental
Laws.

          (f) For purposes of this Agreement:

               (i)  "Environmental  Claim"  means any  claim,  action,  cause of
action,  investigation  or  notice  (written  or oral) by any  person  or entity
alleging potential  liability  (including  potential liability for investigatory
costs,  cleanup costs,  governmental  response costs, natural resources damages,
property damages,  personal injuries,  or penalties) arising out of, based on or
resulting  from  (a) the  presence,  or  Release  into the  environment,  of any
Hazardous  Materials  at any  location,  whether or not owned or operated by the
Company or any of its Subsidiaries or (b) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law.

               (ii) "Environmental Laws" means all federal,  interstate,  state,
local and foreign laws and  regulations  relating to pollution or  protection of
human health,  safety, or the environment (including ambient air, surface water,
ground water, land surface or subsurface strata), including laws and regulations
relating to emissions,  discharges, releases or threatened releases of Hazardous
Materials, or otherwise relating to the manufacture,  processing,  distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials.

               (iii)...."Hazardous   Materials"  means  chemicals,   pollutants,
contaminants,   wastes,  toxic  substances,  hazardous  substances,  radioactive
materials, asbestos, petroleum and petroleum products.

               (iv) "Release" shall mean releasing,  spilling, leaking, pumping,
pouring,  emitting,  emptying,  discharging,  escaping,  leaching,  disposing or
dumping.

          3.18  Intellectual  Property.  Except  for the rights  (the  "Licensed
Rights") licensed to the Company pursuant to the Master License Agreement, dated
as of July 30, 1997,  among  Cendant Car Rental,  Inc.,  Avis Rent A Car System,
Inc.  and Wizard  Co.,  Inc.  (the  "Avis  License"),  either  the  Company or a
Subsidiary of the Company owns,  or is licensed or otherwise  possesses  legally
enforceable rights to use, all Intellectual  Property (as defined below) used in
their  respective  businesses  where the  failure to own,  license or  otherwise
possess such Intellectual Property would result in a Material Adverse Effect and
the  consummation of the  Transactions  shall not alter or impair such rights in
any  material  respect.  Except  as set  forth in  Section  3.18 of the  Company
Disclosure  Letter,  there are no pending or, to the  knowledge  of the Company,
threatened  claims  by any  Person  challenging  the use by the  Company  or its
Subsidiaries of any material  trademarks,  trade names,  service marks,  service
names, mark  registrations,  logos,  assumed names,  registered and unregistered
copyrights,  patents or applications and registrations  therefor  (collectively,
the  "Intellectual  Property")  in  their  respective  operations  as  currently
conducted  which, if adversely  determined,  would result in a Material  Adverse
Effect. The conduct of the businesses of the Company and its Subsidiaries (other
than the use by the  Company  and its  Subsidiaries  of the  Licensed  Rights in
accordance  with the  terms  of the Avis  License)  does  not  infringe,  in any
material respect, upon any intellectual property rights or any other proprietary
right of any Person, and neither the Company nor any Subsidiary has received any
written notice from any other Person  pertaining to or challenging  the right of
the Company or any Subsidiary to use any of the Intellectual Property. Except as
set forth in Section 3.18 of the Company Disclosure Letter,  neither the Company
nor any of its Subsidiaries has made any claim of a violation or infringement by
others of its rights to or in connection with the Intellectual  Property used in
their  respective  businesses  which  violation  or  infringement  would  have a
Material Adverse Effect.

          3.19 Labor Matters.

          (a) Except as set forth in Section  3.19(a) of the Company  Disclosure
Letter or specifically  disclosed in the Company SEC Reports, there are no labor
or collective  bargaining  agreements to which the Company or any  Subsidiary of
the  Company is a party.  To the  knowledge  of the  Company,  there is no union
organizing effort pending or threatened against the Company or any Subsidiary of
the Company.  Except as set forth in Section  3.19(a) of the Company  Disclosure
Letter,  there is no labor strike,  labor dispute,  work  slowdown,  stoppage or
lockout  pending or, to the  knowledge  of the  Company,  threatened  against or
affecting the Company or any  Subsidiary of the Company,  which has had or would
result in a Material  Adverse Effect.  Except as set froth in Section 3.19(a) of
the  Company  Disclosure  Letter,  there is no unfair  labor  practice  or labor
arbitration  proceeding pending or, to the knowledge of the Company,  threatened
against  the Company or any  Subsidiary  of the  Company,  that has had or would
result in a Material  Adverse Effect.  The Company and its  Subsidiaries  are in
compliance in all material  respects with all  applicable  laws  respecting  (i)
employment and employment practices, (ii) terms and conditions of employment and
wages and hours, and (iii) unfair labor practice. Except as set forth in Section
3.19(a)  of the  Company  Disclosure  Letter or  specifically  disclosed  in the
Company  SEC  Reports,  there  is  no  action,  suit,  proceeding,   inquiry  or
investigation pending or, to the knowledge of the Company, threatened against or
involving the Company or any of its Subsidiaries,  at law or in equity, alleging
a violation of applicable laws, rules or regulations  respecting  employment and
employment practices, terms and conditions of employment and wages and hours, or
unfair labor practice that has had or would result in a Material Adverse Effect.

          (b) Except as set forth in Section  3.19(b) of the Company  Disclosure
Letter,  no  grievance  or any  arbitration  proceeding  arising out of or under
collective  bargaining  agreements which would have a Material Adverse Effect is
pending and no claim therefor exists.

          (c)  Neither  the  Company  nor  any  of  its   Subsidiaries  has  any
liabilities  under the Worker  Adjustment and Retraining  Notification  Act (the
"WARN Act") that has had or would result in a Material Adverse Effect.

          3.20  Brokers  or  Finders.   None  of  the  Company  or  any  of  its
Subsidiaries  or  Affiliates  has  entered  into any  agreement  or  arrangement
entitling any agent, broker,  investment banker, financial advisor or other firm
or Person to any brokers' or finders' fee or any other commission or similar fee
in connection  with any of the  Transactions,  except  Morgan  Stanley and Bear,
Stearns & Co. Inc.  ("Bear  Stearns"),  whose fees and expenses shall be paid by
the Company in accordance with the Company's  agreement with such firm. True and
correct  copies of  engagement  letters  between  the Company and each of Morgan
Stanley and Bear Stearns have been provided to Parent.

                                   ARTICLE IV
                        REPRESENTATIONS AND WARRANTIES OF
                           PARENT, PHH AND MERGER SUB

          Each of Parent, PHH and Merger Sub jointly and severally
represents and warrants to the Company as follows:

          4.1 Organization.  Each of Parent, PHH and Merger Sub is a corporation
duly  organized,  validly  existing and in good  standing  under the laws of the
jurisdiction  of its  incorporation  and has the requisite  corporate  power and
authority to own,  lease and operate its properties and to carry on its business
as it is now being conducted. Merger Sub has not engaged in any activities other
than in connection with or as contemplated by this Agreement and has no material
liabilities other than those incident to its formation and the Transactions.

          4.2  Authority  Relative to this  Agreement.  Each of Parent,  PHH and
Merger Sub has the  requisite  corporate  power and  authority  to  execute  and
deliver this  Agreement and to consummate  the  Transactions.  The execution and
delivery of this Agreement by Parent,  PHH and Merger Sub, and the  consummation
of the  Transactions,  have  been duly  authorized  by the  respective  board of
directors  of each  of  Parent,  PHH  and  Merger  Sub,  and by PHH as the  sole
stockholder  of Merger Sub,  and no other  corporate  proceeding  on the part of
Parent,  PHH or  Merger  Sub is  required  to  authorize  this  Agreement  or to
consummate the  Transactions,  other than the filing and the  recordation of the
Certificate of Merger in accordance  with the DGCL. This Agreement has been duly
executed and  delivered by each of Parent,  PHH and Merger Sub and (assuming due
and  valid  authorization,   execution  and  delivery  hereof  by  the  Company)
constitutes a valid and binding agreement of each of Parent, PHH and Merger Sub,
enforceable  against each of Parent,  PHH and Merger Sub in accordance  with its
terms, except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency,  reorganization,  moratorium or other similar laws, now or hereafter
in effect,  relating to creditor's rights generally and (ii) equitable  remedies
of specific  performance and injunctive and other forms of equitable  relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.

          4.3 No Conflict; Required Filings and Consents.

          (a) Except (i) for  applicable  requirements  of (A) the Exchange Act,
(B) the HSR Act and any  similar  foreign  competition  laws,  and (C) any state
securities  and blue sky  filings  applicable  hereto,  (ii) for the  filing and
recordation of the Certificate of Merger,  as required by the DGCL, and (iii) as
set forth in the disclosure letter delivered by Parent, PHH and Merger Sub prior
to the  execution  of this  Agreement  to the Company  (the  "Parent  Disclosure
Letter"),  neither the execution and delivery of this  Agreement by Parent,  PHH
and  Merger  Sub,  nor the  consummation  by  Parent,  PHH and Merger Sub of the
Transactions,  shall  require,  on the part of Parent,  PHH or Merger  Sub,  any
filing with, or obtaining of, any permit, authorization, consent or approval of,
any  Governmental  Entity,  except for such  filings,  permits,  authorizations,
consents  or  approvals  the  failure  of  which  to make or  obtain  would  not
materially  impair the ability of Parent,  PHH or Merger Sub to  consummate  the
Transactions.

          (b)  Except as set forth in Section  4.3(b) of the  Parent  Disclosure
Letter,  neither the execution and delivery of this Agreement by Parent,  PHH or
Merger  Sub,  nor  the  consummation  by  Parent,  PHH  or  Merger  Sub  of  the
Transactions,  shall (i) conflict with or result in a breach of the  certificate
of  incorporation  or by-laws of Parent,  PHH or Merger  Sub,  (ii)  result in a
violation  or breach of or  constitute  (with or without  due notice or lapse of
time,  or both) a  default  under,  or give  rise to any  right of  termination,
cancellation,  suspension,  modification or acceleration under, or result in the
creation of a lien under,  any of the terms,  conditions  or  provisions  of, or
otherwise require the consent or waiver of, or notice to, any other party under,
any material bond note,  mortgage,  indenture,  other evidence of  indebtedness,
guarantee,  license,  agreement or other contract or instrument to which Parent,
PHH or Merger Sub is a party or by which any of them or any of their  respective
properties  or  assets  is  bound,  or (iii)  violate  any law,  statute,  rule,
regulation,  order,  writ,  injunction or decree  applicable  to Parent,  PHH or
Merger Sub, or any of their respective  properties or assets except, in the case
of clauses (ii) and (iii),  for such  violations,  breaches,  defaults or rights
which would not  materially  impair the ability of Parent,  PHH or Merger Sub to
consummate the Transactions.

          4.4 Proxy Statement.  None of the information  supplied by Parent, PHH
or Merger Sub for inclusion or incorporation by reference in the Proxy Statement
shall,  at the time it is filed with the SEC, at the time it is first  mailed to
the Company's  stockholders or at the time of the Stockholders Meeting,  contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in  light  of  the  circumstances  under  which  they  are  made,  not
misleading.

          4.5  Litigation.  Except as set  forth in  Section  4.5 of the  Parent
Disclosure  Letter,   there  is  no  action,   suit,   proceeding,   inquiry  or
investigation  pending  or, to the  knowledge  of  Parent,  PHH or  Merger  Sub,
threatened  involving  Parent,  PHH or Merger  Sub,  at law or in equity,  by or
before any  Governmental  Entity which  questions or challenges  the validity of
this Agreement or which, if adversely  determined,  would  materially  impair or
delay the ability of Parent, PHH or Merger Sub to consummate the Transactions.

          4.6 Financing.  Parent and PHH have or shall have  sufficient  cash on
hand and shall provide,  or cause to be provided,  at such time or times as such
funds are required, to Merger Sub or, as the case may be, the Company, such cash
on hand  (i) to pay  the  Merger  Consideration  and to pay  any  other  amounts
required to be paid in order to consummate the Transactions contemplated by this
Agreement,  including pursuant to Section 2.4, (ii) to pay any fees and expenses
in connection with the  Transactions and (iii) to satisfy the obligations to pay
any existing indebtedness of the Company or its Subsidiaries that is required to
be repaid as a result of the Transactions.

          4.7  Brokers or  Finders.  None of Parent,  PHH,  Merger Sub or any of
their  respective  Affiliates  has entered  into any  agreement  or  arrangement
entitling any agent, broker,  investment banker, financial advisor or other firm
or Person to any brokers' or finders' fee or any other commission or similar fee
in connection  with any of the  Transactions,  except Lehman  Brothers and Chase
Securities  Inc.,  whose fees and expenses shall be paid by Parent in accordance
with Parent's agreement with each such firm.


                                    ARTICLE V
                                    COVENANTS

          5.1 Conduct of Business by the Company Pending the Merger. The Company
covenants and agrees that, during the period from the date of this Agreement and
continuing  until the earlier to occur of the  termination  of this Agreement or
the Effective  Time,  except as  contemplated  by this  Agreement or required by
applicable  law or rule of the New York  Stock  Exchange,  unless  Parent  shall
otherwise  agree in writing  (such  agreement not to be  unreasonably  withheld,
conditioned  or delayed),  and except as set forth in Section 5.1 of the Company
Disclosure Letter:

          (a) the  Company  shall  conduct  its  business  and  shall  cause the
businesses of its Subsidiaries to be conducted, only in, and the Company and its
Subsidiaries  shall  not take any  action  except  in,  the  ordinary  course of
business,  consistent  with  past  practice;  and  the  Company  shall  use  its
reasonable  best efforts to preserve  intact the business  organizations  of the
Company and its  Subsidiaries,  and to maintain  (i) the services of the present
officers, employees and consultants of the Company and its Subsidiaries and (ii)
its existing relations with suppliers, creditors, business associates and others
having business dealings with it; and

          (b) without  limiting the  generality  of the  foregoing,  the Company
shall not, and shall cause its  Subsidiaries  not to, take any of the  following
actions:

               (i) amend its certificate of incorporation or by-laws;

               (ii) issue,  sell, pledge,  dispose of or encumber,  or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class or any  other  equity  interest,  or any  options,  warrants,
convertible  securities  or other  rights of any kind to  acquire  any shares of
capital  stock,  or any  other  equity  interest  in the  Company  or any of its
Subsidiaries (except for the issuance of shares of Company Common Stock pursuant
to the exercise of Options outstanding on the date hereof);

               (iii)  declare,  set  aside,  make or pay any  dividend  or other
distribution  (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock or any other equity interest,  including any
constructive or deemed  distributions,  and any  distribution in connection with
the  adoption  of a  shareholders  rights  plan,  or make any other  payments to
stockholders in their capacity as such, except that a wholly owned Subsidiary of
the Company may declare and pay a dividend to its parent;

               (iv) split, combine or reclassify any of its capital stock or any
other equity interest or issue or authorize or propose the issuance of any other
securities  in  respect  of,  in lieu of or in  substitution  for  shares of its
capital stock or any other equity interest;

               (v)  redeem,   purchase  or   otherwise   acquire,   directly  or
indirectly, any of its capital stock or any other equity interests;

               (vi) (A)  purchase,  acquire,  sell,  transfer,  lease,  license,
mortgage,  encumber or dispose of any material assets,  other than the purchase,
sale,  rental  and  lease  of  vehicles  in the  ordinary  course  of  business,
consistent  with  past  practice;  (B)  acquire  (by  merger,  consolidation  or
acquisition  of stock or assets or otherwise)  any  corporation,  partnership or
other business  organization or division thereof;  (C) sell, transfer or dispose
of any  Subsidiary  of the Company (by merger,  consolidation,  sale of stock or
assets or otherwise); (D) incur or assume any indebtedness for borrowed money or
other liability,  other than in connection with the financing of vehicles in the
ordinary course of business, consistent with past practice; (E) modify, amend or
terminate  any  confidentiality  agreements,  standstill  agreements  or Company
Material  Contracts  to which the Company or its  Subsidiaries  is a party or by
which it is bound,  or waive,  release or assign any material  rights or claims,
other than in the ordinary  course of business,  consistent  with past practice;
(F)  assume,  guarantee,  endorse  or  otherwise  become  liable or  responsible
(whether  directly,  contingently or otherwise) for the obligations of any other
Person,  other than in the  ordinary  course of business,  consistent  with past
practice;  (G) make any material loans, advances or capital contributions to, or
investments in, any other Person (other than to its wholly owned Subsidiaries in
the ordinary course of business, consistent with past practice); (H) repurchase,
redeem,  repay  or  take  any  other  action  with  respect  to the  issued  and
outstanding  11%  Senior  Subordinated  Notes of the  Company  due May 2009 (the
"Notes"),  other than pursuant to Section 5.7; or (I) other than in the ordinary
course of  business,  consistent  with past  practice,  enter into any  material
commitment,  transaction,  contract or agreement, including any of the following
entered into outside the  ordinary  course of business (i) any material  capital
expenditure, (ii) any material contract or agreement outside the ordinary course
of  business,  (iii) any  contracts  or  agreements  that cannot be cancelled on
notice of thirty (30) days or less and (iv) any  noncompete  agreements or other
agreements  that  limit  the  ability  of the  Company  to  conduct  any line of
business;

               (vii)  increase the  compensation,  severance  or other  benefits
payable or to become payable to its directors, officers or employees, other than
increases  in salary or wages of  employees  of the Company or its  Subsidiaries
(who are not directors or executive  officers of the Company) in accordance with
past practice or pursuant to binding  commitments made prior to the date hereof,
or grant any severance or termination pay (except  payments  required to be made
under the Plans or other  obligations  existing on the date hereof in accordance
with the  terms  of such  obligations)  to,  or enter  into  any  employment  or
severance   agreement   with,  any  employee  of  the  Company  or  any  of  its
Subsidiaries, or establish, adopt, enter into or amend any collective bargaining
agreement,  Plan,  trust,  fund,  policy or  arrangement  for the benefit of any
current  or  former   directors,   officers  or   employees   or  any  of  their
beneficiaries,  except,  in each case, as may be required by law or as would not
result  in a  material  increase  in the  cost of  maintaining  such  collective
bargaining agreement, Plan, trust, fund, policy or arrangement;

               (viii) pay, repurchase,  discharge or satisfy any of its material
claims,  liabilities or obligations (absolute,  accrued, asserted or unasserted,
contingent or otherwise),  other than the payment,  discharge or satisfaction in
the ordinary course of business,  consistent with past practice,  or pursuant to
contractual requirements existing on the date hereof, of claims,  liabilities or
obligations   reflected  or  reserved  against,  in,  or  contemplated  by,  the
consolidated  financial statements (or the notes thereto) of the Company and its
Subsidiaries;

               (ix) take any action to change accounting  policies or procedures
or any of its methods of reporting income,  deductions or other items for income
tax purposes, except as required by a change in GAAP, SEC position or applicable
law occurring after the date hereof;

               (x)  approve  or  authorize  any  action to be  submitted  to the
stockholders of the Company for approval other than pursuant to this Agreement;

               (xi) make or change any material  election with respect to Taxes,
agree or settle any material  claim or assessment in respect of Taxes,  or agree
to an extension  or waiver of the  limitation  period to any  material  claim or
assessment in respect of Taxes;

               (xii)  voluntarily take, or commit to take, any action that would
or is  reasonably  likely to result in any of the  conditions  to the Merger set
forth in Article VI not being satisfied or make any  representation  or warranty
of the  Company  contained  herein  that  is  not  qualified  as to  materiality
inaccurate in any material  respect,  or any  representation or warranty that is
qualified  as to  materiality  untrue in any respect at, or as of any time prior
to, the  Effective  Time,  or that would  materially  impair the  ability of the
Company, Parent, PHH or Merger Sub to consummate the Transactions, including the
Merger,   in  accordance  with  the  terms  hereof  or  materially   delay  such
consummation; or

               (xiii)  agree,  authorize  or announce to take any of the actions
described in subsections (i) through (xii) above.

          5.2 No Solicitation.

          (a)  Except as set forth  below,  from and after the date  hereof  and
prior to the  Effective  Time,  the Company shall not,  directly or  indirectly,
through any  Subsidiary  or Affiliate  of the  Company,  or through any officer,
director,  employee,  investment  banker,  agent or other  representative of the
Company or any Subsidiary or Affiliate of the Company,  (i)  encourage,  invite,
initiate or solicit any inquiries  relating to or the  submission or making of a
proposal by any Person with  respect to a  Third-Party  Acquisition  (as defined
below) or (ii)  participate  in, or  encourage,  invite,  initiate  or  solicit,
negotiations  or  discussions  with,  or  furnish or cause to be  furnished  any
information  to, any Person  relating  to a  Third-Party  Acquisition.  Upon the
execution of this Agreement,  the Company shall  immediately (i) cease, or cause
to be ceased,  any discussions or negotiations with any Person,  entity or group
in connection with any proposed or potential  Third-Party  Acquisition and shall
seek to have returned to the Company any  confidential  information  provided in
any such  discussions  or  negotiations  and (ii) take all actions  necessary to
rescind the Company's stock repurchase program authorized by the Board on August
9, 2000.  Notwithstanding the foregoing,  prior to the Stockholders  Meeting, if
the Company, the Board or the Independent Committee,  without being in violation
of the terms of this  Section  5.2,  receives an  unsolicited  bona fide written
proposal  from any Person or group with  respect  to a  Third-Party  Acquisition
which could reasonably be expected to result in a Superior  Proposal (as defined
below),  then the Company may, directly or indirectly,  furnish  information and
access  to such  Person  or group  pursuant  to an  appropriate  confidentiality
agreement, and may participate in discussions and negotiations with, such Person
or group;  provided,  however, that the terms of such confidentiality  agreement
shall have terms that are not less  restrictive  than the terms set forth in the
confidentiality  agreement between the Company and Parent,  dated as of July 31,
2000 (the "Confidentiality Agreement").

          (b) The Company shall within  twenty-four  (24) hours notify Parent in
writing upon receipt of any proposal, written or oral, relating to a Third-Party
Acquisition or any request for nonpublic  information relating to the Company or
any of its Subsidiaries in connection with any pending, proposed or contemplated
Third-Party Acquisition or for access to the properties, books or records of the
Company  or  any  Subsidiary  by  any  Person  that  informs  the  Board  or the
Independent  Committee  that it is considering  making,  or has made, a proposal
relating to a  Third-Party  Acquisition.  Such notice shall  identify the Person
submitting the proposal,  attach a copy of any written  correspondence  or other
written materials relating to such proposal,  summarize any significant terms of
such proposal not reflected in any such  attached  materials,  state whether the
Company is  providing  or intends to  provide  the Person or group  making  such
proposal  with  access  to  information  concerning  the  Company  or any of its
Subsidiaries,  as  provided  in this  Section 5.2 and, if it proposes to provide
such  access to  information,  state  that such  proposal  could  reasonably  be
expected to result in a Superior Proposal and the basis for such conclusion. The
Company  also  shall  promptly  notify  Parent  of any  significant  development
relating to any inquiries, discussions,  negotiations, proposals or requests for
information  concerning  any  Third-Party  Acquisition.  The Company  shall keep
Parent informed of the status of any such negotiations and shall further update,
to the extent of any significant  developments,  the information  required to be
provided in each notice upon the request of Parent.

          (c) Except as provided in  subparagraph  (d) below,  neither the Board
nor the  Independent  Committee  shall (i)  withdraw  or  modify,  or propose to
withdraw or modify,  or refuse or fail at Parent's request to reaffirm,  (A) the
approval  by the  Board  of this  Agreement  or the  Merger,  (B) the  favorable
recommendation of the Independent  Committee and the Board with respect thereto,
or (C) the Board's  recommendation to stockholders of the Company that they vote
their shares of Company Common Stock in favor of adoption of this Agreement, and
the Board's  direction that this Agreement be submitted to stockholders for such
adoption;  (ii)  approve  or  recommend,  or  propose  publicly  to  approve  or
recommend, any Third-Party Acquisition; or (iii) cause the Company to enter into
any  agreement in  principle,  letter of intent,  contract,  agreement  (whether
written or oral) or memorandum of  understanding  (each, a "Company  Acquisition
Agreement") related to any Third-Party Acquisition.

          (d) Notwithstanding  the foregoing,  in the event that the Independent
Committee determines in good faith, after receipt of advice of its outside legal
counsel,  that  failure to take such  action  would  constitute  a breach of the
Board's fiduciary duties to the Company's stockholders under applicable law, the
Independent  Committee  (and  the  Board  acting  on the  recommendation  of the
Independent Committee) may (i) withdraw or modify its approval or recommendation
of this Agreement and the Merger and disclose such withdrawal or modification to
the  Company's  stockholders;  and,  (ii) solely in  relation  to a  Third-Party
Acquisition  that  constitutes  a Superior  Proposal,  provided  the Board,  the
Independent  Committee  and the  Company  have not  violated  the  terms of this
Section 5.2, (A)  recommend  such  Superior  Proposal,  and/or (B) following the
Stockholders  Meeting, if the Company  Stockholder  Approval shall not have been
obtained, terminate this Agreement in accordance with Section 7.1(d)(iii) hereof
and, contemporaneously with such termination,  cause the Company to enter into a
Company Acquisition Agreement with respect to such Superior Proposal,  provided,
however,  that (x) prior to taking any of the  foregoing  actions,  the  Company
shall have paid Parent by wire transfer the amount  payable  pursuant to Section
7.3 and (y) prior to taking  the  action  described  in clause  (B)  above,  the
Independent  Committee shall have (1) given Parent at least three Business Days'
prior written  notice that the Company  intends to terminate  this Agreement and
provided  Parent with a reasonable  opportunity  to respond to any such Superior
Proposal  (which  response  could  include a proposal to revise the terms of the
Transactions) and (2) fully considered any such response by Parent and concluded
that,  notwithstanding  such response,  such proposal continues to be a Superior
Proposal in relation to the  Transactions,  as the terms of the Transactions may
be proposed to be revised by Parent's response.  Notwithstanding  the foregoing,
the obligation of the Company to duly call, give notice of, convene and hold the
Stockholders Meeting in accordance with Section 2.3 hereof shall not be affected
by the commencement, proposal, public disclosure or communication to the Company
of a  Third-Party  Acquisition  or a Superior  Proposal  or by the taking of any
action by the Board or the Independent Committee in accordance with this Section
5.2. No action taken by the Board or the  Independent  Committee  in  accordance
with this  Section 5.2 shall  constitute  a breach of any other  section of this
Agreement.

          (e) As used in this  Agreement,  the  term  "Third-Party  Acquisition"
shall mean any of the following  events:  (i) the  acquisition of the Company by
merger, purchase of stock or assets, joint venture or otherwise by, or a "merger
of equals" with, any Person (which  includes a "person," as such term is defined
in Section  13(d)(3) of the Exchange Act) other than a member of the Acquisition
Group (a "Third  Party");  (ii) the acquisition by a Third Party of any material
portion  (which shall include twenty percent (20%) or more) of the assets of the
Company and its Subsidiaries, taken as a whole; (iii) the acquisition by a Third
Party of twenty  percent  (20%) or more of the  outstanding  shares  of  Company
Common Stock;  (iv) the adoption by the Company of a plan of  liquidation or the
declaration or payment of an  extraordinary  dividend;  or (v) the repurchase by
the Company or any of its  Subsidiaries of more than twenty percent (20%) of the
outstanding shares of Company Common Stock.

          (f) For purposes of this Agreement, "Superior Proposal" means any bona
fide written  proposal to acquire,  directly or  indirectly,  for  consideration
consisting of cash and/or securities,  all of the shares of Company Common Stock
then outstanding or all or substantially  all of the assets of the Company to be
followed by a pro rata  distribution of the sale proceeds to stockholders of the
Company,  that (i) is not subject to any financing  conditions or contingencies,
(ii) provides holders of Company Common Stock with per share  consideration that
the Independent  Committee  determines in good faith, after receipt of advice of
its financial advisor, is more favorable from a financial point of view than the
consideration  to be received by holders of Company  Common Stock in the Merger,
(iii) is determined  by the  Independent  Committee in its good faith  judgment,
after receipt of advice of its financial  advisor and outside legal counsel,  to
be  likely  of being  completed  (taking  into  account  all  legal,  financial,
regulatory and other aspects of the proposal, the Person making the proposal and
the expected timing to complete the proposal),  (iv) does not, in the definitive
Company Acquisition Agreement,  contain any "due diligence" conditions,  and (v)
has not been  obtained  by or on  behalf of the  Company  in  violation  of this
Section 5.2.

          5.3 Access to Information; Confidentiality.

          (a) Until the Effective  Date,  the Company shall (and shall cause its
Subsidiaries  to)  afford  to the  officers,  employees,  accountants,  counsel,
financing sources and other representatives of Parent,  reasonable access during
normal  business hours to its  properties,  books,  contracts,  commitments  and
records; furnish to Parent all information concerning its business,  properties,
and personnel as Parent may reasonably request or has reasonably requested;  and
use reasonable  best efforts to make available  during normal  business hours to
the  officers,  employees,  accountants,  counsel,  financing  sources and other
representatives  of Parent the  appropriate  individuals  (including  management
personnel, attorneys, accountants and other professionals) for discussion of the
Company's business, properties, prospects and personnel as Parent may reasonably
request.

          (b)  Parent  shall  keep  all  information  disclosed  to the  persons
identified  in clause  (a) above  pursuant  to this  Agreement  confidential  in
accordance with the terms of the Confidentiality Agreement.

          (c) As soon as  practicable  (but in no case later than 21 days) after
the   execution  of  this   Agreement,   the  Company  shall  permit  Parent  to
electronically  link  the  Company's  financial  reporting  system  to  Parent's
financial reporting consolidation system ("Hyperion"). The link to Hyperion will
be completed by Parent's  financial  reporting  staff,  with assistance from the
Company's  accounting staff, at no incremental cost to the Company.  Parent will
provide the  necessary  Hyperion  and  ancillary  software to be  installed on a
computer in the Company's accounting department.

          5.4 Consents; Approvals.

          (a) The Company,  Parent and Merger Sub shall each use its  reasonable
best efforts (which efforts, to the extent reasonably practicable, shall be made
prior to the  consummation  of the Merger),  and cooperate  with each other,  to
obtain  as  promptly  as   practicable   all   consents,   waivers,   approvals,
authorizations  or orders  (including  all rulings and  approvals  of all United
States and foreign  Governmental  Entities),  and the Company,  Parent,  PHH and
Merger Sub shall make all filings  (including all filings with United States and
foreign  Governmental  Entities)  required in connection with the authorization,
execution and delivery of this Agreement by the Company,  Parent, PHH and Merger
Sub and the consummation by them of the Transactions.

          (b)  Each  party  hereto  shall  make  an  appropriate   filing  of  a
notification  and  report  form  pursuant  to the HSR Act  with  respect  to the
Transactions  within  fifteen  Business  Days  after the date  hereof,  shall as
promptly  as  practicable  supply any  additional  information  and  documentary
material that may be requested pursuant to the HSR Act, and shall use reasonable
best efforts to obtain  early  termination  of the waiting  period under the HSR
Act. In addition,  each party hereto shall  promptly  make any other filing that
may be required under any antitrust law or by any antitrust  authority and shall
as promptly as practicable  supply and additional  information  and  documentary
material that may be required in connection therewith.

          5.5 Indemnification and Insurance.

          (a) From and  after  the  Effective  Date,  Parent  and the  Surviving
Corporation and their respective  successors  shall  indemnify,  defend and hold
harmless  each  Person  who is now,  or has been at any  time  prior to the date
hereof or who becomes prior to the Effective Time, an officer or director of the
Company or any of the Subsidiaries  (the "Covered  Parties") against all losses,
claims,  damages,  costs,  expenses  (including  reasonable  attorneys' fees and
expenses),  liabilities or judgments or amounts that are paid in settlement with
the approval of the indemnifying party (which approval shall not be unreasonably
withheld  or delayed)  incurred  in  connection  with any  threatened  or actual
action,  suit or proceeding  based in whole or in part on or arising in whole or
in part out of the fact that such  person is or was a director or officer of the
Company ("Indemnified Liabilities"), including all Indemnified Liabilities based
in whole or in part on, or arising in whole or in part out of, this Agreement or
the transactions  contemplated hereby, in each case to the fullest extent that a
corporation  is permitted by law to indemnify its own directors or officers,  as
the case may be.  In the event  any such  claim,  action,  suit,  proceeding  or
investigation  is brought against any Covered Party,  the  indemnifying  parties
shall  assume  and  direct  all  aspects  of  the  defense  thereof,   including
settlement,  and the Covered  Party shall  cooperate  in the defense of any such
matter. The Covered Party shall have a right to participate in (but not control)
the defense of any such  matter  with its own  counsel  and at its own  expense.
Notwithstanding the right of the indemnifying  parties to assume and control the
defense of such litigation,  claim or proceeding,  such Covered Party shall have
the right to employ  separate  counsel and to participate in the defense of such
litigation,  claim or proceeding,  and the  indemnifying  parties shall bear the
fees, costs and expenses of such separate counsel and shall pay such fees, costs
and expenses promptly after receipt of an invoice from such Covered Party if (i)
the use of counsel chosen by the indemnifying  parties to represent such Covered
Party  would  present  such  counsel  with a  conflict  of  interest,  (ii)  the
defendants  in, or targets of, any such  litigation,  claim or proceeding  shall
have been advised by counsel that there may be legal defenses available to it or
to other  Covered  Parties  which are  different  from or in  addition  to those
available to the indemnifying  parties or (iii) the  indemnifying  parties shall
not have employed counsel satisfactory to such Covered Party, in the exercise of
the Covered Party's reasonable judgment,  to represent such Covered Party within
a reasonable time after notice of the institution of such  litigation,  claim or
proceeding.  The Covered Parties as a group shall be represented by a single law
firm (plus no more than one local counsel in any  jurisdiction)  with respect to
each such matter  unless there is, under  applicable  standards of  professional
conduct, a conflict on any significant issue between the positions of any two or
more Covered Parties.  The indemnifying parties shall not settle any such matter
unless (i) the Covered  Party gives prior  written  consent,  which shall not be
unreasonably  withheld or delayed,  or (ii) the terms of the settlement  provide
that the Covered  Party shall have no  responsibility  for the  discharge of any
settlement  amount  and  impose no other  obligations  or duties on the  Covered
Party,  and the settlement  discharges all rights against the Covered Party with
respect to such matter. Any Covered Party wishing to claim indemnification under
this Section 5.5, upon learning of any such claim, action,  suit,  proceeding or
investigation,  shall promptly notify Parent and the Surviving  Corporation (but
the  failure so to notify  shall not  relieve  the  indemnifying  party from any
liability  which it may have under this Section  5.5,  except to the extent such
failure  materially  prejudices the  indemnifying  parties).  Each Covered Party
shall be entitled to the advancement of expenses to the full extent permitted by
law in connection  with any such action (subject to tendering any undertaking to
repay such expenses, to the extent required by applicable law).  Notwithstanding
the  foregoing,  in the event that there is any  conflict  between  this Section
5.5(a) and the terms of the Amended and Restated Certificate of Incorporation or
Amended  and  Restated  By-Laws  of  the  Company,   the  Amended  and  Restated
Certificate of Incorporation  and/or Amended and Restated  By-laws,  as the case
may be, shall prevail.

          (b) All rights to  indemnification,  all  limitations on liability and
all rights to  advancement  of expenses  existing in favor of a Covered Party as
provided  herein,  in  the  Company's   Amended  and  Restated   Certificate  of
Incorporation,  Amended and Restated By-Laws or other indemnification agreements
as in effect as of the date hereof shall  survive the Merger and shall  continue
in full force and effect,  without any  amendment  thereto,  for a period of six
years from the  Effective  Time to the extent  such rights are  consistent  with
applicable  law;  provided that in the event any claim or claims are asserted or
made within such six-year period,  all rights to  indemnification  in respect of
any such claim or claims shall  continue  until  disposition of any and all such
claims;  provided  further,  that any  determination  required  to be made  with
respect to whether a Covered  Party's  conduct  complies  with the standards set
forth under  applicable  law, the  Company's  Amended  Restated  Certificate  of
Incorporation,  Amended and Restated By-Laws or such agreements, as the case may
be, shall be made by independent legal counsel selected by the Covered Party and
reasonably acceptable to the Surviving Corporation.

          (c) In the event that Cendant or the Surviving  Corporation  or any of
their respective  successors or assigns (i) consolidates with or merges into any
other  Person  and  shall  not be the  surviving  corporation  or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its  properties  and assets to any Person,  then,  and in each such case, to the
extent  necessary  to  effectuate  the  purposes  of this  Section  5.5,  proper
provision shall be made so that such successors, assigns and transferees, as the
case may be, assume the  obligations  set forth in this Section 5.5, and none of
the actions  described in the foregoing clauses (i) or (ii) shall be taken until
such provision is made.

          (d) For a period of six years after the Effective Time,  Cendant shall
cause the  Surviving  Corporation  and its  successors  to  maintain  in effect,
without any lapses in coverage,  policies of directors' and officers'  liability
insurance (or a "tail"  policy) for the benefit of those Persons who are covered
by the Company's directors' and officers' liability insurance policies as of the
date hereof,  providing  coverage with respect to matters occurring prior to the
Effective  Time  that is at  least  equal to the  coverage  provided  under  the
Company's current directors' and officers'  liability  insurance policies to the
extent that such liability  insurance can be maintained at an annual cost to the
Surviving  Corporation  of not  greater  than 200 percent of the premium for the
current Company directors' and officers' liability  insurance;  provided that if
such  insurance (or "tail"  policy)  cannot be so  maintained at such cost,  the
Surviving  Corporation  shall  maintain as much of such  insurance  as can be so
maintained at a cost equal to 200 percent (200%) of the current annual  premiums
of the Company for such insurance.

          5.6 Employee Benefits.

          (a) During the period  commencing at the Effective  Time and ending on
December  31,  2001,  Parent  shall cause all current and former  employees  and
officers  of the  Company  and its  Subsidiaries  who are  entitled  to  receive
compensation and benefits as of the Effective Time, other than employees covered
by collective bargaining agreements, to receive (i) the salary or wage level and
bonus opportunity,  to the extent  applicable,  not materially less favorable in
the  aggregate  than  that in  effect  on the date  hereof  and  (ii)  benefits,
perquisites and other terms and conditions of employment that are not materially
less favorable in the aggregate than the benefits,  perquisites  and other terms
and conditions that they were entitled to receive on the date hereof.

          (b) Subject to Section  5.6(a)  hereof,  from and after the  Effective
Time,  Parent shall  honor,  pay,  perform and satisfy any and all  liabilities,
obligations and responsibilities to, or in respect of, each employee and officer
of the Company and its Subsidiaries, and each former employee and officer of the
Company and its  Subsidiaries,  as of the Effective Time arising under the terms
of, or in  connection  with,  any employee  benefit,  fringe  benefit,  deferred
compensation  or incentive  compensation  plan or arrangement or any employment,
consulting,  retention,  severance,  change-of-control or similar agreement,  in
each case,  to the extent  listed in Section  3.14(a) or 3.16(a) of the  Company
Disclosure Letter and in accordance with the terms thereof in effect on the date
hereof.  Without  limiting the generality of the  foregoing,  until December 31,
2001,  Parent shall keep in effect all severance and retention plans,  practices
and policies  that are  applicable  to employees and officers of the Company and
its Subsidiaries as of the date hereof.

          (c) Parent  shall,  or shall cause the Surviving  Corporation  and its
Subsidiaries  to,  give  Continuing   Employees  full  credit  for  purposes  of
eligibility  and  vesting  under  any  employee  benefit  plans or  arrangements
maintained by Parent,  the Surviving  Corporation or any Subsidiary of Parent or
the  Surviving  Corporation  for such  Continuing  Employees'  service  with the
Company,  any Subsidiary of the Company or any of their respective  predecessors
to the same extent  recognized by the Company,  any Subsidiary of the Company or
any such  predecessor for similar  purposes  immediately  prior to the Effective
Time. In addition,  Parent shall,  or shall cause the Surviving  Corporation and
its Subsidiaries  to, give Continuing  Employees full credit for purposes of the
determination  of benefits under any employee  benefit plans or  arrangements in
effect as of the date hereof maintained by Parent for such Continuing Employees'
service  with  the  Company,  any  Subsidiary  of the  Company  or any of  their
respective  predecessors  to the same  extent  recognized  by the  Company,  any
Subsidiary  of  the  Company  or  any  such  predecessor  for  similar  purposes
immediately  prior to the  Effective  Time.  Parent  shall,  or shall  cause the
Surviving  Corporation and its  Subsidiaries to, (i) waive all limitations as to
preexisting   conditions,   exclusions  and  waiting  periods  with  respect  to
participation and coverage  requirements  applicable to the Continuing Employees
under any welfare plan that such  employees  may be eligible to  participate  in
after the Effective  Time,  other than  limitations or waiting  periods that are
already  in  effect  with  respect  to such  employees  and  that  have not been
satisfied as of the  Effective  Time under any welfare plan  maintained  for the
Continuing  Employees  immediately prior to the Effective Time, and (ii) provide
each Continuing  Employee with credit for any  co-payments and deductibles  paid
prior to the Effective Time in satisfying any applicable co-payment,  deductible
or out-of-pocket  requirements in respect of the year during which the Effective
Time  occurs  under any  welfare  plans  that such  employees  are  eligible  to
participate  in  after  the  Effective  Time  to the  same  extent  as if  those
deductibles or co-payments  had been paid under the welfare plans for which such
employees are eligible after the Effective Time.

          (d) Nothing  contained herein shall constitute  assurance of continued
employment of any officer or employee of the Company or any of its  Subsidiaries
following the Effective Time.

          5.7  Note  Tender  Offer.   Parent  may,  in  its  sole  and  absolute
discretion,  commence a tender offer and consent  solicitation to repurchase any
and all of the  outstanding  Notes  (the  "Note  Tender  Offer")  on  terms  and
conditions  determined solely by Parent. The Note Tender Offer shall be effected
in compliance with applicable  laws and SEC rules and  regulations.  The Company
shall  cooperate  with  Parent,  PHH  and  Merger  Sub in  connection  with  the
preparation  of all  documents  and  the  making  of  all  filings  required  in
connection with the Note Tender Offer and shall use its commercially  reasonable
efforts to take,  or cause to be taken,  all  actions  and to do, or cause to be
done,  all other things  necessary,  proper or advisable to consummate  the Note
Tender Offer; provided, however, that it is understood and agreed by the parties
hereto that (i) such Note Tender Offer shall be  consummated no earlier than the
Closing Date,  (ii) the Company shall have no obligation to provide any funds to
consummate  the Note Tender  Offer,  and (iii)  Parent or PHH shall  provide the
funds  required to  consummate  the Note Tender Offer on or after the  Effective
Time, together with all related fees and expenses.

          5.8  Notification  of Certain  Matters.  The Company shall give prompt
notice to Parent,  and Parent  (on behalf of itself,  PHH and Merger  Sub) shall
give prompt notice to the Company,  of (i) the occurrence or  non-occurrence  of
any event known to it, the occurrence or  non-occurrence  of which is reasonably
likely to cause any  representation  or warranty of such party contained in this
Agreement to be materially untrue or inaccurate, (ii) any failure of the Company
or Parent, PHH or Merger Sub, as the case may be, to comply with or satisfy,  or
the  occurrence or  non-occurrence  of any event known to it, the  occurrence or
non-occurrence  of which is reasonably likely to cause the failure by such party
materially to comply with or satisfy any covenant,  condition or agreement to be
complied  with or satisfied by it hereunder;  (iii) the  occurrence of any other
event  known  to it which  would be  reasonably  likely  (A) to have a  Material
Adverse  Effect or (B) to cause any  condition  set  forth in  Article  VI to be
unsatisfied in any material  respect at any time prior to the Effective Time; or
(iv) any action, suit,  proceeding,  inquiry or investigation pending or, to the
knowledge of the Company,  threatened which questions or challenges the validity
of this Agreement;  provided,  however, that the delivery of any notice pursuant
to this Section 5.8 shall not limit or otherwise  affect the remedies  available
hereunder to the party receiving such notice.

          5.9  Further  Action.  Upon the terms and  subject  to the  conditions
hereof each of the parties hereto shall use its reasonable best efforts to take,
or cause to be taken,  all  actions  and to do,  or cause to be done,  all other
things  necessary,  proper or  advisable  to  consummate  and make  effective as
promptly as practicable the  transactions  contemplated  by this  Agreement,  to
obtain in a timely manner all necessary  waivers,  consents and approvals and to
effect all  necessary  registrations  and filings,  and  otherwise to satisfy or
cause to be satisfied all  conditions  precedent to its  obligations  under this
Agreement.

          5.10 Public  Announcements.  Parent,  PHH,  Merger Sub and the Company
shall  consult  with each other before  issuing any press  release or making any
public  statement  with  respect  to this  Agreement,  the  Merger  or the other
Transactions  and shall not issue any such press release or make any such public
statement  without the prior  consent of the other  parties,  which shall not be
unreasonably withheld;  provided, however, that any party may, without the prior
consent of the others, issue such press release or make such public statement as
may, upon the advice of counsel, be required by law or the rules and regulations
of The New York Stock Exchange,  in advance of obtaining such prior consent,  in
which case,  the parties  shall  cooperate to reach  mutual  agreement as to the
language of any such report,  statement or press release.  Immediately following
the execution and delivery of this  Agreement,  Parent,  PHH, Merger Sub and the
Company are each issuing press releases to be mutually  agreed upon with respect
to this Agreement, the Merger and the other Transactions.

          5.11  Transfer  Taxes.  Parent  shall pay any real  property  or other
similar transfer Taxes incurred in connection with the consummation of the Offer
and the Merger.

          5.12 Financial Statements.  Upon request by Parent or PHH, the Company
shall use  commercially  reasonable  efforts to cooperate with Parent and PHH in
connection  with  preparing  such  financial   statements  as  are  required  by
applicable law and by SEC rules and  regulations to be filed by PHH with the SEC
in connection with the prospectus for the medium term notes to be issued by PHH;
such cooperation shall include,  without  limitation,  providing all information
reasonably requested by Parent or PHH.

          5.13 Section 16 Matters.  The Company shall take all such steps as may
be  required  to cause any  dispositions  of  Company  Common  Stock  (including
derivative  securities with respect to the Company Common Stock)  resulting from
the Transactions  contemplated by this Agreement by each officer or director who
is subject to the  reporting  requirements  of Section 16(a) of the Exchange Act
with respect to the Company to be exempt under Rule 16b-3  promulgated under the
Exchange Act, such steps to be taken in  accordance  with the No-Action  Letter,
dated  January 12,  1999,  issued by the  Commission  to Skadden,  Arps,  Slate,
Meagher & Flom LLP.


                                   ARTICLE VI
                            CONDITIONS TO THE MERGER

          6.1  Conditions to Each Party's  Obligation to Effect the Merger.  The
respective  obligations  of each party to effect the Merger  shall be subject to
the  fulfillment  or waiver (to the extent  permitted by  applicable  law) at or
prior to the Effective Time of the following conditions:

          (a) Stockholder Approval.  The Company Stockholder Approval shall have
been obtained at or prior to the Effective Time in accordance with the DGCL.

          (b) No Injunction or Statute.  No statute,  rule,  regulation,  order,
decree,  judgment,  injunction  or  ruling  shall  have been  enacted,  entered,
promulgated or enforced by any court or other  Governmental  Entity of competent
jurisdiction  which,  in any such case, (i) prohibits or restricts the ownership
or operation by Parent (or any of its Affiliates or  Subsidiaries) of a material
portion of the Company's and its Subsidiaries'  businesses or assets, or compels
Parent (or any of its Affiliates or Subsidiaries) to dispose of or hold separate
any  material  portion of the  Company's  and its  Subsidiaries'  businesses  or
assets,  or (ii) restrains in any material respect or prohibits the consummation
of the Merger,  which has not been vacated,  dismissed or withdrawn prior to the
Effective  Time. The Company and Parent shall use their  respective best efforts
to have any of the  foregoing  vacated,  dismissed or withdrawn by the Effective
Time.

          (c)  No  Action.  No  action,  suit  or  proceeding  shall  have  been
instituted,  or shall be  pending or  threatened  by a  Governmental  Entity (i)
seeking to restrain in any material  respect or prohibit the consummation of the
Merger or the performance of any of the other Transactions  contemplated by this
Agreement,  (ii) seeking to obtain from the Company,  Parent,  PHH or Merger Sub
any damages that would result in a Material  Adverse  Effect or (iii) seeking to
impose the restrictions,  prohibitions or limitations  referred to in subsection
(b) above.

          (d) HSR Act. Any waiting period applicable to the Merger under the HSR
Act and any  applicable  foreign  competition  or antitrust laws shall have been
terminated or expired.

          6.2 Conditions to Obligations of the Company to Effect the Merger. The
obligation  of the  Company  to  effect  the  Merger  shall  be  subject  to the
fulfillment or waiver (to the extent permitted by applicable law) at or prior to
the Effective Time of the following conditions:

          (a) The  representations  and warranties of Parent, PHH and Merger Sub
set forth in this Agreement  shall be true and correct in all respects as of the
Effective  Time as though made on or as of such time  (ignoring  for purposes of
this  determination  any  materiality  or  Material  Adverse  Effect  qualifiers
contained within  individual  representations  and  warranties),  except for (i)
those  representations  and  warranties  that  address  matters  only  as  of  a
particular  date or only with  respect to a  specific  period of time which need
only be true and correct as of such date or with respect to such period and (ii)
such  failures  to be true and  correct  as would  not,  individually  or in the
aggregate,  reasonably be expected to  materially  impair the ability of Parent,
PHH or Merger Sub to consummate the Merger.

          (b) Parent,  PHH and Merger Sub shall have  performed  and complied in
all material respects with all obligations, agreements and covenants required by
this  Agreement to be performed  and complied  with by it prior to the Effective
Time.

          (c) The Company shall have received a certificate  signed by the chief
financial  officer of Parent,  dated as of the Closing Date, to the effect that,
to the best of such  officer's  knowledge,  the  conditions set forth in Section
6.2(a) and Section 6.2(b) have been satisfied.

          6.3  Conditions to  Obligations of Parent and Merger Sub to Effect the
Merger.  The obligation of Parent, PHH and Merger Sub to effect the Merger shall
be subject to the  fulfillment or waiver (to the extent  permitted by applicable
law) at or prior to the Effective Time of the following conditions:

          (a) The  representations  and  warranties  of the Company set forth in
this  Agreement  shall be true and correct in all  respects as of the  Effective
Time as  though  made on or as of  such  time  (ignoring  for  purposes  of this
determination  any materiality or Material Adverse Effect  qualifiers  contained
within  individual  representations  and  warranties),   except  for  (i)  those
representations and warranties that address matters only as of a particular date
or only with  respect to a  specific  period of time which need only be true and
correct as of such date or with respect to such period and (ii) such failures to
be true and correct as would not,  individually or in the aggregate,  reasonably
be expected to result in a Material Adverse Effect.

          (b) The Company  shall have  performed  and  complied in all  material
respects  with  all  obligations,  agreements  and  covenants  required  by this
Agreement to be performed or complied  with by it prior to the  Effective  Time,
except for such failures to perform or comply as would not,  individually  or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.

          (c) Parent  shall  have  received  a  certificate  signed by the chief
financial  officer of the Company,  dated as of the Closing  Date, to the effect
that,  to the best of such  officer's  knowledge,  the  conditions  set forth in
Section 6.3(a) and Section 6.3(b) have been satisfied.

          (d) Neither  the Board nor the  Independent  Committee  (i) shall have
withdrawn, modified or changed its approval or recommendation of this Agreement,
the Merger or the other  Transactions  in any  manner  which  Parent  reasonably
determines to be adverse to Parent,  (ii) shall have recommended the approval or
acceptance of a Superior  Proposal or Third-Party  Acquisition  from a Person or
entity  other  than a member  of the  Acquisition  Group,  or (iii)  shall  have
executed any Company Acquisition Agreement.

          (e) No event, change,  development or circumstance shall have occurred
or shall exist  which is  reasonably  expected  to result in a Material  Adverse
Effect.

          (f) The  Company  shall have  obtained  the  consents,  approvals  and
waivers set forth in Section 6.3(f) of the Company Disclosure Schedule.


                                   ARTICLE VII
                                   TERMINATION

          7.1 Termination. This Agreement may be terminated at any time prior to
the  Effective  Time,   notwithstanding   adoption  of  this  Agreement  by  the
stockholders of the Company:

          (a)  by  mutual  written  consent  duly  authorized  by the  Board  of
Directors of each of the Company (provided such termination has been approved by
the Independent Committee) and Parent; or

          (b) by either the Company (provided such termination has been approved
by the Independent Committee) or Parent as follows:

               (i) if the Effective  Time shall not have occurred on or prior to
June 30, 2001;  provided,  however,  that the right to terminate  this Agreement
under this Section  7.1(b)(i)  shall not be available to any party whose failure
to  fulfill  any  obligation  under  this  Agreement  has been the  cause of, or
resulted  in, the  failure of the Merger to be  consummated  on or prior to such
date; or

               (ii) if a Governmental  Entity shall have issued a  nonappealable
final  order,  decree or ruling or taken any other  nonappealable  final  action
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger (which order, decree, ruling or other action the parties hereto shall
have used their best efforts to lift); or

               (iii) if the  Company  Stockholder  Approval  shall not have been
obtained at the Stockholders Meeting; or

          (c) by Parent, on behalf of itself, PHH and Merger Sub, as follows:

               (i) upon a material breach of any covenant or agreement set forth
in this Agreement (a "Terminating Breach") on the part of the Company;  provided
that, if such Terminating Breach is curable on or prior to the earlier of (A) 60
days following  notice of such  Terminating  Breach and (B) June 30, 2001 by the
Company  through the exercise of its reasonable  best efforts and for so long as
the Company  continues to exercise such reasonable best efforts,  Parent may not
terminate this Agreement  under this Section  7.1(c)(i) until the earlier of (A)
60 days following notice of such Terminating Breach and (B) June 30, 2001; or

               (ii)  (x)  the  Independent  Committee  or the  Board  shall  (A)
withdraw, modify or change its approval or recommendation of this Agreement, the
Merger  or  the  other  Transactions  in  any  manner  which  Parent  reasonably
determines to be adverse to Parent; (B) approve or recommend to the stockholders
of the Company a Third-Party Acquisition or a Superior Proposal; (C) violate any
of the  provisions of Section 5.2 hereof;  (D) take any public  position or make
any disclosures to the Company's stockholders which has the effect of any of the
foregoing; or (E) resolve to enter into a Company Acquisition Agreement relating
to a Third-Party  Acquisition or a Superior  Proposal;  or (y) the Company shall
(A)  execute  a  Company   Acquisition   Agreement  relating  to  a  Third-Party
Acquisition or a Superior  Proposal (B) violate any of the provisions of Section
5.2 hereof; or

               (iii) if any  representation or warranty of the Company set forth
in this Agreement  shall have become untrue or shall have been untrue when made,
if such failure to be true and correct,  individually or in the aggregate, would
result in a Material  Adverse Effect;  provided that, if such failure is curable
on or prior to the earlier of (A) 60 days following  notice of such  Terminating
Breach  and (B)  June  30,  2001 by the  Company  through  the  exercise  of its
reasonable  best  efforts and for so long as the Company  continues  to exercise
such reasonable best efforts, Parent may not terminate this Agreement under this
Section  7.1(c)(iii)  until the earlier of (A) 60 days following  notice of such
Terminating Breach and (B) June 30, 2001; or

          (d) by the Company (provided such termination has been approved by the
Independent Committee) as follows:

               (i)  upon a  Terminating  Breach  on the part of  Parent,  PHH or
Merger Sub; provided -------- that, if such Terminating  Breach is curable on or
prior to the earlier of (A) 60 days following notice of such Terminating  Breach
and (B) June 30, 2001 by Parent,  PHH or Merger Sub through the  exercise of its
reasonable  best efforts and for so long as Parent,  PHH and Merger Sub continue
to exercise such  reasonable  best efforts,  the Company may not terminate  this
Agreement  under  this  Section  7.1(d)(i)  until  the  earlier  of (A) 60  days
following notice of such Terminating Breach and (B) June 30, 2001; or

               (ii) if any  representation or warranty of Parent,  PHH or Merger
Sub,  respectively,  set forth in this  Agreement  shall have been untrue in any
material  respect or shall have been untrue in any  material  respect when made;
provided  that,  if such failure is curable  prior to the earlier of (A) 60 days
following notice of such Terminating Breach and (B) June 30, 2001 by Parent, PHH
or Merger Sub, as the case may be, through the exercise of its  reasonable  best
efforts  and for so long as  Parent,  PHH or  Merger  Sub,  as the  case may be,
continues  to  exercise  such  reasonable  best  efforts,  the  Company  may not
terminate this Agreement under this Section  7.1(d)(ii) until the earlier of (A)
60 days following notice of such Terminating Breach and (B) June 30, 2001; or

               (iii) if,  following the  Stockholders  Meeting,  (A) the Company
Stockholder Approval shall not have been obtained,  (B) the Company concurrently
executes and delivers a definitive agreement with respect to a Superior Proposal
and (C) the  Independent  Committee  determines in good faith,  after receipt of
advice of its outside legal counsel,  that a failure to terminate this Agreement
in order to enter  into a  definitive  agreement  with  regard to such  Superior
Proposal  would  constitute a breach of its  fiduciary  duties to the  Company's
stockholders under applicable law; provided that, prior to such termination, (x)
the Company has given  Parent  three (3) Business  Days'  advance  notice of the
Company's  intention to accept such Superior Proposal and shall have complied in
all  respects  with the  provisions  of Section 2.6 and Section 5.2; and (y) the
Company  shall  have  paid by wire  transfer  the  Fee and the  Parent  Expenses
pursuant to Section 7.3(b).

          7.2 Effect of  Termination.  In the event of the  termination  of this
Agreement  pursuant to Section 7.1,  written notice  thereof shall  forthwith be
given to the other party or parties  specifying the provision hereof pursuant to
which such  termination is made, and this Agreement shall forthwith  become void
and there shall be no  liability  on the part of any party  hereto or any of its
Affiliates, directors, officers, stockholders,  representatives or agents except
for any obligation of the Company or Parent set forth in Article VII hereof,  if
any.  Notwithstanding  the foregoing,  or any other  provision of this Agreement
(including Section 7.3),  nothing herein shall relieve the Company,  Parent, PHH
or Merger Sub from liability for any breach hereof.

          7.3 Fees and Expenses.

          (a) Except as set forth in this  Section  7.3,  all fees and  expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not the Merger is consummated.

          (b) The Company shall pay, or cause to be paid, to Parent,  the Parent
Expenses (as defined  below)  actually  incurred and a fee of  $28,000,000  (the
"Fee") upon the first to occur of any of the following events:

               (i) the  termination  of this  Agreement by Parent or the Company
pursuant  to  subsection  (b)(i) of  Section  7.1,  or the  termination  of this
Agreement by Parent  pursuant to  Subsection  (c)(i) or (c)(iii) of Section 7.1;
provided,  that prior to such  termination,  the Company  becomes aware that any
Person  has  made  or  intends  to make a  proposal  relating  to a  Third-Party
Acquisition and, within twelve months following the date of such termination,  a
Third-Party Acquisition is consummated or a definitive agreement with respect to
a Third-Party Acquisition is executed by the Company;

               (ii) the  termination  of this  Agreement  by Parent  pursuant to
Section 7.1(c)(ii);

               (iii) the  termination of this Agreement by the Company  pursuant
to Section 7.1(d)(iii); or

               (iv) the  termination  of this  Agreement  by Parent  pursuant to
Section 7.1(b)(iii);  provided, that a Third-Party Acquisition shall be publicly
announced or otherwise made known to the public at or prior to the  Stockholders
Meeting and,  within twelve months  following  the date of such  termination,  a
Third-Party Acquisition is consummated or a definitive agreement with respect to
a Third-Party Acquisition is executed by the Company.

          (c)  "Parent  Expenses"  means  all  out-of-pocket  expenses  and fees
(including fees and expenses payable to all banks, investment banking agents and
counsel for arranging,  committing to provide or providing any financing for the
Transactions  contemplated  hereby or structuring the Transactions  contemplated
hereby and all fees of counsel, accountants,  experts and consultants to Parent,
PHH and Merger Sub and all printing and advertising  expenses) actually incurred
or  accrued  by  either  of them or on  their  behalf  in  connection  with  the
Transactions,  including the financing thereof, and actually incurred or accrued
by banks,  investment  banking firms,  other  financial  institutions  and other
Persons  and  incurred  by Parent,  PHH and Merger  Sub in  connection  with the
negotiation,  preparation,  execution and  performance  of this  Agreement,  the
structuring and financing of the Transactions  and any financing  commitments or
agreements  relating  thereto;  provided,  however,  that in no event  shall the
amount of Parent Expenses exceed $2,500,000.

          (d) The Fee and Parent Expenses shall be paid by wire transfer of same
day funds to an account  designated  by Parent  within two Business Days after a
demand for payment  following the first to occur of any of the events  described
in  Section  7.3(b);  provided  that,  in the  event  of a  termination  of this
Agreement under Section  7.1(d)(iii),  the Fee and Parent Expenses shall be paid
as therein provided as a condition to the effectiveness of such termination.

          (e) The agreements  contained in this Section 7.3 are an integral part
of the Transactions and do not constitute a penalty. In the event of any dispute
between the Company and Parent as to whether the Fee and Parent  Expenses  under
this Section 7.3 are due and payable,  the prevailing party shall be entitled to
receive  from the other  party the  reasonable  costs  and  expenses  (including
reasonable legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, relating to such dispute.  Interest
shall be paid on the amount of any unpaid Fee or Parent Expenses at the publicly
announced prime rate of Citibank, N.A. from the date such Fee or Parent Expenses
was required to be paid.


                                  ARTICLE VIII
                               GENERAL PROVISIONS

          8.1 Nonsurvival of  Representations,  Warranties and  Agreements.  The
representations,   warranties  and  agreements  in  this  Agreement  or  in  any
instrument  delivered pursuant to this Agreement shall not survive the Effective
Time of the  Merger;  provided,  that the  agreements  contained  in  Article I,
Article  II,  Sections  5.5 and 5.6 and this  Article  VIII  shall  survive  the
Effective Time.

          8.2  Notices.  Any  notice  required  to be given  hereunder  shall be
sufficient if in writing, and sent by facsimile  transmission (provided that any
notice  received by  facsimile  transmission  or  otherwise  at the  addressee's
location on any Business Day after 5:00 p.m.  (addressee's  local time) shall be
deemed to have been received at 9:00 a.m.  (addressee's  local time) on the next
Business Day), by reliable  overnight  delivery service (with proof of service),
hand  delivery or certified or  registered  mail (return  receipt  requested and
first-class postage prepaid), addressed as follows:

                           If to Parent, PHH or Merger Sub:

                           Cendant Corporation
                           6 Sylvan Way
                           Parsippany, New Jersey  07054
                           Attention:  General Counsel
                           Telecopier No.:  973-496-5335

                           with copies to:

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           One Rodney Square
                           Wilmington, Delaware  19801
                           Attention:  Patricia Moran Chuff, Esq.
                           Telecopier No.:  302-651-3001

                           If to the Company:

                           Avis Group Holdings, Inc.
                           World Headquarters
                           900 Old Country Road
                           Garden City, New York  11530
                           Attention:  General Counsel
                           Telecopier No.:  516-222-6922

                           with copies to:

                           White & Case LLP
                           1155 Avenue of the Americas
                           New York, New York  10036
                           Attention:  John M. Reiss, Esq.
                           Telecopier No.:  212-354-8113

                           and to the Special Committee at:

                           JER Partners
                           1650 Tysons Blvd.
                           Suite 1600
                           McLean, VA 22102
                           Attention:  Deborah Harmon
                           Telecopier:  (703) 714-8124

                           with copies to:

                           Cahill Gordon & Reindel
                           80 Pine Street
                           New York, New York  10005-1702
                           Attention:  Richard E. Farley, Esq.
                           Telecopier No.:  212-269-5420

or to such other address as any party shall specify by written  notice so given,
and such  notice  shall  be  deemed  to have  been  delivered  as of the date so
telecommunicated,  personally  delivered or mailed.  Any party to this Agreement
may notify  any other  party of any  changes to the  address or any of the other
details specified in this paragraph;  provided that such notification shall only
be  effective on the date  specified  in such notice or five (5)  Business  Days
after the notice is given,  whichever is later.  Rejection  or other  refusal to
accept or the inability to deliver because of changed address of which no notice
was given  shall be deemed to be  receipt  of the  notice as of the date of such
rejection, refusal or inability to deliver.

          8.3 Assignment;  Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
(whether by operation of law or otherwise)  without the prior written consent of
the other  parties,  except  that  Merger  Sub may  assign any of its rights and
obligations hereunder to a wholly owned Subsidiary of Parent which is a Delaware
corporation; provided, however, that no such assignment shall relieve Merger Sub
of its obligations hereunder.  Subject to the preceding sentence, this Agreement
shall be binding  upon and shall  inure to the  benefit of the parties and their
respective successors and permitted assigns.  Notwithstanding anything contained
in this Agreement to the contrary, except for the provisions of Sections 5.5 and
5.6, nothing in this Agreement,  expressed or implied,  is intended to confer on
any Person other than the parties hereto or their respective heirs,  successors,
executors,  administrators  and  assigns any rights,  remedies,  obligations  or
liabilities under or by reason of this Agreement.

          8.4 Entire Agreement.  This Agreement,  the Company Disclosure Letter,
the Parent  Disclosure  Letter and any  documents  delivered  by the  parties in
connection  herewith  constitute  the entire  agreement  among the parties  with
respect  to the  subject  matter  of this  Agreement  and  supersede  all  prior
representations,  warranties,  agreements and understandings  among the parties,
both  written  and  oral,  with  respect  thereto,  except  the  Confidentiality
Agreement which shall continue in full force and effect;  provided that if there
is any conflict between the Confidentiality  Agreement and this Agreement,  this
Agreement shall prevail.

          8.5  Amendment.  Subject to  applicable  law,  this  Agreement  may be
amended by the parties  hereto,  by action taken by their  respective  boards of
directors and, with respect to the Company, by the Independent Committee, at any
time  before  or after  the  Company  Stockholder  Approval,  but after any such
Company Stockholder  Approval,  no amendment shall be made which by law requires
the further approval of stockholders  without  obtaining such further  approval.
This  Agreement may not be amended  except by an instrument in writing signed on
behalf of each of the parties.

          8.6 Governing Law; Consent to Jurisdiction.

          (a) This  Agreement  shall be governed by and  construed in accordance
with the laws of the  State of  Delaware  without  regard to the  principles  of
conflicts of laws thereof.

          (b) Each of the parties  hereto (i)  consents to submit  itself to the
exclusive personal jurisdiction of any Delaware state court or any federal court
located in the State of  Delaware  in the event any  dispute  arises out of this
Agreement or any of the  transactions  contemplated  by this  Agreement and (ii)
agrees that it shall not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court.

          8.7  Counterparts.  This  Agreement  may be executed by the parties in
separate counterparts,  each of which when so executed and delivered shall be an
original,  but all such counterparts shall together  constitute one and the same
instrument. Each counterpart may consist of a number of copies of this Agreement
each signed by less than all, but together  signed by all of the parties hereto.
This Agreement shall become  effective when one or more  counterparts  have been
signed by each of the parties and delivered to the other parties.

          8.8  Headings.  Headings  of the  Articles  and  Sections  of  this
Agreement are for the  convenience  of the parties  only,  and shall be given no
substantive or interpretive effect whatsoever.

          8.9  Interpretation.  When a reference is made in this Agreement to an
Article or  Section,  such  reference  shall be to an Article or Section of this
Agreement unless otherwise indicated. The table of contents to this Agreement is
for  reference  purposes  only and shall not  affect in any way the  meaning  or
interpretation  of this Agreement.  Whenever the words "include,"  "includes" or
"including" are used in this  Agreement,  they shall be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder" and
words  of  similar  import  when  used in this  Agreement  shall  refer  to this
Agreement as a whole and not to any particular provision of this Agreement.  All
terms defined in this Agreement shall have the defined meanings when used in any
certificate  or  other  document  made  or  delivered  pursuant  thereto  unless
otherwise  defined  therein.  The  definitions  contained in this  Agreement are
applicable  to the singular as well as the plural forms of such terms and to the
masculine  as well as to the  feminine  and neuter  genders  of such  term.  Any
agreement,  instrument  or  statute  defined  or  referred  to  herein or in any
agreement  or  instrument  that is  referred  to  herein  means  such  agreement
instrument  or statute as from time to time amended,  modified or  supplemented,
including (in the case of agreements  or  instruments)  by waiver or consent and
(in the case of statutes) by  succession of  comparable  successor  statutes and
references to all  attachments  thereto and  instruments  incorporated  therein.
References to a Person are also to its permitted successors and assigns. Each of
the parties has  participated in the drafting and negotiation of this Agreement.
If an ambiguity or question of intent or interpretation  arises,  this Agreement
must be construed as if it is drafted by all the parties and no  presumption  or
burden of proof  shall  arise  favoring  or  disfavoring  any party by virtue of
authorship  of any of the  provisions  of this  Agreement.  The inclusion of any
matters in the  Company  Disclosure  Letter or the Parent  Disclosure  Letter in
connection  with any  representation,  warranty,  covenant or agreement  that is
qualified  as to  materiality  or  "Material  Adverse  Effect"  shall  not be an
admission  by the Company that such matters is material or would have a Material
Adverse Effect.

          8.10 Waivers.  No action taken pursuant to this  Agreement,  including
any investigation by or on behalf of any party,  shall be deemed to constitute a
waiver by the party taking such action of compliance  with any  representations,
warranties,  covenants  or  agreements  contained in this  Agreement.  Any term,
covenant or condition of this  Agreement  may be waived at any time by the party
which is entitled to the benefit thereof, but only by a written notice signed by
such party  expressly  waiving such term or  condition.  The waiver by any party
hereto of a breach of any provision  hereunder shall not operate or be construed
as a waiver of any prior or subsequent breach of the same or any other provision
hereunder.

          8.11  Incorporation  of Annex  and  Disclosure  Letters.  The  Company
Disclosure Letter and the Parent  Disclosure  Letter are hereby  incorporated in
this  Agreement  and made a part of this  Agreement for all purposes as if fully
set forth in this Agreement.

          8.12  Severability.  Any term or provision of this Agreement  which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,  be
ineffective  to the  extent  (and  only to the  extent)  of such  invalidity  or
unenforceability  without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or  enforceability of
any of the terms or provisions of this Agreement in any other  jurisdiction.  If
any  provision  of  this  Agreement  is so  broad  as to be  unenforceable,  the
provision shall be interpreted to be only so broad as is enforceable.  Upon such
determination that any term or other provision is invalid,  illegal or incapable
of being  enforced,  the parties hereto shall  negotiate in good faith to modify
this Agreement so as to effect the original  intent of the parties as closely as
possible in an  acceptable  manner in order that the  transactions  contemplated
hereby  are  consummated  as  originally  contemplated  to the  greatest  extent
possible.

          8.13   Enforcement  of  Agreement.   The  parties  hereto  agree  that
irreparable  damage would occur if any of the  provisions of this  Agreement was
not performed in accordance with its specific terms or as otherwise breached and
that  money  damages  would not be an  adequate  remedy  for any  breach of this
Agreement.  It is  accordingly  agreed that the parties  shall be entitled to an
injunction or injunctions  to prevent  breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court referred to
in Section 8.6(b),  this being in addition to any other remedy to which they are
entitled at law or in equity or pursuant to this  Agreement.  In any such action
for  specific  performance,  each of the parties  shall waive (i) the defense of
adequacy  of a remedy  at law and  (ii) any  requirement  for the  securing  and
posting of any bond.

          8.14 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT WAIVES, TO THE
FULLEST EXTENT  PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY ACTION,  SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT.

          8.15 Execution. This Agreement may be executed by facsimile signatures
by any party and such signature shall be deemed binding for all purposes hereof,
without delivery of an original signature being thereafter required.

          8.16  Date for any  Action.  In the  event  that any date on which any
action is required to be taken  hereunder by any of the Parties  hereto is not a
Business Day,  such action shall be required to be taken on the next  succeeding
day which is a Business Day.

          8.17 Parties in  Interest.  This  Agreement  shall be binding upon and
inure solely to the benefit of each Party hereto, and nothing in this Agreement,
express or implied,  is intended  to or shall  confer upon any other  Person any
right,  benefit  or remedy of any nature  whatsoever  under or by reason of this
Agreement,  other than  Section  5.5 (which is intended to be for the benefit of
the Persons covered thereby and may be enforced by such Persons).

          8.18 Certain Definitions. As used in this Agreement:

          (a) The term  "Affiliate,"  as applied to any  Person,  shall mean any
other Person directly or indirectly controlling,  controlled by, or under common
control  with,  that  Person;   for  purposes  of  this  definition,   "control"
(including, with correlative meanings, the terms "controlling," "controlled by,"
"under common control  with"),  as applied to any Person,  means the possession,
directly or  indirectly,  of the power to direct or cause the  direction  of the
management and policies of that Person,  whether through the ownership of voting
securities, by contract or otherwise.

          (b) The term "Associate" has the meaning set forth in Rule 12b-2 under
the Exchange Act.

          (c) A Person shall be deemed to "beneficially"  own securities if such
Person would be the beneficial  owner of such securities  under Rule 13d-3 under
the  Exchange  Act,  including  securities  which  such  Person has the right to
acquire (whether such right is exercisable immediately or only after the passage
of time).

          (d) The term  "Business Day" means any day on which  commercial  banks
are open for business in New York, New York other than a Saturday, a Sunday or a
day  observed as a holiday in New York,  New York under the laws of the State of
New York or the federal laws of the United States.

          (e)  The  term  "Person"  shall  include  individuals,   corporations,
partnerships, trusts, limited liability companies, associations,  unincorporated
organizations,  joint ventures, other entities, groups (which term shall include
a "group"  as such term is defined in Section  13(d)(3)  of the  Exchange  Act),
labor unions or Governmental Entity.

          (f) The term  "Subsidiary," when used with respect to any party, means
any corporation or other organization,  whether  incorporated or unincorporated,
of which such party directly or indirectly  owns or controls at least a majority
of the securities or other interests having by their terms ordinary voting power
to elect a  majority  of the board of  directors  or others  performing  similar
functions  with  respect  to such  corporation  or  other  organization,  or any
organization of which such party is a general partner.

                                       [SIGNATURE PAGE FOLLOWS]


<PAGE>




          IN WITNESS  WHEREOF,  the parties have  executed  this  Agreement  and
caused the same to be duly  delivered  on their behalf on the day and year first
written above.

                                        CENDANT CORPORATION


                                        By: /s/ Henry R. Silverman
                                            ------------------------------------
                                            Name: Henry R. Silverman
                                            Title: Chairman, President and
                                            Chief Executive Officer


                                        PHH CORPORATION


                                        By: /s/ James E. Buckman
                                            ------------------------------------
                                            Name: James E. Buckman
                                            Title: Executive Vice President
                                                   and General Counsel


                                        AVIS ACQUISITION CORP.


                                        By: /s/ James E. Buckman
                                            ------------------------------------
                                           Name: James E. Buckman
                                           Title: Executive Vice President
                                                  and General Counsel


                                        AVIS GROUP HOLDINGS, INC.


                                        By: /s/ Kevin M. Sheehan
                                            ------------------------------------
                                            Name:  Kevin M. Sheehan
                                            Title: President, Corporate and
                                                   Business Affairs,
                                                   Chief Financial Officer


<PAGE>

<TABLE>

<CAPTION>


                                 Defined Terms

                                                                                                 Page
<S>                                                                                               <C>

Acquisition.........................................................................................1
Acquisition Group...................................................................................1
Affiliate..........................................................................................56
Agreement...........................................................................................1
Associate..........................................................................................56
Assumed Option......................................................................................8
Assumed Option Plan.................................................................................8
Assumed Option Plans................................................................................8
Avis Fleet.........................................................................................14
Avis License.......................................................................................25
Bear Stearns.......................................................................................27
Beneficially.......................................................................................56
Board...............................................................................................1
Business Day.......................................................................................56
Car Holdings........................................................................................1
Cendant Common Stock................................................................................8
Certificate of Merger...............................................................................2
Certificates........................................................................................5
Class B Common Stock...............................................................................13
Closing.............................................................................................3
Closing Date........................................................................................3
Code...............................................................................................20
Code...............................................................................................19
Company.............................................................................................1
Company Acquisition Agreement......................................................................34
Company Common Stock................................................................................1
Company Disclosure Letter..........................................................................14
Company SEC Reports................................................................................16
Company Stockholder Approval.......................................................................10
Confidentiality Agreement..........................................................................33
Contract...........................................................................................16
Control............................................................................................56
Covered Parties....................................................................................37
DGCL................................................................................................1
Effective Date......................................................................................3
Effective Time......................................................................................3
Elected Portion.....................................................................................8
Environmental Claim................................................................................25
Environmental Laws.................................................................................25
ERISA..............................................................................................19
ERISA Affiliate....................................................................................20
Exchange Act.......................................................................................15
Exchange Ratio......................................................................................9
Fairness Opinion...................................................................................13
Fee................................................................................................49
GAAP...............................................................................................16
Governmental Entity................................................................................15
Hazardous Materials................................................................................25
HSR Act............................................................................................15
Hyperion...........................................................................................37
Indemnified Liabilities............................................................................38
Independent Committee...............................................................................1
Intellectual Property..............................................................................25
IRS................................................................................................19
Letter of Transmittal...............................................................................5
Material Adverse Effect............................................................................12
Merger..............................................................................................1
Merger Consideration................................................................................4
Merger Sub..........................................................................................1
Merger Sub Common Stock.............................................................................5
Morgan Stanley......................................................................................1
Multiemployer Plan.................................................................................20
Note Tender Offer..................................................................................41
Notes..............................................................................................31
Option..............................................................................................8
Parent Disclosure Letter...........................................................................28
Parent Expenses....................................................................................49
Payment Agent.......................................................................................5
Payment Fund........................................................................................5
Permits............................................................................................21
Person.............................................................................................56
PHH.................................................................................................1
Plan...............................................................................................19
Plans..............................................................................................19
Preferred Stock....................................................................................13
Proxy Statement....................................................................................10
Release............................................................................................25
Retention Election..................................................................................8
SEC................................................................................................10
Securities Act.....................................................................................16
Shares..............................................................................................1
Stockholders Meeting...............................................................................10
Subsidiary.........................................................................................57
Superior Proposal..................................................................................36
Surviving Corporation...............................................................................2
Tax Return.........................................................................................19
Taxes..............................................................................................19
Terminating Breach.................................................................................47
Third Party........................................................................................35
Third-Party Acquisition............................................................................35
Transactions........................................................................................2
WARN Act...........................................................................................27

</TABLE>