BANDAG, INCORPORATED AND SUBSIDIARIES
                                                                    Exhibit 10.2


                         TIRE DISTRIBUTION SYSTEMS, INC.
                     SEVERANCE AGREEMENT FOR SAM FERRISE II

          THIS SEVERANCE AGREEMENT  ("Agreement") is entered into as of the 20th
day of January, 2000, by and between TIRE DISTRIBUTION SYSTEMS, INC., a Delaware
corporation ("TDS") and SAM FERRISE II ("Employee").

                                 R E C I T A L S

          WHEREAS,  Employee  has  been  a key  executive  employee  of  Bandag,
Incorporated  ("Bandag"),   the  ultimate  owner  of  100%  of  the  issued  and
outstanding  common  stock of TDS, and  possesses an extensive  knowledge of the
business and affairs of Bandag and TDS,  their  proprietary  information,  trade
secrets, policies, methods, personnel, and problems;

          WHEREAS,  as of the date  hereof,  Employee  has resigned as executive
vice president and chief  operating  officer of Bandag and is now an at-will key
executive employee of TDS and desires to continue to be employed at-will by TDS,
and acknowledges that this Agreement provides for severance payments from TDS to
which  he is  not  otherwise  entitled  by  any  contract  or  any  other  legal
obligation;

          WHEREAS,  as a key executive  employee of TDS,  Employee  acknowledges
that he will obtain  extensive  knowledge  of the business and affairs of Bandag
and TDS,  their  proprietary  information,  trade  secrets,  policies,  methods,
personnel and problems;

          WHEREAS,  the parties agree and acknowledge that this Agreement is not
intended to constitute an employment  contract;  does not create any  employment
rights other than those  expressly  set forth  herein;  does not alter or modify
Employee's status as an "at-will" employee of TDS or the terms and conditions of
his  employment  except as expressly set forth  herein,  and does not create any
rights to continued  employment or to termination only "for cause";  but rather,
is intended  solely to provide for the  availability  of  severance  payments to
Employee under the terms and conditions  set forth herein in  consideration  and
exchange  for  Employee's  agreement  to be  bound  by the  Non-Competition  and
Confidentiality provisions contained in this Agreement;

          NOW,  THEREFORE,  in  consideration of the covenants and agreements of
the parties herein  contained,  the sufficiency of which is acknowledged by each
party, the parties hereto agree as follows:

          1. Employee  Covenants.  Employee  covenants and agrees to be bound by
the terms of the  Non-Competition  and  Confidentiality  provisions set forth in
paragraph 2, below.

          2. Covenant Not to Compete and Confidentiality.

          (a) Employee has obtained or acquired and will, during the

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                      BANDAG, INCORPORATED AND SUBSIDIARIES


course of  Employee's  employment  with TDS,  obtain or  acquire,  knowledge  of
Confidential  Information,  which knowledge would, in the event Employee were to
become employed by or associated with a competitor of TDS, become  available and
provide  invaluable  benefits to such competitor and cause  irreparable  harm to
TDS. In consideration of the severance  payments provided herein,  Employee will
not, within the geographic  location provided herein, from the date hereof until
the number of months set forth in the immediately following sentence has elapsed
following termination of Employee's employment with TDS for any reason, directly
or indirectly,  as a director,  officer,  employee, or as an owner of any equity
proprietary  interest in (except for  ownership  of shares in a publicly  traded
company not  exceeding  five  percent  (5%) of any class of  outstanding  equity
securities),  or as a  consultant  or  otherwise,  render  services to, have any
financial interest in, or otherwise  participate in the affairs of, any business
("Competitive  Business")  which is, or is planning or organizing to be, engaged
in the  manufacture  and/or  sale  of  products  or the  rendering  of  services
competitive with the products  manufactured or sold or the services  rendered by
TDS.  Employee  shall be  restricted  (as set  forth in this  Section  2(a)) for
twenty-four (24) months following termination of Employee's employment with TDS,
unless the reason for such termination is the voluntary termination of Employee,
in which event the period of restriction shall be twelve (12) months,  provided,
however, that, in the event of Employee's voluntary termination,  TDS shall have
the  right,  exercisable  in its  sole  discretion,  to  cause  such  period  of
restriction to be twenty-four (24) months (such  twenty-four (24) or twelve (12)
month period is hereinafter  referred to as the Period of Restriction).  TDS may
exercise such right by giving  employee  written notice of TDS' exercise of such
right as soon as reasonably  practicable  after the effective date of Employee's
voluntary  termination.  TDS'  right to cause the  Period of  Restriction  to be
twenty-four months shall expire after the first installment  payment provided by
Section 4 hereof has been  made.  The  geographic  limitation  of the  foregoing
covenant not to compete  shall extend to any state of the United States in which
TDS sold or actively  attempted to sell its products or services  within the one
(1) year period prior to the  termination of Employee's  employment with TDS. In
the event that Employee is employed by a Competitive  Business  which is engaged
in the manufacture or sale of multiple  products,  this Section 2 shall apply to
only  those  portions  of  said  Competitive  Business  which  are  directly  or
indirectly competitive with TDS.

          (b) Employee has,  during the course of his employment with Bandag and
will,  during the course of Employee's  employment  with TDS,  obtain or acquire
knowledge of  Confidential  Information,  which  knowledge  would,  in the event
Employee were to become employed by or associated with a competitor of Bandag or
of any corporation or other entity in which Bandag owns, directly or indirectly,
a majority of such corporation's or other entity's outstanding voting securities
(a  "Subsidiary"),  become  available  and provide  invaluable  benefits to such
competitor and cause irreparable harm to Bandag or any such


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                      BANDAG, INCORPORATED AND SUBSIDIARIES


Subsidiary. In consideration of the severance payments provided herein, Employee
will not, within the geographic  location provided herein,  from the date hereof
until the  expiration of the applicable  Period of  Restriction  (as provided in
Section 2(a) above) following  termination of Employee's  employment with TDS or
any Subsidiary for any reason, directly or indirectly,  as a director,  officer,
employee,  or as an owner of any equity  proprietary  interest  in  (except  for
ownership of shares in a publicly traded company not exceeding five percent (5%)
of any class of outstanding equity securities), or as a consultant or otherwise,
render services to, have any financial interest in, or otherwise  participate in
the affairs of, any business  ("Competitive  Business") which is, or is planning
or organizing to be, engaged in the  manufacture  and/or sale of products or the
rendering of services competitive with the products  manufactured or sold or the
services rendered by Bandag or any Subsidiary.  The geographic limitation of the
foregoing covenant not to compete shall extend to any state of the United States
in  which  Bandag  or any  Subsidiary  sold or  actively  attempted  to sell its
products or services  within the one (1) year period prior to the termination of
Employee's  employment  with TDS.  In the event that  Employee  is employed by a
Competitive  Business  which is engaged in the  manufacture  or sale of multiple
products,  this Section 2 shall apply to only those portions of said Competitive
Business  which  are  directly  or  indirectly  competitive  with  Bandag or any
Subsidiary.

          (c) From the date hereof until  twenty-four  (24) months following the
termination  of  Employee's  employment,  Employee  will  not,  on behalf of any
Competitive  Business,  be  connected in any way with  soliciting  or hiring any
employees  of Bandag,  TDS or any  Subsidiary  who were  subject  to  Employee's
general  supervision  during  employment by Bandag or TDS,  until such employees
have not been employed by Bandag, TDS or any Subsidiary for six (6) months.

          (d) In addition  to all duties of loyalty  imposed on Employee by law,
Employee shall maintain  Confidential  Information (as defined in subsection (e)
below) in strict confidence and secrecy and shall not at any time after the date
hereof,  or at any time after  termination of,  employment with TDS, directly or
indirectly,  use or disclose to others any Confidential Information,  or use any
Confidential  Information for the benefit of any person or entity (including the
Employee) other than Bandag or TDS,  without the prior written consent of TDS or
Bandag, as the case may be (except for disclosures to persons acting on Bandag's
or TDS's  behalf with a need to know such  information,  provided  such  persons
agree to hold such  information  in confidence on terms  acceptable to Bandag or
TDS,  as the case may be, and except for  disclosures  that may be required by a
court of competent  jurisdiction,  provided  Employee notifies TDS or Bandag, as
the case may be, a reasonable time prior to any such disclosure).

          (e) "Confidential  Information" means Proprietary Ideas (as defined in
subsection (f) below) and other information (excluding


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                      BANDAG, INCORPORATED AND SUBSIDIARIES


information that is generally known to the public by means other than disclosure
by Employee) related to Bandag's, TDS's or any Subsidiary's business, whether or
not in written or printed form, not generally known in the trade or industry, of
which Employee has become informed during his employment by Bandag or TDS or has
or  will  become  informed  during  his  employment  by TDS,  including  without
limitation,  product  specifications,   service  specifications,   manufacturing
procedures, methods, equipment,  compositions,  technology,  designing, business
plans,  marketing  plans,  formulae,  trade  secrets,  know-how,   research  and
development programs,  sales methods,  customer lists,  strategic plans, mailing
lists, sales levels and quantities,  customer usages and requirements,  computer
programs and other confidential technical or business information and data.

          (f)  "Proprietary  Ideas" means  ideas,  suggestions,  Inventions  (as
defined in  subsection  (g) below) and work  relating in any way to the business
and  activities  of Bandag or TDS,  which are or may be subjects  of  protection
under applicable law concerning patents,  copyrights, trade secrets, trademarks,
service marks or other intellectual property rights.

          (g)  "Inventions"  means designs,  discoveries,  improvements,  ideas,
conceptions,   works  of   authorship,   know  how,   innovations,   inventions,
enhancements, modifications, methods, techniques, technological developments and
suggestions,  whether or not  patentable,  copyrightable  or  susceptible to any
other  form  of  legal  protection,   including  without  limitation,  products,
processes, machines, tooling, articles,  compositions of matter, promotional and
advertising materials,  data processing programs and systems,  manufacturing and
sales techniques,  artwork,  drawings, plans and specifications which either (i)
relate to the business of Bandag,  TDS or any  Subsidiary as conducted from time
to time,  or (ii)  relate  to  Bandag's,  TDS's or any  Subsidiary's  actual  or
demonstrably anticipated research or development,  or (iii) result from any work
performed by Employee for TDS or Bandag, as the case may be.

          3. Specific  Enforcement;  Injunctive Relief. The parties  acknowledge
that damages would be an inadequate  remedy for any breach of the  provisions of
Section 2 by Employee.  Therefore,  the  obligations of Employee under Section 2
shall be specifically enforceable and Employee agrees that TDS or Bandag, as the
case may be,  shall be entitled  to an  injunction,  restraining  order or other
equitable relief from any court of competent jurisdiction,  restraining Employee
from committing any violations of the provisions of Section 2 of this Agreement,
and should such  injunction  or decree  issue in favor of TDS or Bandag,  as the
case may be, TDS or Bandag,  as the case may be,  shall also be  entitled to all
costs,  expenses,  and fees  (including,  without  limitation,  attorneys' fees)
incurred in connection  with such action.  Such remedies shall be cumulative and
not  exclusive,  and shall be in addition to any other remedy TDS or Bandag,  as
the case may be, may have.


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                      BANDAG, INCORPORATED AND SUBSIDIARIES


          4. Severance  Payments.  TDS agrees that if TDS terminates  Employee's
employment with TDS, it will pay Employee a severance payment of $680,000, or if
Employee voluntarily  terminates his employment with TDS, it will pay Employee a
severance benefit of $340,000 if the Period of Restriction is twelve (12) months
or a severance  benefit of $680,000 if the Period of  Restriction is twenty-four
(24)  months  (subject  in all cases to all  required  federal,  state and local
payroll withholding), and payable as set forth herein. TDS will pay Employee the
severance  amount in twenty-four  (24) or twelve (12) equal monthly  installment
payments,  depending  upon the length of the Period of  Restriction,  commencing
thirty (30) days after the date of Employee's  termination of  employment,  with
monthly  installment  payments made  thereafter on the 1st day of each month for
twenty-three  (23) or eleven (11)  months,  as the case may be. For  purposes of
this paragraph,  the date of Employee's  termination of employment is defined as
the last date on which Employee renders services to TDS.

          (a) It is  understood  and agreed to by the parties  that,  as used in
this paragraph 4, the terms  "terminates" or "voluntarily  terminates"  does not
include  the  termination  of  Employee's  employment  with  TDS  due to  death,
disability or retirement.

          (b) It is further  understood and agreed to by the parties that in the
event Employee engages in any conduct in violation of, or inconsistent with, his
obligations  under  paragraph  2, in addition to all other  rights and  remedies
available to TDS or Bandag, as the case may be, TDS's obligation to make further
severance  payments  under  this  Agreement  shall be  immediately  and  forever
discharged and released and Employee shall be obligated to reimburse TDS for all
severance payments theretofore made by TDS.

          (c) As a condition  precedent  to  Employee's  entitlement  to receive
severance  payments and to TDS's  obligation to provide such payments under this
Agreement,  Employee  agrees that, in the event of his termination by TDS or his
voluntary  termination,  he will  execute and be bound by the terms of a general
release of all claims  against TDS  ("Release")  arising up to and including the
date of his execution of the Release.  Employee understands and agrees that such
Release will include,  at a minimum, a release of all claims against TDS and its
affiliated  companies and  successors,  and its and their  officers,  directors,
employees,    and   agents,    arising   under   federal,    state   and   local
anti-discrimination  or civil rights laws,  as well as all claims,  statutory or
common-law, arising out of Employee's employment with TDS or its termination.

          5. Entire Agreement.  This Agreement  constitutes the entire agreement
and  understanding  of the parties  pertaining to the subject  matter  contained
herein and supersedes all prior and contemporaneous agreements,  representations
and understandings, whether written or oral, as to the matters set forth herein.


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                      BANDAG, INCORPORATED AND SUBSIDIARIES


          6.  Modification  and Waiver.  No provisions of this  Agreement may be
modified,  waived or discharged unless such a waiver,  modification or discharge
is agreed to in writing signed by the parties hereto.

          7.  No  Other  Agreements.  No  agreements,  representations,  oral or
otherwise,  express or implied,  with respect to the subject  matter hereof have
been made by either party which are not expressly set forth in this Agreement.

          8.  Costs of  Enforcement.  In the  event  that a court  of  competent
jurisdiction  determines  that  Employee has breached this  Agreement,  Employee
shall be  liable to TDS or  Bandag,  as the case may be,  for all of its  actual
costs (statutory and  nonstatutory),  expenses and attorneys' fees,  incurred to
enforce this Agreement.

          9.  Successors and Assigns.  This Agreement  shall be binding upon and
inure to the benefit of TDS and Bandag, their successors and assigns,  including
the purchaser of all or substantially all of the assets of TDS or Bandag, as the
case may be, and Employee  and his heirs,  executors,  administrators  and legal
representatives.  Employee  may not assign  this  Agreement,  in whole or in any
part.

          10. Bandag as Third Party  Beneficiary.  TDS and Employee  acknowledge
that the  provisions in Section 2 as they relate to Bandag or any Subsidiary are
intended for the benefit of Bandag.  Accordingly,  the parties agree that Bandag
shall be entitled to enforce  against  Employee the  provisions  of Section 2 as
they relate to Bandag or any  Subsidiary as fully as TDS could  enforce  against
Employee the provisions of Section 2 as they relate to TDS.

          11.  Governing  Law. The validity,  interpretation,  construction  and
performance of this Agreement shall be governed by the laws of the State of Iowa
applicable  to contracts  made and to be  performed  therein  between  residents
thereof.

          12.  Counterparts.  This  Agreement  may be  executed  in one or  more
counterparts,  each of which shall be deemed to be an original  but all of which
together shall constitute one and the same instrument.

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

EMPLOYEE                             TIRE DISTRIBUTION SERVICES, INC.


/s/ Sam Ferrise II                   By: /s/ Warren W. Heidbreder
---------------------------------        -------------------------------------
                                       Its: Secretary
                                           -----------------------------------

/s/ Janet R. Sichterman              /s/ Janet R. Sichterman
---------------------------------        -------------------------------------
          Witness                                 Witness


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