EXHIBIT 10.4
                              SEPARATION AGREEMENT



                                   dated as of
                                 July 30th, 1997












                                     between



                              HFS Car Rental, Inc.

                                       and

                              Avis Rent A Car, Inc.






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                              SEPARATION AGREEMENT

       SEPARATION  AGREEMENT  ("Agreement")  dated as of July 30th,  1997 by and
between HFS Car Rental,  Inc., a Delaware  corporation,  and an indirect  wholly
owned subsidiary of HFS Incorporated (together with its successors and permitted
assigns,  "Holdings"),  and  Avis  Rent  A Car,  Inc.,  a  Delaware  corporation
(together with its successors and permitted assigns, "ARAC").

                                    RECITALS

       WHEREAS,  ARAC and  certain of its  subsidiaries  currently  conduct  the
business of owning and managing car rental operations under the service mark and
tradename  "Avis"  (the  "Car  Rental   Business")   primarily  through  certain
subsidiaries of ARAC (the "Direct Car Rental  Subsidiaries"),  their  respective
subsidiaries  and  joint  ventures,  all as  identified  on  Schedule  1  hereto
(collectively, the "Car Rental Subsidiaries");

       WHEREAS,  ARAC is presently a direct wholly owned  subsidiary of Holdings
established for the purposes of taking title to the capital stock and associated
goodwill of the Direct Car Rental  Subsidiaries  and certain  assets  associated
with the Car Rental Business,  and assuming certain liabilities  associated with
the Car  Rental  Business,  all as  specified  herein,  such  that ARAC will own
substantially all of the assets,  business and operations currently conducted by
the Car  Rental  Business  other than the System  (as  defined  herein)  and the
business of granting  franchise rights or licenses with respect to the operation
of Avis car rental  locations  under the System  and the  Proprietary  Marks (as
defined herein);

       WHEREAS,  the Board of Directors of Holdings has determined that it is in
the best  interest  of  Holdings  and the  stockholder  of Holdings to conduct a
public offering (the  "Separation") of  approximately  75% of ARAC Common Stock;
and

       WHEREAS,  the parties have  determined that it is necessary and desirable
to set  forth the  principal  corporate  transactions  required  to  effect  the
Separation  and to set forth other  agreements  that will govern  certain  other
matters following such Separation.


       NOW, THEREFORE, in consideration of the foregoing premises and the mutual
agreements,  provisions and covenants  contained in this Agreement,  the parties
hereby agree as follows:


                                    ARTICLE I

                                   DEFINITIONS

     Section  1  Definitions.  As used  herein,  the  following  terms  have the
following meanings:

       "Action"  means any claim,  suit,  arbitration,  inquiry,  proceeding  or
investigation   by  or  before  any  court,   governmental   or   regulatory  or
administrative agency or commission or any other tribunal.

       "Affiliate" of any specified person means any other person that, directly
or indirectly,  controls, is controlled by or is under direct or indirect common
control with such specified person.



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       "Agreement" has the meaning specified in the Recitals.

       "Ancillary  Agreements" means the Master License Agreement,  the Computer
Services Agreement,  the Reservation Agreement,  the Employee Benefits and Other
Employment Matters Allocation Agreement, the Lease Agreements,  the Cost Sharing
Agreement, and the Tax Disaffiliation Agreement.

       "ARAC" has the meaning specified in the Recitals.

       "ARAC Bylaws" means the bylaws of ARAC in the form filed as an exhibit to
the Form S-1.

       "ARAC  Certificate"  means the restated  certificate of  incorporation of
ARAC in the form filed as an exhibit to the Form S-1.

       "ARAC Common Stock" means the  outstanding  shares of common  stock,  par
value $.01 per share, of ARAC.

       "ARAC  Liabilities"  means all of (i) the  Liabilities of ARAC under this
Agreement,  (ii) the Assumed Liabilities,  (iii) the Liabilities of ARAC arising
after  the  Separation  Date and (iv) any  liabilities  for  Taxes for which HFS
Incorporated  is  entitled  to  indemnification  from ARAC  pursuant  to the Tax
Disaffiliation Agreement.

       "ARAC Transferred Assets" has the meaning specified in Section 2.1.

       "Assumed   Liabilities"   means  the  Liabilities   arising  directly  or
indirectly from the operation of the Car Rental Business or the ownership or use
of  assets  (including  the ARAC  Transferred  Assets)  or other  activities  in
connection  therewith  whether arising before,  on or after the Separation Date,
including but not limited to any  Liabilities  arising or in connection  with or
related to (i)  information  contained in or omitted from the Form S-1, (ii) any
Liabilities set forth or referenced in the audited financial  statements of ARAC
included  in the Form  S-1,  (iii) all  litigation  relating  to the Car  Rental
Business,  including any liability arising from the franchise agreements arising
prior to the  Separation  Date and (iv) the Wizard  Note  pursuant to the Wizard
Note Assumption and Release  Agreement  between Wizard Co., and ARAC and Reserve
Claims  Management  Co.  dated  as  of  the  date  hereof.  Notwithstanding  the
foregoing,  the Assumed Liabilities shall not include (i) operating leases under
which Holdings remains liable,  and (ii) liabilities  related to alleged acts of
illegal  discrimination  against  customers in the Car Rental Business which are
alleged to have occurred prior to the Separation Date.

     "Car Rental  Business"  has the meaning  specified in the first  recital of
this Agreement.

     "Car Rental Subsidiaries" has the meaning specified in the first recital of
this Agreement.

     "Code" means the Internal Revenue Code of 1986, as amended.

     "Commission" means the Securities and Exchange Commission.

       "Computer Services Agreement" means the Computer Services Agreement dated
as of the date hereof  between  WizCom and Rent A Car,  pursuant to which WizCom
has granted ARAC rights to use the Wizard




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System in the conduct of its car rental  business  and  pursuant to which WizCom
receives fees in exchange therefor as such agreement may be amended from time to
time.

       "Cost Sharing Agreement" means the Cost Sharing Agreement dated as of the
date hereof between WizCom and ARAC,  providing for certain matters  relating to
the sharing of space and support services, as such agreement may be amended from
time to time.

       "Covered  Claims"  means any claim that is of a type covered by insurance
or self insurance of Holdings as in effect on the Separation  Date and that is a
type of claim specified as a covered claim on Schedule 5.6(a).

       "Direct Car Rental  Subsidiaries"  has the meaning specified in the first
recital of this Agreement.

       "Employee  Benefits  Agreement"  means the  Employment  Benefits  & Other
Employment  Matters  Allocation  Agreement  dated as of the date hereof  between
Holdings, HFS and ARAC, providing for certain matters relating to the allocation
of employee benefits and related matters,  as such agreement may be amended from
time to time.

     "Fleet Financing Program" means the approximately $3.5 billion asset-backed
fleet financing  program of ARAC being  structured  jointly by Chase  Securities
Inc. and Lehman Brothers Inc.

       "Form S-1"  means the  registration  statement  on Form S-1 filed by ARAC
with the Commission to effect the registration of the ARAC Common Stock pursuant
to the Securities Act, as such  registration  statement may be amended from time
to time.

       "Franchise  Agreements" means all franchise  agreements to which Holdings
or any Car  Rental  Subsidiary  is a party,  pursuant  to which  Holdings(either
directly or through any such Car Rental Subsidiary) has granted franchise rights
with  respect to the  operation  of Avis car rental  facilties,  and in exchange
therefor, receives franchise fees, royalties, license fees and service fees.

      "Guarantees" means the guarantees of Holdings listed on Schedule 3 hereto.

       "HFS" means HFS Incorporated, a Delaware corporation.

       "Holdings" has the meaning specified in the Recitals.

       "Holdings Liabilities" means all of (i) the Liabilities of Holdings under
this  Agreement,   (ii)  the  Liabilities  of  Holdings  (other  than  any  ARAC
Liabilities),  arising after the Separation Date, (iii)  liabilities  related to
alleged  acts of  illegal  discrimination  against  customers  in the Car Rental
Business which are alleged to have occurred  prior to the  Separation  Date, and
(iv) any liabilities for Taxes as for which ARAC is entitled to  indemnification
from HFS Incorporated pursuant to the Tax Disaffiliation Agreement.

       "Holdings Transferred Assets" has the meaning specified in Section 2.1.

       "Lease Agreements" means the Lease Agreements and Sublease Agreements, as
the case may be,  between  WizCom and Rent A Car providing for the allocation of
the executive and other offices of ARAC and WizCom,  as such  agreements  may be
amended from time to time.





<PAGE>



       "Liabilities"   means  any  and  all  claims,   debts,   liabilities  and
obligations,  absolute or  contingent,  matured or not  matured,  liquidated  or
unliquidated,  accrued  or not  accrued,  known or  unknown,  whenever  arising,
including all costs and expenses (including reasonable attorney's fees) relating
thereto under any law, rule, regulation,  action, order or consent decree of any
Governmental  entity  or any  award of any  arbitrator  of any  kind,  and those
arising under any contract, commitment or undertaking.

       "Loss" has the meaning specified in Section 4.1.

       "Master License Agreement" means the Master License Agreement dated as of
the date hereof  between Rent A Car and Holdings  pursuant to which Holdings has
granted franchise rights to Rent A Car with respect to the operation of Avis car
rental facilities, and in exchange therefor receives royalties, license fees and
service fees, as amended from time to time.


       "New Credit  Facilities"  means a revolving credit facility in the amount
of up to $125 million,  a term loan facility in the amount of $120 million and a
$225 million  standby letter of credit  facility,  each with the Chase Manhattan
Bank, as agent, and the other lenders thereto.

       "Rent  A Car"  means  Avis  Rent  A Car  System,  Inc.,  a  wholly  owned
subsidiary of ARAC.

       "Reservation Agreement" means the Reservation Services Agreement dated as
of the date  hereof  between  HFS and  Rent A Car  pursuant  to which  HFS is to
provide  certain  reservation  services to Rent A Car,  as amended  from time to
time.

       "Securities Act" means the Securities Act of 1933, as amended.

     "Separation"  has  the  meaning  specified  in the  third  recital  of this
Agreement.

       "Separation  Date" means the date determined by the Board of Directors of
Holdings  as the date on  which  the  Separation  shall  be  effected,  which is
contemplated to occur on or about September 22, 1997.

       "System"  shall have the meaning given to such term in the Master License
Agreement.

       "Tax" or  "Taxes"  shall have the  meaning  given to such term in the Tax
Disaffiliation Agreement.

       "Tax  Disaffiliation  Agreement" means the Tax  Disaffiliation  Agreement
dated as of the date hereof  between HFS  Incorporated  and ARAC  providing  for
certain tax related matters, as such agreement may be amended from time to time.

     "Wizard Note" means the note,  dated October 1996, made by Wizard Co., Inc.
in the principal amount of $194,100,000.

       "WizCom" means WizCom International,  Ltd., a Delaware corporation and an
indirect wholly owned subsidiary of HFS.




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       "WizCom Transferred Assets" means the assets and agreements identified on
Schedule 4 hereto which were intended to be  transferred  on October 16, 1996 in
connection with the acquisition of ARAC by HFS Incorporated.




                                   ARTICLE II

                         TRANSFER OF CAR RENTAL BUSINESS

       Section 1 Transfer of Assets. (a) Prior to the Separation Date,  Holdings
shall  take or shall  cause to be  taken  all  actions  necessary  to cause  the
transfer,  assignment,  delivery and  conveyance to ARAC of all of Holdings' and
its  subsidiaries'  rights,  title  and  interest  in the  assets  listed  below
(collectively, the "ARAC Transferred Assets"):

       (i) the shares of common stock and preferred stock, if any, of the Direct
     Car  Rental  Subsidiaries  owned by  Holdings  as set forth on  Schedule  1
     hereto; and

       (ii) all books, records and files of, or relating exclusively to, the Car
     Rental Business;  provided,  however,  that Holdings shall retain access to
     such  books,  records  and files to the  extent  required  to carry out its
     obligations under the Master License Agreement.

       (b) Prior to the  Separation  Date,  ARAC shall take or shall cause to be
taken all actions necessary to cause the transfer,  assignment and conveyance to
Holdings  or  its   subsidiaries   or  affiliates  of  all  of  ARAC's  and  its
subsidiaries,   rights,   title  and   interest  in  the  assets   listed  below
(collectively, the "Holdings Transferred Assets"):

       (i) the System;

       (ii) the Franchise Agreements identified on Schedule 2 hereto;

       (iii) the WizCom Transferred Assets; and

       (iv) all books,  records  and files of, or relating  to, the System,  the
Franchise Agreements  identified on Schedule 2 hereto and the WizCom Transferred
Assets; provided,  however, that ARAC shall retain access to such books, records
and files to the extent required to carry out its  obligations  under the Master
License Agreement.

       Section 2 Assignment and Assumption of  Liabilities.  Except as set forth
in one or more of the Ancillary Agreements,  from and after the Separation Date,
(i) ARAC shall, and/or shall cause its subsidiaries to, assume, pay, perform and
discharge in due course all of the ARAC  Liabilities,  and (ii) Holdings  shall,
and/or shall cause its  subsidiaries  to, assume,  pay, perform and discharge in
due course all of the Holdings Liabilities.





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       Section 3 Transfers  Not Effected  Prior to the  Separation  Date. To the
extent any transfers  contemplated  by this Article II shall not have been fully
effected  prior to the  Separation  Date,  Holdings and ARAC shall  cooperate to
effect such  transfers as promptly as possible  following the  Separation  Date.
Nothing  herein  shall be deemed to require  the  transfer  of any assets or the
assumption of any Liabilities  that by their terms or by operation of law cannot
be transferred or assumed;  provided,  however, that Holdings and ARAC and their
respective  subsidiaries and Affiliates shall cooperate in seeking to obtain any
necessary  consents or approvals for the transfer of all assets and  Liabilities
as  contemplated  by this  Article  II. In the event that any such  transfer  of
assets or Liabilities  has not been  consummated  effective as of the Separation
Date, the party  retaining such asset or Liability  shall  thereafter  hold such
assets in trust for the use and  benefit of the party  entitled  thereto (at the
expense of the party entitled thereto) and retain such Liability for the account
of the party to whom such Liability is to be assumed pursuant  hereto,  and take
such other actions as may be reasonably  required in order to place the parties,
insofar as reasonably  possible,  in the same position as would have existed had
such asset been  transferred,  or such  Liability  been assumed as  contemplated
hereby.  As and when any such  asset or  Liability  becomes  transferable,  such
transfer and  assumption  shall be effected  forthwith.  Holdings and ARAC agree
that,  as of the  Separation  Date,  each party  hereto  shall be deemed to have
acquired complete and sole beneficial ownership over all of the assets, together
with all of the rights,  powers and  privileges  incidental  thereto,  that such
party is entitled to acquire pursuant to the terms of this Agreement.

       Section 4 No Representations or Warranties; Consents. Each of the parties
hereto  understands  and agrees that no party hereto is, in this Agreement or in
any other  agreement or document  contemplated  by this  Agreement or otherwise,
representing  or  warranting  in  any  way  as to  the  value  or  freedom  from
encumbrance of, or any other matter concerning,  any assets of such party, or as
to the legal  sufficiency  to convey title to an asset  transferred  pursuant to
this Agreement or an Ancillary  Agreement,  including,  without limitation,  any
conveyancing  or assumption  instruments.  It is also agreed and understood that
there are no warranties whatsoever, express or implied, given by either party to
this Agreement, as to the condition, quality,  merchantability or fitness of any
of the  assets,  businesses  or other  rights  transferred  or  retained  by the
parties,  as the case may be, and all such assets,  businesses  and other rights
shall be "as is, where is" and "with all faults"  (provided  that the absence of
warranties  given by the parties shall not negate the  allocation of Liabilities
under this Agreement and shall have no effect on any manufacturers,  sellers, or
other third party  warranties  that are  intended  to be  transferred  with such
assets).  Similarly,  each party  hereto  understands  and agrees  that no party
hereto is, in this Agreement or in any other agreement or document  contemplated
by this Agreement or otherwise,  representing  or warranting in any way that the
obtaining  of any  consents or  approvals,  the  execution  and  delivery of any
amendatory agreements and the taking of any filings or applications contemplated
by this Agreement  will satisfy the provisions of any or all applicable  laws or
judgments or other instruments or agreements relating to such assets.

       Notwithstanding  the  foregoing,  the parties  shall use their good faith
efforts to obtain  all  consents  and  approvals,  to enter into all  reasonable
amendatory  agreements and to make all filings and applications  contemplated by
this  Agreement,  and shall  take all such  further  actions  as shall be deemed
reasonably  necessary to preserve for each of Holdings and ARAC, to the greatest
extent  reasonably  feasible,  consistent with this Agreement,  the economic and
operational benefits of the allocation of assets provided for in this Agreement.
In case at any time after the Separation Date any further action is necessary or
desirable to carry out the purposes of this  Agreement,  the proper officers and
directors  of each  party to this  Agreement  shall take all such  necessary  or
desirable  action,  provided that any financial cost shall be borne by the party
receiving the benefit of the action.





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       Section 5 Conveyancing  and Stock Assumption  Instruments.  In connection
with  the  asset  and  stock   transfers  and  the  assumptions  of  Liabilities
contemplated  by this  Agreement,  the  parties  shall  execute,  or cause to be
executed by the appropriate entities,  conveyancing and assumption  instruments,
including appropriate releases and novations, in such forms as the parties shall
reasonably  agree,  including  deeds as may be  appropriate,  the  assignment of
trademarks and franchise  rights,  and the assignment and assumption of existing
lease  agreements.  Any transfer of capital  stock shall be effected by means of
delivery of stock  certificates  and  executed  stock powers and notation on the
stock record books of the corporations, or other legal entities involved and, to
the extent required by applicable law, by notation on public registries.


                                   ARTICLE III

                                 THE SEPARATION

       Section 1  Cooperation Prior to the Separation.
       (a)  Holdings  and ARAC  have  prepared  the Form S-1  which  sets  forth
disclosure concerning ARAC, the Separation and other matters.  Holdings and ARAC
shall  each use  reasonable  efforts  to cause the Form S-1 to become  effective
under the Securities Act.

       (b)  Holdings  and ARAC shall  cooperate  in  preparing,  filing with the
Commission  and  causing to become  effective  any  registration  statements  or
amendments  thereto  that are  appropriate  to reflect the  establishment  of or
amendments to any employee benefit and other plans  contemplated by the Employee
Benefits Agreement.

       (c)  Holdings  and ARAC shall take all such action as may be necessary or
appropriate  under  the  securities  or blue  sky  laws of the  states  or other
political  subdivisions of the United States in connection with the transactions
contemplated by this Agreement.

       (d) ARAC has prepared and filed a preliminary  listing  application  with
and will pursue the approval of the  application  to permit  listing of the ARAC
Common Stock on, the New York Stock Exchange.

       Section 2  Conduct of Car Rental Business Pending Separation.

       (a)  Prior to the  Separation  Date,  the Car  Rental  Business  shall be
operated  by  Holdings  and ARAC and its  subsidiaries  for the sole  benefit of
Holdings and its stockholder.

       (b) Prior to the  Separation  Date,  ARAC  shall  have no  operations  or
conduct  any  business  except as a holding  company  for Rent A Car and Reserve
Claims   Management  Co.  and  in  preparation  for  the   consummation  of  the
transactions contemplated by this Agreement.

       Section 3 Holdings Board Action;  Conditions Precedent to the Separation.
Holdings' Board of Directors shall, in its discretion, establish any appropriate
procedures in connection with the  Separation.  In no event shall the Separation
occur unless the following  conditions  shall,  unless waived by Holdings in its
sole discretion, have been satisfied:

     (a) all necessary  regulatory approvals and consents of third parties shall
have been received;



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     (b) the Form S-1 shall have been declared  effective  under the  Securities
Act;

     (c) the Fleet  Financing  Program  and the New Credit  Facilities  shall be
available;

       (d) ARAC's Board of  Directors,  as named in the Form S-1 shall have been
     elected by Holdings,  as sole stockholder of ARAC, and the ARAC Certificate
     and ARAC Bylaws shall be in effect;

       (e) the ARAC Common Stock shall have been approved for listing on the New
     York Stock Exchange, subject to official notice of issuance;

       (f)  Holdings'  Board of  Directors  shall  have  formally  approved  the
     Separation  and  shall  not  have  abandoned,   deferred  or  modified  the
     Separation at any time prior to the Separation Date;

       (g) the  transactions  contemplated by Sections 2.1 and 2.2 and Article V
     shall  have  been  consummated  in all  material  respects  and each of the
     Ancillary Agreements, in form and substance satisfactory to Holdings, shall
     have been  executed  by the parties  thereto  and each of the  transactions
     contemplated  by the Ancillary  Agreements to be consummated on or prior to
     the Separation Date shall have been consummated;

       (h) no  preliminary  or permanent  injunction  or other order,  decree or
     ruling  issued by a court of  competent  jurisdiction  or by a  government,
     regulatory or administrative  agency or commission,  and no statute,  rule,
     regulation or executive  order  promulgated or enacted by any  governmental
     authority,   shall  be  in  effect   preventing  the  consummation  of  the
     Separation; and

       (i) Holdings shall have been released from any liabilities, Guarantees or
     other  obligations with respect to any indebtedness or otherwise of ARAC or
     its Subsidiaries;

provided,  that  the  satisfaction  of such  conditions  shall  not  create  any
obligation on the part of Holdings to effect the  Separation or in any way limit
Holdings'   power  of  termination  set  forth  in  Section  7.1  or  alter  the
consequences of any such termination from those specified in such Section.


                                   ARTICLE IV

                                 INDEMNIFICATION

       Section 1 ARAC Indemnification of Holdings. Except as otherwise expressly
provided in any of the Ancillary Agreements, from and after the Separation Date,
ARAC and its subsidiaries (the "ARAC  Indemnitors")  shall jointly and severally
indemnify,   defend  and  hold  harmless  HFS,  Holdings  and  their  respective
subsidiaries,  and  each of their  respective  directors,  officers,  employees,
agents and Affiliates and each of the heirs,  executors,  successors and assigns
of any of the foregoing  (the "Holdings  Indemnitees")  from and against any and
all  damage,  loss,  liability  and  expense  (including,   without  limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in  connection  with any or all such  investigations  or any and all  Actions or
threatened Actions) (collectively,  "Losses") incurred or suffered by any of the
Holdings  Indemnitees  and  arising  out of or related to the ARAC  Liabilities.
Losses  shall  include  but not be limited  to: (i) all  amounts  required to be
reimbursed to an insurer for insurance proceeds  previously paid by such insurer
as a result of a Loss; (ii) all deductible amounts required to be paid under any




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insurance  policybefore  coverage attaches for a Loss; (iii) all amounts paid to
third parties in excess of insurance  coverage;  (iv) all other amounts not paid
by insurers in connection  with Losses;  and (v) the cost of any action  against
insurers to obtain insurance  coverage.  Notwithstanding  the foregoing,  Losses
shall not include expenditures made prior to the Separation.

       Section 2 Holdings Indemnification of ARAC. Except as otherwise expressly
provided in any of the Ancillary Agreements, from and after the Separation Date,
Holdings and its  subsidiaries  (the "Holdings  Indemnitors")  shall  indemnify,
defend and hold harmless ARAC and its subsidiaries, and each of their respective
directors,  officers,  employees,  agents and  Affiliates and each of the heirs,
executors,   successors   and  assigns  of  any  of  the  foregoing  (the  "ARAC
Indemnitees") from and against any and all Losses incurred or suffered by any of
the ARAC Indemnitees and arising out of or related to the Holdings Liabilities.

       Section 3 Notice and Payment of Claims.  If any  Holdings  Indemnitee  or
ARAC  Indemnitee  (the  "Indemnified  Party")  determines  that  it is or may be
entitled to indemnification by the ARAC Indemnitors or the Holdings Indemnitors,
as the case may be (the "Indemnifying Party"), under this Article IV (other than
in connection  with any Action  subject to Section 4.4), the  Indemnified  Party
shall deliver to the  Indemnifying  Party a written  notice  specifying,  to the
extent reasonably  practicable,  the basis for its claim for indemnification and
the amount for which the Indemnified Party reasonably believes it is entitled to
be  indemnified.  After the  Indemnifying  Party shall have been notified of the
amount for which the Indemnified Party seeks  indemnification,  the Indemnifying
Party shall,  within 30 days after  receipt of such  notice,  either (i) pay the
Indemnified Party such amount in cash or other  immediately  available funds (or
reach  agreement  with  the  Indemnified  Party  as  to  a  mutually   agreeable
alternative payment schedule) or (ii) object to the claim for indemnification or
the amount thereof by giving the Indemnified  Party written notice setting forth
the grounds therefor. Any objection shall be resolved in accordance with Section
7.13.  If the  Indemnifying  Party does not give such notice  within such 30-day
period,  the  Indemnifying  Party  shall  be  deemed  to have  acknowledged  its
liability for such claim and the  Indemnified  Party may exercise any and all of
its rights under applicable law to collect such amount.

       Section 4 Notice and Defense of Third-Party  Claims.  Promptly  following
the  earlier of (A)  receipt of written  notice of the  commencement  by a third
party of any Action against or otherwise  involving any Indemnified Party or (B)
receipt of written  information  from a third party  alleging the existence of a
claim  against an  Indemnified  Party,  in either  case,  with  respect to which
indemnification  may be  sought  pursuant  to  this  Agreement  (a  "Third-Party
Claim"),  the Indemnified Party shall give the Indemnifying Party prompt written
notice thereof.  The failure of the Indemnified Party to give notice as provided
in this Section 4.4 shall not relieve the Indemnifying  Party of its obligations
under  this  agreement,  except to the  extent  that the  Indemnifying  Party is
prejudiced  by such  failure to give  notice.  Such notice  shall  describe  the
Third-Party Claim in reasonable detail and shall indicate the amount of the Loss
that has been or will be sustained by the Indemnified Party.

     (a) Within 30 days after receipt of such notice, the Indemnifying Party may
by giving written  notice  thereof to the  Indemnified  Party,  (i)  acknowledge
liability for and at its option elect to assume the defense of such  Third-Party
Claim  at  its  sole  cost  and   expense  or  (ii)   object  to  the  claim  of
indemnification  for such Third-Party  Claim setting forth the grounds therefor.
Any  objection  shall be  resolved  in  accordance  with  Section  7.13.  If the
Indemnifying Party does not within such 30-day period give the Indemnified Party
such notice,  the Indemnifying  Party shall be claimed to have  acknowledged its
liability for such Third-Party Claim.




<PAGE>



     (b) Any defense of a Third-Party  Claim as to which the Indemnifying  Party
has elected to assume the defense  shall be conducted  by attorneys  employed by
the  Indemnifying  Party and reasonably  satisfactory to Holdings in the case of
Holdings  Indemnitees and ARAC in the case of ARAC Indemnitees.  The Indemnified
Party  shall  have  the  right  to  participate  in such  proceedings  and to be
represented  by attorneys of its own  choosing at the  Indemnified  Party's sole
cost and expense;  provided  that if the  defendants  or parties  against  which
relief is sought in any such claim include both the  Indemnifying  Party and one
or more Indemnified  Parties and, in the reasonable  judgment of Holdings in the
case of  Holdings  Indemnitees  and  ARAC in the  case  of ARAC  Indemnitees,  a
conflict of interest  between  such  Indemnified  Parties and such  Indemnifying
Party exists in respect of such claim,  such Indemnified  Parties shall have the
right  to  employ  one  firm  of  counsel  selected  by  Holdings  for  Holdings
Indemnities or ARAC for ARAC  Indemnities  and in that event the reasonable fees
and expenses of such  separate  counsel (but not more than one separate  counsel
reasonably  satisfactory  to the  Indemnifying  Party)  shall  be  paid  by such
Indemnifying Party.

     (c) If the Indemnifying  Party assumes the defense of a Third-Party  Claim,
the  Indemnifying  Party may settle or  compromise  the claim  without the prior
written  consent of the  Indemnified  Party;  provided  that  without  the prior
written consent of Holdings in the case of Holdings  Indemnitees and ARAC in the
case of ARAC  Indemnitees,  the  Indemnifying  Party  may not  agree to any such
settlement  unless as a  condition  to such  settlement  the  Indemnified  Party
receives  a  written  release  from  any  and  all  liability  relating  to such
Third-Party  Claim and such settlement or compromise does not include any remedy
or relief to be applied to or against the Indemnified Party, other than monetary
damages for which the Indemnifying Party shall be responsible hereunder.

     (d) If the Indemnifying  Party does not assume the defense of a Third-Party
Claim for which it has  acknowledged  liability for  indemnification  under this
Article IV, Holdings in the case of Holdings Indemnitees and ARAC in the case of
ARAC Indemnitees may pursue the defense of such Third-Party Claim and choose one
firm of counsel in connection  therewith.  The Indemnifying Party is required to
reimburse  Holdings  or ARAC,  as the case may be,  on a  current  basis for its
reasonable expenses of investigation,  reasonable attorney's fees and reasonable
out-of-pocket  expenses incurred by Holdings in the case of Holdings Indemnitees
and ARAC in the case of ARAC  Indemnitees in defending  against such Third-Party
Claim and the  Indemnifying  Party  shall be bound by the result  obtained  with
respect thereto,  provided that the  Indemnifying  Party shall not be liable for
any settlement  effected  without the consent of the Indemnifying  Party,  which
consent shall not be unreasonably withheld.

     (e) The Indemnifying  Party shall pay to the Indemnified  Party in cash the
amount for which the Indemnified Party is entitled to be indemnified (if any) no
later than the later of (i) the date on which the  Indemnified  Party  makes any
payment in satisfaction  (partial or otherwise) of the Third-Party Claim or (ii)
the  date  on  which  such  Indemnifying  Party's  objection,  if  any,  to  its
responsibility  for  indemnification  under this  Article  IV has been  resolved
pursuant  to  section  7.13  or  by   settlement  or  compromise  or  the  final
nonappealable judgment of a court of competent jurisdiction.

       Section 5 Insurance  Proceeds.  The amount that any Indemnifying Party is
or may be required to pay to any  Indemnified  Party pursuant to this Article IV
shall be reduced (including, without limitation, retroactively) by any insurance
proceeds or other amounts actually recovered by or on behalf of such Indemnified
Parties in reduction of the related  Loss.  If an  Indemnified  Party shall have
received the payment  required by this Agreement from an  Indemnifying  Party in
respect of a Loss and shall subsequently actually receive insurance proceeds, or
other amounts in respect of such Loss as specified above,  then such Indemnified
Party  shall pay to such  Indemnifying  Party a sum equal to the  amount of such





<PAGE>



insurance proceeds or other amounts actually received after deducting  therefrom
all of the Indemnifying Party's costs and expenses associated with such Loss.

       Section  6  Contribution.  If the  indemnification  provided  for in this
Article IV is unavailable to an Indemnified Party in respect of any Loss arising
out of or related to information contained in or omitted from the Form S-1, then
the ARAC Indemnitees,  in lieu of indemnifying the Holdings  Indemnitees,  shall
contribute to the amount paid or payable by the Holdings Indemnitees as a result
of such Loss in such  proportion as is appropriate to reflect the relative fault
of ARAC, on the one hand,  and Holdings,  on the other hand, in connection  with
the  statements or omissions  which resulted in such Loss. The relative fault of
the ARAC  Indemnitees  on the one hand and of the  Holdings  Indemnitees  on the
other hand shall be determined by reference to, among other things,  whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information  concerning ARAC on the
one hand or Holdings on the other hand.

       Section 7 Subrogation.  In the event of payment by an Indemnifying  Party
to any  Indemnified  Party  in  connection  with  any  Third-Party  Claim,  such
Indemnifying  Party shall be subrogated to and shall stand in the first place of
such  Indemnified  Party as to any events or  circumstances  in respect of which
such Indemnified  Party may have any right or claim relating to such Third-Party
Claim. Such Indemnified Party shall cooperate with such Indemnifying  Party in a
reasonable  manner,  and at the cost and expense of such Indemnifying  Party, in
prosecuting any subrogated right or claim.

       Section 8 No  Third-Party  Beneficiaries.  This Article IV shall inure to
the benefit of, and be enforceable by Holdings,  the Holdings Indemnitees,  ARAC
and the ARAC Indemnitees and their respective  successors and permitted assigns.
The  indemnification  provided  for by this  Article  IV shall  not inure to the
benefit of any other  third  party or parties  and shall not relieve any insurer
who would  otherwise be obligated  to pay any claim of the  responsibility  with
respect thereto or, solely by virtue of the  indemnification  provisions hereof,
provide any  subrogation  rights with  respect  thereto and each party agrees to
waive such rights against the other to the fullest extent permitted.

       Section 9 Remedies  Cumulative.  The remedies provided in this Article IV
shall be cumulative and shall not preclude assertion by any Indemnified Party of
any  other  rights  or the  seeking  of any and all other  remedies  against  an
Indemnifying Party. The procedures set forth in this Article IV, however,  shall
be the exclusive  procedures  governing any indemnity  action brought under this
Article IV or otherwise relating to Losses.

       Section 10 Survival of  Indemnities.  The obligations of each of Holdings
and ARAC under this Article IV shall survive the sale or other transfer by it of
any  assets or  businesses  or the  assignment  by it of any  Liabilities,  with
respect  to any  Loss  of the  other  related  to  such  assets,  businesses  or
Liabilities.

       Section  11  After-Tax  Indemnification  Payments.  Except  as  otherwise
expressly provided herein or in an Ancillary Agreement, indemnification payments
made by either party under this Article  shall give effect to, and be reduced by
the value of, any and all applicable  deductions,  losses,  credits,  offsets or
other items for Federal, state or other tax purposes attributable to the payment
of the indemnified liability by the Indemnified Party.






<PAGE>



                                    ARTICLE V

                           CERTAIN ADDITIONAL MATTERS

       Section 1 Intercompany  Payables/Receivables.  All  intercompany  amounts
payable  or  receivable  by  Holdings  or ARAC shall be settled on or before the
Separation  Date,  other than  amounts  payable or  receivable  pursuant  to the
Ancillary Agreements.

     Section 2 Ancillary Agreements. On the date hereof, Holdings and ARAC shall
execute and deliver the Ancillary Agreements.

       Section  3 ARAC  Officers  and  Board  of  Directors.  On or prior to the
Separation  Date,  Holdings  shall take and shall cause ARAC to take all actions
necessary to appoint as officers and  directors of ARAC those  persons  named in
the Form S-1 to constitute  the officers and directors of ARAC on the Separation
Date.

       Section 4 ARAC  Certificate of  Incorporation  and By-laws.  Prior to the
Separation  Date,  Holdings  shall  take  all  action  necessary  to  cause  the
certificate  of  incorporation  and by-laws of ARAC to be amended  and  restated
substantially in the form attached to the Form S-1 as exhibits thereto.

       Section 5 Credit Facilities.  (a) Prior to the Separation Date,  Holdings
and ARAC  shall  take all  necessary  action  to  replace  the  existing  credit
facilities and fleet financing  arrangements so as to release  Holdings from any
liability or obligation with respect thereto from and after the Separation Date.

       (b)  Prior to the  Separation  Date,  Holdings  and ARAC  shall  take all
necessary  action  to obtain  the Fleet  Financing  Program  and the New  Credit
Facilities.

       (c) Prior to the Separation  Date, ARAC and its  subsidiaries  shall take
all necessary action to release Holdings from any  liabilities,  Guarantees,  or
other  obligations with respect to indebtedness or other  obligations of ARAC or
its subsidiaries, other than the obligations under the Ancillary Agreements.

       Section 6  Insurance Policies and Claims Administration.

       (a) Maintenance of Insurance Coverage Prior to Separation Date.  Holdings
and ARAC shall use  reasonable  efforts to  maintain in full force and effect at
all times up to and  including  the  Separation  Date its current  property  and
casualty insurance programs,  including, without limitation,  primary and excess
general  liability,  automobile,  workers'  compensation,   property  and  crime
insurance policies (collectively,  the "Policies" and individually, a "Policy").
Holdings and its subsidiaries shall retain with respect to any Covered Claims as
set forth on Schedule  5.6(a)  relating to periods prior to the Separation  Date
all of their  respective  rights,  benefits and  privileges,  if any, under such
Policies.  To the  extent  not  already  provided  for by the terms of a Policy,
Holdings shall use  reasonable  efforts to cause ARAC and its  subsidiaries,  as
appropriate,  to be named as additional insureds under such Policy in respect of
Covered  Claims  arising or relating to periods  prior to the  Separation  Date;
provided,  however,  that nothing  contain  herein shall be construed to require
Holdings  or any of its  subsidiaries  to pay any  additional  premium  or other
charges in respect to, or waive or otherwise  limit any of its rights,  benefits
or  privileges  under,  any such  Policy  to effect  the  naming of ARAC and its
subsidiaries as such additional insureds.





<PAGE>



       (b) ARAC  Responsible for  Establishing  Insurance  Coverage On and After
Separation  Date.  Commencing on and as of the Separation Date, ARAC and each of
its  subsidiaries  shall be responsible for establishing and maintaining its own
separate insurance programs (including,  without limitation,  primary and excess
general liability,  automobile,  workers,  compensation,  property, director and
officer liability, fire, crime, surety and other similar insurance policies) for
activities  and claims  relating to any period on or after the  Separation  Date
involving ARAC or any of its subsidiaries.  Notwithstanding  any other agreement
or  understanding  to the contrary,  except as set forth in Section  5.6(c) with
respect to claims  administration and financial  administration of the Policies,
neither Holdings nor any of its subsidiaries  shall have any  responsibility for
or  obligation  to ARAC or its  subsidiaries  relating to liability and casualty
insurance  matters for any period,  whether prior to, at or after the Separation
Date.

       (c)  Administration  and Procedure.  (i) ARAC or a subsidiary of ARAC, as
appropriate,  shall be responsible for the claims  administration  and financial
administration  of all  Policies  for  Covered  Claims  relating  to the assets,
ownership or operation prior to the Separation Date of the Car Rental  Business;
provided,  however,  that  such  retention  by  ARAC  of the  Policies  and  the
responsibility  for claims  administration  and financial  administration of the
Policies  are in no way  intended  to limit,  inhibit or  preclude  any right to
insurance  coverage for any Covered Claims under the Policies by Holdings.  ARAC
or  a  subsidiary  thereof,  as  appropriate,   shall  be  responsible  for  all
administrative and financial matters relating to insurance policies  established
and maintained by ARAC and its subsidiaries for claims relating to any period on
or after the Separation Date involving ARAC or any of its subsidiaries.

(ii) ARAC shall  notify  Holdings  of any  Covered  Claim  relating to ARAC or a
subsidiary  thereof under one or more of the Policies relating to a period prior
to the  Separation  Date,  and ARAC  agrees to  cooperate  and  coordinate  with
Holdings  concerning  any strategy  Holdings may  reasonably  elect to pursue to
secure coverage and payment for such Covered Claim by the appropriate  insurance
carrier.  Notwithstanding  anything  contained herein, in any other agreement or
applicable Policy or any  understanding to the contrary,  ARAC or an appropriate
subsidiary thereof assumes  responsibility for, and shall pay to the appropriate
insurance carriers or otherwise, any premiums,  retrospectively-rated  premiums,
defense costs, indemnity payments, deductibles,  retentions or other charges, as
appropriate (collectively,  "Insurance Charges"),  whenever arising, which shall
become due and payable under the terms and conditions of any  applicable  Policy
in respect of any liabilities, losses, claims, actions or occurrences,  whenever
arising  or  becoming  known,  involving  or  relating  to any  of  the  assets,
businesses, operations or liabilities of ARAC or any of its subsidiaries, to the
extent  set forth in  Section  5.6(a) and any such  charges  that  relate to the
period after the Separation Date. To the extent that the terms of any applicable
Policy provide that Holdings or a subsidiary thereof, as appropriate, shall have
an obligation to pay or guarantee the payment of any Insurance Charges, Holdings
or such subsidiary shall be entitled to demand that ARAC or a subsidiary thereof
make  such  payment  directly  to the  person  or entity  entitled  thereto.  In
connection  with any such demand,  Holdings shall submit to ARAC or a subsidiary
thereof a copy of any invoice received by Holdings or a subsidiary pertaining to
such Insurance Charges, together with appropriate supporting  documentation,  if
available.  In the event that ARAC or its subsidiary  fails to pay any Insurance
Charges  when due and payable,  whether at the request of the party  entitled to
payment or upon demand by Holdings or a subsidiary  of  Holdings,  Holdings or a
subsidiary  of Holdings  may (but shall not be required  to) pay such  Insurance
Charges for and on behalf of ARAC or its subsidiary and, thereafter, ARAC or its
subsidiary shall forthwith reimburse Holdings or such subsidiary of Holdings for
such payment.







<PAGE>



                                   ARTICLE VI

                              ACCESS TO INFORMATION

       Section 1 Provision of Corporate Records. Each of Holdings and ARAC shall
arrange as soon as practicable  following the Separation  Date for the provision
to the other of existing  corporate  governance  documents  (e.g.  minute books,
stock registers, stock certificates, documents of title, etc.) in its possession
relating to the other or to its business and affairs.

       Section 2 Access to Information. From and after the Separation Date, each
of Holdings and ARAC shall afford the other, including its accountants,  counsel
and  other  designated  representatives,   reasonable  access  (including  using
reasonable  efforts to give access to persons or firms  possessing  information)
and  duplicating  rights during  normal  business  hours to all records,  books,
contracts,  instruments,  computer data and other data and  information  in such
party's possession relating to the business and affairs of the other (other than
data and information subject to an attorney/client or other privilege),  insofar
as such access is  reasonably  required by the other  party  including,  without
limitation,  for  audit,  accounting  and  litigation  purposes,  as well as for
purposes of fulfilling disclosure and reporting obligations.

       Section 3  Litigation  Cooperation.  Each of Holdings  and ARAC shall use
reasonable  efforts to make available to the other,  upon written  request,  its
officers,  directors,  employees and agents as witnesses to the extent that such
persons may reasonably be required in connection with any legal,  administrative
or other  proceedings  arising  out of the  business  of the other  prior to the
Separation Date in which the requesting party may from time to time be involved.

       Section 4 Reimbursement. Each party providing witnesses under Section 6.3
to the  other  shall  be  entitled  to  receive  from  the  recipient,  upon the
presentation  of  invoices  therefor,  payment for all  out-of-pocket  costs and
expenses as may be reasonably incurred in providing such witnesses.


       Section 5 Retention of Records.  Except as  otherwise  required by law or
agreed to in writing,  each party shall,  and shall cause each of its respective
subsidiaries  to, retain all information  relating to the other party's business
in  accordance  with  the  past  practice  of such  party.  Notwithstanding  the
foregoing, except as provided in the Tax Disaffiliation Agreement, any party may
destroy or otherwise  dispose of any  information at any time,  providing  that,
prior to such destruction or disposal, (a) such party shall provide no less than
30 days prior  written  notice to the other party,  specifying  the  information
proposed to be destroyed or disposed of and (b) if the  recipient of such notice
shall  request in writing prior to the scheduled  date for such  destruction  or
disposal that any of the information  proposed to be destroyed or disposed of be
delivered to such  requesting  party,  the party  proposing the  destruction  or
disposal shall promptly  arrange for the delivery of such of the  information as
was requested at the expense of the requesting party.

       Section 6  Confidentiality.  Each party  shall  hold and shall  cause its
directors,  officers,  employees,  agents,  consultants and advisors to hold, in
strict  confidence,  unless compelled to disclose by judicial or  administrative
process or, in the opinion of its  counsel,  by other  requirements  of law, all
information (other than any such information  relating solely to the business or
affairs of such party)  concerning  the other  party  (except to the extent that
such  information  can be shown to have been (a) in the public domain through no
fault of such party,  (b) later lawfully  acquired on a  non-confidential  basis
from other sources by the party to which it was furnished,  (c) information that
typically would have been disclosed by Holdings or ARAC, as




<PAGE>



the case may be,  in the  ordinary  course  of  business  consistent  with  past
practice or (d)  information  that may be  disclosed  pursuant to any  Ancillary
Agreement).  Neither party shall release or disclose any such information to any
other person, except its auditors,  attorneys,  financial advisors,  bankers and
other  consultants and advisors who shall be advised of and agree to comply with
the provisions of this Section 6.6;  provided,  that with respect to the matters
identified  on Schedule 6.6 hereof,  no  information  may be disclosed by either
party  under any  circumstance  without the prior  written  consent of the other
party hereto.

       Section 7 Mail.  After the Separation Date, each of Holdings and ARAC may
receive mail, telegrams, packages and other communications property belonging to
the other. Accordingly, at all times after the Separation Date, each of Holdings
and ARAC authorizes the other to receive and open all mail, telegrams,  packages
and other communications  received by it and not unambiguously  intended for the
other party or any of the other party's  officers or directors  specifically  in
their  capacities as such, and to retain the same to the extent that they relate
to the business of the receiving party or, to the extent that they do not relate
to the  business  of the  receiving  party and do relate to the  business of the
other party, or to the extent that they relate to both businesses, the receiving
party  shall  promptly  contact  the  other  party  by  telephone  for  delivery
instructions and such mail, telegrams,  packages or other communications (or, in
case the same  relate to both  businesses,  copies  thereof)  shall  promptly be
forwarded to the other party in accordance with its delivery  instructions.  The
foregoing  provisions of this Section 6.7 shall constitute full authorization to
the postal  authorities,  all  telegraph  and  courier  companies  and all other
persons to make deliveries to Holdings or ARAC, as the case may be, addressed to
either of them or to any of their  officers or directors  specifically  in their
capacities as such.  The  provisions of this Section 6.7 are not intended to and
shall not be deemed to constitute an authorization by either Holdings or ARAC to
permit the other to accept  service of process on its behalf,  and neither party
is or shall be  deemed  to be the agent of the  other  for  service  of  process
purposes or for any other purpose.


                                   ARTICLE VII

                                  MISCELLANEOUS

       Section  1  Termination.   This  Agreement  may  be  terminated  and  the
Separation  deferred,  modified or abandoned at any time prior to the Separation
Date by and in the sole discretion of the Board of Directors of Holdings without
the approval of ARAC. In the event of such termination,  no party shall have any
liability to any other party pursuant to this Agreement.

       Section 2 Expenses.  Except as specifically provided in this Agreement or
in an Ancillary  Agreement,  all costs and expenses  incurred in connection with
the interpretation, execution, delivery and implementation of this Agreement and
with the consummation of the  transactions  contemplated by this Agreement shall
be paid  by the  party  incurring  the  expense.  The  determination  of who has
incurred an expense shall be made by the Chief Financial  Officer of Holdings or
HFS,  which  determination  shall be binding  and final upon each of the parties
hereto and not subject to further  review.  In addition,  it is  understood  and
agreed that ARAC shall pay the legal,  filing,  accounting,  printing  and other
out-of-pocket expenditures in connection with (i) the preparation,  printing and
filing of the Form S-1,  (ii)  obtaining the Fleet  Financing  Program and (iii)
obtaining the New Credit Facilities.





<PAGE>



       Section 3 Notices.  All notices and  communications  under this Agreement
shall be in writing and any communication or delivery  hereunder shall be deemed
to have been duly given when received addressed as follows:

           If to Holdings, to:

              HFS Car Rental, Inc.
              c/o HFS Incorporated
              6 Sylvan Way
              Parsippany, NJ  07054
              Attn: General Counsel
              Telecopy Number: (973) 428-6057

           If to ARAC, to:

              Avis Rent A Car, Inc.
              900 Old Country Road
              Garden City, NY  11530
              Attn: General Counsel
              Telecopy Number: (516) 222-3751

Any party may, by written notice so delivered to the other  parties,  change the
address to which delivery of any notice shall thereafter be made.

       Section 4 Amendment  and  Waiver.  This  Agreement  may not be altered or
amended, nor may rights hereunder be waived,  except by an instrument in writing
executed by the party or parties to be charged with such amendment or waiver. No
waiver of any terms,  provision  or condition of or failure to exercise or delay
in exercising  any rights or remedies under this  Agreement,  in any one or more
instances shall be deemed to be, or construed as, a further or continuing waiver
of any such term,  provision,  condition,  right or remedy or as a waiver of any
other term, provision or condition of this Agreement.

       Section 5  Counterparts.  This  Agreement  may be executed in one or more
counterparts  each of which shall be deemed an original  instrument,  but all of
which together shall constitute but one and the same Agreement.

       Section 6 Governing Law;  Jurisdiction;  Forum.  This Agreement  shall be
construed  in  accordance  with,  and  governed by, the laws of the State of New
York,  without  regard to the  conflicts of law rules of such state.  Each party
hereto  expressly   submits  and  consents  in  advance  to  the   non-exclusive
jurisdiction  of the State and Federal  courts  sitting in the City of New York,
Borough of Manhattan, State of New York, in any action to enforce an arbitration
agreement or award,  or action seeking a pre-arbitral  injunction,  pre-arbitral
attachment  or other order in aid of  arbitration,  and hereby  waives any claim
that any such state or federal court is an inconvenient or improper forum.

       Section  7 Entire  Agreement.  This  Agreement  including  the  schedules
hereto,   together  with  the  Ancillary   Agreements,   constitute  the  entire
understanding  of the parties  hereto with respect to the subject matter hereof,
superseding  all  negotiations,  prior  discussions  and  prior  agreements  and
understandings relating




<PAGE>



to such subject matter.  To the extent that the provisions of this Agreement are
inconsistent with the provisions of any Ancillary Agreements,  the provisions of
such Ancillary Agreement shall prevail.

       Section 8 Parties in Interest.  Neither of the parties  hereto may assign
its rights or delegate any of its duties under this Agreement  without the prior
written  consent of each other party.  This Agreement shall be binding upon, and
shall  inure  to the  benefit  of,  the  parties  hereto  and  their  respective
successors and permitted assigns.  Nothing contained in this Agreement,  express
or  implied,  is intended to confer any  benefits,  rights or remedies  upon any
person or entity other than Holdings and ARAC, and Holdings Indemnitees and ARAC
Indemnitees under Article IV hereof.

       Section  9  Tax  Disaffiliation  Agreement.   Notwithstanding  any  other
provision of this  Agreement to the  contrary,  any and all matters  relating to
Taxes shall be exclusively governed by the Tax Disaffiliation Agreement.

       Section 10 Further  Assurances  and Consents.  In addition to the actions
specifically  provided  for  elsewhere  in this  Agreement,  each of the parties
hereto will use its  reasonable  efforts to (i) execute and deliver such further
instruments  and  documents  and take such other  actions as any other party may
reasonably  request in order to effectuate the purposes of this Agreement and to
carry out the terms hereof and (ii) take, or cause to be taken, all actions, and
to do,  or  cause  to be done,  all  things,  reasonably  necessary,  proper  or
advisable  under  applicable  laws,  regulations  and agreements or otherwise to
consummate and make effective the  transactions  contemplated by this Agreement,
including,  without  limitation,  using its  reasonable  efforts  to obtain  any
consents and  approvals  and to make any filings and  applications  necessary or
desirable  in  order  to  consummate  the  transactions   contemplated  by  this
Agreement;  provided  that  no  party  hereto  shall  be  obligated  to pay  any
consideration therefor (except for filing fees and other similar charges) to any
third party from whom such  consents,  approvals and amendments are requested or
to take any action or omit to take any  action if the taking of or the  omission
to take  such  action  would  be  unreasonably  burdensome  to the  party or its
business.

       Section 11 Exhibits and  Schedules.  The Exhibits and Schedules  shall be
construed  with and as an integral part of this  Agreement to the same extent as
if the same had been set forth verbatim herein.

       Section 12 Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining   provisions   hereof.   Any  such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction. Without prejudice to any
rights or remedies  otherwise  available to any party hereto,  each party hereto
acknowledges  that damages would be an  inadequate  remedy for any breach of the
provisions  of this  Agreement  and agrees that the  obligations  of the parties
hereunder shall be specifically enforceable.

       Section 13 Dispute  Resolution.  (a)  Resolution  of any and all disputes
arising out of or relating to this Agreement or any of the Ancillary Agreements,
whether  based on  contract,  tort,  statute or  otherwise,  including,  but not
limited to,  disputes over  arbitrability  (collectively,  "Disputes")  shall be
exclusively  governed by and settled in accordance  with the  provisions of this
Section 7.13;  provided,  however,  that nothing contained herein shall preclude
either party from seeking or obtaining (a) injunctive relief or (b) equitable or
other judicial relief to enforce the provisions hereof or to preserve the status
quo pending resolution of Disputes hereunder.





<PAGE>



       (b) Holdings or ARAC (each a "Party") may commence proceedings  hereunder
by  delivering  a written  notice  to the other  Party  providing  a  reasonable
description of the Dispute to the other (the "Demand").

       (c) Within 10 days following receipt by a Party of a Demand,  the Dispute
shall be referred to representatives  of the parties for resolution,  each party
being  represented by a senior executive  officer who has no direct  operational
responsibility   for  the   matters   contemplated   by  this   Agreement   (the
"Representatives").  The  Representatives  shall  promptly  meet in a good faith
effort to  resolve  the  Dispute.  If the  Representatives  do not agree  upon a
resolution  within  thirty  (30)  calendar  days  after  receipt by a Party of a
Demand,  each of  Holdings  and ARAC  shall  be free to  exercise  the  remedies
available to them under Section 7.13(d).

       (d) The  Parties  hereby  agree to submit all  Disputes  not  resolved by
negotiation  pursuant to Section 7.13(c) for resolution by arbitration under the
terms hereof, which arbitration shall be final,  conclusive and binding upon the
parties, their successors and assigns. Except as expressly provided otherwise in
this  Agreement,  the  arbitration  shall be conducted in New York,  New York by
three   arbitrators   (the  "Panel")  in  accordance  with  the   JAMS/Endispute
Comprehensive Arbitration Rules and Procedures then in effect as amended herein.
The arbitration shall be governed by the United States Arbitration Act, 9 U.S.C.
ss. 1, et seq. Notwithstanding the foregoing (a) each Party shall have the right
to examine the books and records of the other Party that are reasonably  related
to the Dispute; (b) each Party shall provide to the other, reasonably in advance
of any hearing, copies of all documents which a Party intends to present in such
hearing; (c) each party shall be allowed to conduct reasonable discovery through
written requests for information, document requests, requests for stipulation of
fact,  and  depositions,  the  nature  and  extent of which  discovery  shall be
determined  by the Panel,  taking into  account the needs of the Parties and the
desirability of making discovery expeditious and cost effective. The Panel shall
complete all hearings not later than ninety (90) days after its appointment. The
award  shall be in writing  and shall  specify  the facts and law on which it is
based.  The  arbitrators  shall  not be  empowered  to  award to any  party  any
consequential  damages,  lost profits or punitive damages in connection with any
Dispute  and each party  hereby  irrevocably  waives  any right to recover  such
damages. Judgment upon any award may be entered in any court having jurisdiction
thereof.

       Section 14 Titles and  Headings.  Titles and headings to sections  herein
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.





<PAGE>



       IN WITNESS  WHEREOF,  the parties hereto have duly executed and delivered
this Agreement on the day and year first above written.



          HFS CAR RENTAL, INC.



          y:__________________
          Name
          Title:





     AVIS RENT A CAR, INC.




     By:____________________

     Name:

     Title:




<PAGE>



Schedule 1


                              AVIS RENT A CAR, INC.
                                  SUBSIDIARIES

Avis Rent A Car, Inc. f/k/a
                                          Delaware
Rental Car System Holdings, Inc.

Subsidiaries (100% owned):



Avis Rent A Car System, Inc. -      Delaware

Subsidiaries (100% owned):

   1.Avis International, Ltd. - Delaware

       Subsidiaries (100% owned):

       ( a )  Avis Management Pty. Limited  - Australia

              Subsidiary (100% owned):

              -We Try Harder Pty. Limited -  Australia

              -Chaconne Pty. Limited -    Australia

              -W.T.H. Pty. Limited - Australia

       Subsidiaries:

              -Auto Accident Consultants Pty. Limited  - Australia
                      (100% owned)

              -W.T.H. Fleet Leasing Pty. Limited  - Australia
                      (ownership shared with parent)

              -Avis Services Pty. Ltd. - Australia
                      (100% owned)

       ( b )  Avis Management Services, Limited - Delaware




<PAGE>



       ( c )  Arbitra S.A. - Argentina

       ( d )  Avis Caribbean, Limited     - Delaware

              Subsidiaries (100% owned):

                      -Avis Rent A Car de Puerto Rico, Inc.  - Puerto Rico

                      -Virgin Islands Enterprises, Inc. - Virgin Islands

       ( e )  Avis Asia and Pacific, Limited - Delaware

              Subsidiary (100% owned)

                      -Avis Rent A Car Limited  - New Zealand
                                          subsidiary (100% owned)

                      - Altra Auto Rental Limited - New Zealand

       ( f )  WTH Canada, Inc. - Canada

              Subsidiary (100% owned):

                      -Aviscar Inc. - Canada
                              subsidiary ( 100% owned)

                      - Avis Services Canada, Inc. - Canada

       ( g )  Avis Rent A Car (Hong Kong) Ltd. - Hong Kong

              Subsidiaries (less than 100% owned):

              National Car Rentals (Private) Limited (29% owned)*   Singapore

              Sistem Sewa Kereta Malaysia Sdn. Bhd. (25% owned)* Malaysia

   -----------
   *By agreement with Avis Europe  Limited  ("AEL"),  shares in these  companies
    will be transferred to AEL as soon as the other shareholders consent to such
    transfer.

Avis International, Ltd.

       Subsidiaries (less than 100% owned):





<PAGE>



       West Indies Car Rental Limited (49% owned) - Jamaica

2.     Avis Enterprises, Inc. f/k/a Avis Leasing Corporation -  Delaware

       Subsidiaries (100% owned)

              ( a)    Avis Service, Inc. - Delaware

              ( b )   Avis Lube, Inc. - Delaware

3.     Pathfinder Insurance Company - Colorado

4.     PF Claims Management, Ltd. - Delaware

5.     Avis Leasing Corporation - Delaware

6.     Zam, Inc. - West Virginia

7.     Global Excess & Reinsurance Ltd. - Bermuda

8.     Constellation Reinsurance Company Limited - Barbados

9.     We Try Harder Japan Co., Ltd. - Japan

10.    Servicios Avis S.A. - Mexico

11.    Avis Rent A Car Limited - Fiji

12.    Avis Rent A Car Sdn. Bhd. - Malaysia

13.    Avis Rent A Car Sdn. Bhd.-  Singapore

14.    Avis Rent A Car Limited - Vanuatu


Avis Rent A Car, Inc. f/k/a
Rental Car System Holdings, Inc.

   Subsidiaries (less than 100% owned):

       Reserve Claims Management Co. f/k/a Avis Leasing - Delaware
       International, Ltd.





<PAGE>
                                 JOINT VENTURES



Sistem Sewa Kereta Malaysia Sdn. Bhd.
40 Jalan Sultan Ismail
50250 Kuala Lumpur
Malaysia

   Capitalization:    Authorized:           5,000,000
                      Issued:               2,000,000

   Shareholders:      Avis Rent A Car (Hong Kong) Ltd.
   25%
                      Melewar Leisure Sdn. Bhd.
   75%

West Indies Car Rental Ltd.
3 Oxford Road
Kingston 3
Jamaica, West Indies

   Capitalization     Authorized:         100,000 shares at $0.10
                      Issued:             100,000 shares Jamaican

Shareholders:              Hilsons Limited:                               50,000
                           Avis International, Ltd.                       49,000
                           Peter George Mais, Esq.                         1,000

National Car Rentals (Private) Limited
325 Telok Blangah Road
Singapore 0409

Capitalization             Authorized:      900,000 ordinary shares at $1.00
                           Issued:          810,000

Shareholders:     Avis Rent A Car (Hong Kong) Ltd.                       234,000
                  Goodwood Hotels Corporation (Pte) Ltd.                 180,000
                  Herbie Lim Pte. Ltd.                                    63,000
                  Straits Steamship Co. Ltd.                             333,000






<PAGE>



Schedule 2

                      TERRITORIES OF OTHER SYSTEM LICENSEES


                          AVIS RENT A CAR SYSTEM, INC.
                          FRANCHISED LICENSEE LOCATIONS
                                 REVISED 7/1/97

"1955" Type Franchise Agreements                     292
"1992" Type Franchise Agreements                     17
Letter Agreements (1955) Type                        3
Agency Agreements (1955) Type                        1
"1955" Type Truck Franchise Agreements               134





          CITY-STATE ...........   DATE             TYPE
          --------------           ------           ------
          1   Birmingham, AL       Sep-59                B
                Anniston, AL ...   Nov-69                C
                Tuscaloosa, AL .   Mar-66                B
                Columbus, GA ...   Aug-83                C
          2   Dothan, AL           May-74                C
          3   Huntsville, AL       Apr-56                B
                Decatur, AL ....   Feb-64                B
                Florence, AL ...   Apr-87                C
          4   Mobile, AL           May-63                C
                Point Clear, AL .. Aug-69                C
          5   Montgomery, AL       Oct-51                B
                Columbia, SC ...   Oct-59                B
                Camden, SC .....   Sep-61                B
                Sumter/Selma, AL   Oct-73                C
                Greenville, AL .   Feb-79                C
                Macon, GA ......   May-96           New Agreement




<PAGE>



          CITY-STATE ............   DATE              TYPE
          ----------                ------            -------------
                Greenwood, SC ...   May-96            New Agreement
          6     Little Rock, AR     Sep-52            B
                El Dorado, AR ...   May-68            B
                Fayetteville, AR    Oct-70            C
                Fort Smith, AR ..   Sep-64            B
                Harrison, AR ....   Jun-75            C
                Hot Springs, AR .   Jan-62            B
                Jonesboro, AR ...   Dec-61            C
                Pine Bluff, AR ..   Dec-55            B
                Stuttgart, AR ...   Nov-56            C
                Texarkana, AR ...   May-72            C
                Savannah, GA ....   Jan-87            B
                Midland, TX .....   Dec-90            B
                Abilene, TX .....   Dec-90            B
                San Angelo, TX ..   Dec-90            C
                Clovis, NM ......   Dec-90            C
                Albany, GA ......   Apr-94            B
          7     Los Angeles, CA     Jan-53            C
                Arcadia, CA .....   Oct-79            C
                Alhambra, CA ....   Oct-79            C
                Azusa, CA .......   Oct-79            C
                Bakersfield, CA .   Oct-78            B
                Beverly Hills, CA   May-56            C
                Bishop, CA ......   Aug-76            C
                Burbank, CA .....   Jan-56            C
                Coronado, CA ....   May-56            C
                Culver City, CA .   Jun-61            C





<PAGE>



CITY-STATE .............   DATE     TYPE
------------------------   ------   ----
      Disneyland, CA ...   Aug-61   C
      Glendale, CA .....   May-56   C
      Glendora, CA .....   Oct-79   C
      Imperial, CA .....   Jul-80   C
      Lancaster, CA ....   Jan-56   C
      Lennox, CA .......   Dec-77   C
      Long Beach, CA ...   Jan-56   C
      Marina Del Rey, CA   Feb-78   C
      Monrovia, CA .....   Oct-79   C
      Montebello, CA ...   Oct-79   C
      Monterey Parks, CA   Oct-79   C
      Oceanside, CA ....   Sep-78   B
      Oxnard, CA .......   Jul-60   C
      Palm Desert, CA ..   Jul-74   C
      Palm Springs, CA .   May-56   C
      Pasedena, CA .....   Jan-56   C
      Pico Rivera, CA ..   Oct-79   C
      Ridgecrest, CA ...   Sep-72   B%
      San Diego, Ca ....   Jan-56   C
      Santa Barbara, CA    Jan-56   C
      Santa Monica, CA .   Jan-56   C
      South Gate, CA ...   Jun-61   C
      Thousand Oaks, CA    Jan-75   C
      Van Nuys, CA .....   Nov-67   C
      Ventura, CA ......   Mar-61   C
      Vernon, CA .......   Jun-61   C
      Victorville, CA ..   Sep-72   B




<PAGE>



          CITY-STATE ..........   DATE                    TYPE
          ---------------------   ------                  -----
                West Covina, CA   Oct-79                  C
                Whittier, CA ..   Oct-79                  C
                Yuma, AZ ......   Jul-80                  B
                Las Vegas, NV .   Jan-56                  B
                Barstow, CA ...   Nov-87                  B
      8   McKinleyville, CA       Jul-93                  C
      9   St. Simons Island, GA   May-61                  C
                Brunswick, GA .   May-61                  C
      10   Valdosta, GA           Nov-77                  C
      11   Galesburg, IL          Mar-82                  C
      12   Evansville, IN         Sep-54                  B
      13   Valparaiso, IN         Feb-71                  B
      14   Burlington, IA         Dec-73                  C
      15   Cedar Rapids, IA       Nov-60                  C
      16   Davenport, IA          May-68                  C
                Dubuque, IA ...   Jan-75                  C
                Waterloo, IA ..   May-78                  C
                Peoria, IL ....   Jan-87                  B
                Bloomington, IL   Jan-87                  C
                Champaign, IL .   Jan-87                  B
                Decatur, IL ...   Jan-87                  B
                Pekin, IL .....   Jan-87                  C
                Springfield, IL   Jan-87                  B
                Danville, IL ..   Jan-87                  B
           17   Dex Moines, IA    Jan-63                  C
           18   Sioux City, IA    May-90                  C
           19   North Platte, NE  Apr-89                  C







          CITY-STATE ..............   DATE                TYPE
          -----------------           ------              -------------
          20   Salina, KS             Dec-94              C
                Hays, KS ..........   Dec-96              C
                Great Bend, KS ....   Feb-96              C
                Independence, KS ..   Dec-95              New Agreement
                Topeka, KS ........   Dec-95              New Agreement
                McPherson, KS .....   Dec-95              New Agreement
           21   Garden City, KS       Aug-85              C
                Liberal, KS .......   Feb-84              C
           22   Lexington, KY         Sep-56              B
                Frankfort, KY .....   Dec-61              B
           23   Alexandria, LA        Jan-78              C
                Gulfport, MS ......   Feb-84              C
           24   Shreveport, LA        Aug-54              B
                Monroe, LA ........   Jun-57              B
           25   Presque Isle, ME      Jun-73              C
           26   Alpena, MI            Aug-71              C
                Salt Ste. Marie, MI   Jun-74              B
           27   Hancock, MI           Apr-56              C
           28   Iron Mountain, MI     Jun-60              C
           29   Kalamazoo, MI         Feb-72              C
                Benton, MI ........   Aug-76              C
                Traverse City, MI .   Jun-73              C
           30   Pellston, MI          Aug-89              C
                Charlevoix, MI ....   Jun-91              C
                Gaylord, MI .......   Aug-91              C
           31   Duluth, MN            Jan-65              B
                Rhinelander, WI ...   May-85              C




<PAGE>



          CITY-STATE ..................   DATE              TYPE
          ---------------                 ------            -------------
                International Falls, MN   Apr-95            New Agreement
                Bemidji, MN ...........   Apr-95            New Agreement
                Hibbing, MN ...........   Apr-95            New Agreement
                Eveleth, MN ...........   Apr-95            New Agreement
                Marquette, MI .........   Jun-96            New Agreement
                Brainerd, MN ..........   Jun-96            New Agreement
           32   Rochester, MN             Dec-60            B
                Stevens Point, WI .....   Aug-81            C
                Eau Claire, WI ........   Aug-81            C
                Land O'Lakes, WI ......   Aug-81            C
                Marshfield, WI ........   Aug-81            C
                Wausau, WI ............   Aug-81            C
           33   Springfield, MO           Mar-70            C
                Branson, MO ...........   Apr-78            C
                Joplin, MO ............   May-84            C
           34   Butte, MT                 Jan-87            C
                Helena, MT ............   Jan-90            C
                Glacier Park, MT ......   May-94            C
                Great Falls, MT .......   May-94            C
           35   Glendive, MT              Jul-87            C
                Sidney, MT ............   Jul-87            C
           36   Missoula, MT              Sep-89            C
                Kalispell, MT .........   Sep-89            C
                Billings, MT ..........   Feb-95            C
           37   McCook, NE                Aug-72            C
           38   Manchester, NH            Jun-75            C
                Hampton, NH ...........   Apr-78            C




<PAGE>



          CITY-STATE                  DATE                 TYPE
          -----------------------    -----                 ------------------
                Nashua, NH .......   Jun-75                   C
                Salem, NH ........   Jun-76                   C
                Brattleboro, VT ..   Jul-76                   C
                Merrimack, NH ....   May-82                   Letter Agreement
                Laconia, NH ......   Oct-82                   Letter Agreement
                Keene, NH ........   Dec-89                   C
           39   Matawan, NJ          Nov-64                   B
                Freehold, NJ .....   Oct-60                   B
                Lakewood, NJ .....   Oct-60                   B
                Point Pleasant, NJ   Oct-60                   B
                Port Monmouth, NJ    Nov-64                   B
                Sayreville, NJ ...   Dec-62                   B
                Toms River, NJ ...   Oct-60                   B
                Red Bank, NJ .....   Jun-91                   B
                Eatontown, NJ ....   May-93                   New Agreement
                Wall, NJ .........   Apr-95                   New Agreement
       40   Piscataway (Plain), NJ   Jun-57                   B
                Cranford, NJ .....   Feb-58                   B
                Dover, NJ ........   Dec-61                   B
                East Orange, NJ ..   Aug-74 (Truck)           T
                Flemington, NJ ...   Jun-62                   B
                Fort Lee, NJ .....   Jun-61                   T
                Hackettstown, NJ .   Dec-61                   B
                Linden, NJ .......   Aug-60                   B
                Madison, NJ ......   May-65                   B
                Millburn, NJ .....   Aug-74                   B
                Montclair, NJ ....   Jul-61                   B





<PAGE>



          CITY-STATE                   DATE              TYPE
          ----------                   ------            -----
                Morristown, NJ .....   Aug-60            B
                New Brunswick, NJ ..   Apr-60            B
                Oakland, NJ ........   Aug-74 (Truck)    T
                Troy Hills, NJ .....   Aug-74            B
                Perth Amboy, NJ ....   Aug-60            B
                Rahway, NJ .........   Sep-60            B
                Ridgefield, NJ .....   Jul-61            B
                Ridgewood, NJ ......   Jul-61            B
                Saddle Brook, NJ ...   Aug-74 (Truck)    T
                Somerville, NJ .....   Mar-58            B
                Springfield, NJ ....   Aug-74            B
                Roxbury, NJ ........   Aug-74            B
                Summit, NJ .........   May-61            B
                Union, NJ ..........   Jan-60            B
                Port Jervis, NJ ....   Dec-61            B
                West Orange, NJ ....   Aug-81            C
           41   Roswell, NM            Feb-84            C
                Santa Fe, NM .......   Apr-65            C
                Los Alamos, NM .....   Apr-66            C
                Alamogordo, NM .....   Apr-95            New Agreement
           42   Albany, NY             Dec-64            B
                Schenectady, NY ....   Dec-64            B
                Troy, Watervliet, NY   Dec-64            B
                Rutland, VT ........   Sep-91            C
                Hanover, NH ........   Oct-95            B
                Springfield, VT ....   Aug-96
           43   Plattsburgh, NY        Sep-82            C





<PAGE>



          CITY-STATE                  DATE              TYPE
          --------------------       ------             -----
                Lake Placid, NY ..   Sep-82             B
           44   White Plains, NY     Jan-61             B
                Larchmont, NY ....   Jan-61             B
                Mamaroneck, NY ...   May-76             B
                Rye, Tarrytown, NY   Jan-61             B
                Scarsdale, NY ....   Jan-61             B
           45   Wilmington, NC       Nov-71            B%
                Florence, SC .....   Sep-74             B%
                Rocky Mount, NC ..   Sep-86             B
                Goldsboro, NC ....   Sep-86             B
                Greenville, NC ...   Sep-86             C
                Kinston, NC ......   Sep-86             B
                Jacksonville, NC .   Sep-86             C
                Morehead City, NC    Sep-86             B
                New Bern, NC .....   Sep-86             B
           46   Bismarck, ND         Oct-64             B
           47   Fargo, ND            Oct-71             C
           48   Grand Forks, ND      Dec-88             C
           49   Jamestown, ND        Dec-85             C
           50   Minot, ND            Jan-81             C
                Williston, ND ....   Jun-81             C
                Aberdeen, SD .....   Jul-77             C
           51   Cambridge, OH        Jan-87             C
           52   Lima, OH             Dec-82             C
           53   Enid, OK             Jul-63             C
           54   Medford, OR          Dec-91             C
           55   Harrisburg, PA       Sep-66             B%




<PAGE>



          CITY-STATE .............   DATE                 TYPE
          -----------------------    ------               -------------
                State College, PA    Mar-94               New Agreement
                Mechanicsburgh, PA   Mar-94               New Agreement
                Hershey, PA ......   Mar-94               New Agreement
           56   Lancaster, PA        Mar-57               C
           57   New Kensington, PA   Apr-59               B
                Monroeville, PA ..   Apr-59               B
                Oakmont, PA ......   Feb-61               B
                Vandergrift, PA ..   Feb-61               T
                Wilkensburg, PA ..   Feb-61               B
           58   Greensburg, PA       Jul-88               B
                Waltz Mills, PA ..   Feb-92               Agency Agreement
           59   Pierre, SD           Apr-79               C
           60   Rapid City, SD       Feb-92               C
                Sioux Falls, SD ..   Aug-95               C
           61   Kingsport, TN        Apr-81               B%
                Greenville, TN ...   Oct-81               C
           62   Nashville, TN        Jun-65               C
                Chattanooga, TN ..   Jun-65               C
                Knoxville, TN ....   Oct-76               C
                Memphis, TN ......   Jun-65               C
                Olive Branch, MS .   Jul-76               C
           63   Amarillo, TX         Jan-78               B
                Lubbock, TX ......   Jun-75               B
           64   Corpus Christi, TX   Jan-56               B
                Brownsville, TX ..   Jan-56               B
                Harlingen, TX ....   Jan-56               B
                McAllen, TX ......   Jan-56               B





<PAGE>



          CITY-STATE ................   DATE             TYPE
          --------------                ------           ----
                Rockport, TX ........   Apr-81           C
                S. Padre Island, TX .   May-79           C
                Victoria, TX ........   Feb-56           B
                Laredo, TX ..........   Dec-92           B
           65   Dallas, TX              Jan-56           B
                Austin, TX ..........   Apr-56           B
                Fort Worth, TX ......   Mar-56           B
                San Antonio, TX .....   Jul-57           B
           66   Ogden, UT               Apr-94           B
           67   St. George, UT          Oct-74           C
                Cedar City, UT ......   Sep-77           C
                Page, AZ ............   May-75           C
                Vernal, UT ..........   Feb-82           C
                Ely, NV .............   Mar-82           Letter Agreement
                Elko, NV ............   Oct-79           C
           68   Burlington, VT          Feb-63           C
           69   Richmond, VA            Mar-56           B
                Charlottesville, VA .   Sep-58           B
                Harrisonville, VA ...   Jul-65           B
                Lynchburg, VA .......   Dec-61           B
                Newport, VA .........   May-57           B
                Petersburg, VA ......   Jul-65           B
                Waynesboro, VA ......   Apr-60           B
                Salisbury, MD .......   May-87           B%
                Cambridge, Easton, MD   May-87           C
                Dover, DE ...........   May-87           B%
                Seaford, DE .........   May-87           C





<PAGE>



          CITY-STATE ..............   DATE           TYPE
          ------------                ------         ------
           70   Roanoke, VA           Apr-79         B
                Bluefield, WV .....   Feb-81         C
                W. Sulpher Sprs, WV   Dec-81         C
                Clarksburg, WV ....   Aug-83         B
                Fairmount, WV .....   Aug-83         B
                Morgantown, WV ....   Aug-83         B
                Columbus, MS ......   Oct-86         C
                Paducah, KY .......   Aug-77         C
                Greenville, MS ....   Jan-90         C
                Longview, TX ......   Feb-90         C
                Tyler, TX .........   Feb-90         C
                Killeen, TX .......   Mar-91         C
                College Station, TX   Jan-91         C
                Temple, TX ........   Mar-91         C
                Waco, TX ..........   Oct-90         C
                Meridan, MS .......   Sep-91         B
           71   Appleton, WI          Oct-58         C
                Green Bay, WI .....   Jul-63         C
                Madison, WI .......   Jun-72         C
                Wisconsin Dells, WI   Apr-78         C
                Menominee, MI .....   Jan-73         C
                Sturgeon Bay, WI ..   Sep-68         C
                LaCrosse, WI ......   Mar-85         C
           72   Casper, WY            Jul-65         C
                Laramie, WY .......   Jul-76         C
                Riverton, WY ......   Dec-69         B
                Cody, WY ..........   Mar-89         B





<PAGE>



          CITY-STATE ........   DATE            TYPE
          -------------         ------          ----
           73   Sheridan, WY    Jul-78          B
                Gillette, WY    Jul-78          B%
           74   Anchorage, AK   Apr-56          B%
                Fairbanks, AK   Apr-56          B%
                Juneau, AK ..   Apr-56          B%
                Kodiak, AK ..   Apr-56          B%
           75   Craig, CO       Sep-68          T
           76   Kelso, WA       Feb-69          T






<PAGE>

<TABLE>
<CAPTION>


                          ARACS LICENSEES - CAR RENTAL

 Country                                                                                                                  Expiration
Caribbean                 Licensee Name                             Address                                                     Date
-----------------         --------------------------------------    ----------------------------------------------        ----------
<C>                          <C>                                       <C>                                                      <C>
Anguilla                  Apex Car Rental, Ltd.                     P.O. Box 93, The Valley, Anguilla                      31 DEC 02

Antigua                   Gomes Enterprises, Ltd.                   P.O. Box 849, St. John's                               31 DEC 99
Aruba                     ASHA, N.V.                                P.O. Box 254, Oranjestad                               31 DEC 98
Bahamas                   Windsor Servicentor, Ltd.                 One West Bay, P.O. Box CB 13999, Nassau                 YTY
Bonaire                   Drive Yourself(Bonaire), N.V.             Strocofa, Zeelandia, Curacao                           31 DEC 97
Cayman Brac               T&D Auto Rentals                          P.O. Box 400, Georgetown, Grand Cayman, Cayman         31 DEC 01
                                     Islands
Curacao                   Drive Yourself (Curacao), N.V.            Stracoba, Zeelandia                                    31 DEC 97
Dominica                  A.C. Shillingford & Co., Ltd.             P.O. Box 123, Roseau                                   31 DEC 99
Dominican Rep.            Servicolt C. por A.                       P.O. Box 176-9, Santo Domingo                          31 DEC 97
French Guiana             Cefber, S.A.R.L.                          7, lot La Desireee, 97351, Matoury                     31 DEC 00
Grand Cayman              David Foster/Stephen Foster               P.O. Box 400, Airport Road, Georgetown                 31 DEC 01
                          (Partnership)
Grenada                   Spice Isle Rentals, Ltd.                  P.O. Box 82, St. George's                              31 DEC 00
Guadeloupe                Cie. Generade de Location, S.A.R.L.       Rue F. Forest, Z.I. Jarry                              31 DEC 00
Haiti                     Soc. Haitienne de Commerce                P.O. Box 15554, Petionville                            31 DEC 99
Martinique                Cie.Martiniquaise de Locations, S.A.R.L.  Auto GM 2I La Lezarde, 97232, Lamenting                31 DEC 00
Nevis                     Holiday Car Rentals, Ltd.                 P.O. Box 45, Basseterre, St. Kitts, W.I.               31 DEC 00
Providenciales            Provo Auto Supply, Ltd.                   P.O. Box, Providenciales, Turks & Caicos               31 DEC 00

St. Barthelemy            Robert J. Ledee                           P.O. Box 561, 97133 St. Jean                           31 DEC 99
St. Eustatius             Mercury Transport (Statia), N.V.          Lampweg #1                                             31 DEC 00
St. John V.I.             V.I. Miscellaneous Services, Inc.         P.O. Box 1388, Cruz Bay, St. John, USVI 00830          31 DEC 00
St. Kitts                 Holiday Car Rentals, Ltd.                 P.O. Box 45, Basseterre                                31 DEC 99
St. Lucia                 Sun Drive Rentals, Ltd.                   P.O. Box 1010, Castries                                31 DEC 99
St. Maarten               Mercury Transport, N.V.                   P.O. Box 2015, Phillipsburg                            31 DEC 98

</TABLE>



<PAGE>


<TABLE>
<CAPTION>

<S>                           <C>                                          <C>                                                  <C>
St. Vincent               Systems Car Rental                         Paul's Ave. Kingstown, St. Vincent                    31 DEC 02
Tortola, B.V.I.           Auto Parts & Sales, Ltd.                   P.O. Box 344, Road Town                               31 DEC 98

Central America
Belize                    Eco Rental, Ltd.                           P.O. Box 1007, Poinsetta Rd., Ladyville                31 DEC98
Costa Rica                Linea de Accion, S.A.                      Agencia Mazda, La Uruca, San Jose                       YTY
Guatemala                 Arrendadora de Guatemala                   12 Calle 2-73 Zona 9 Guatemala City                     31DEC01
Honduras                  Arrandadora de Vehiculos, S.A.             P.O. Box 1208, Tegucigalpa                              31DEC99
Mexico                    Comercial Arriete S.A.                     Apartado 656, 97000 Merida, Yucatan                     31JAN07
Panama                    Rent A Car Panamena, S.A.                  Distribuidora David, Via Simon Bolivar                  31DEC01
                                                                     Calle 12 de Octubre, Panama
South America
Chile                     Servic, S.A.                               San Pablo 9900, Santiago                                31DEC01
Colombia                  Autosolving                                Avenida 15 - No. 101 - 45, Bogota                       31DEC99
Ecuador                   Turismo, Carros y Botes Cia., Ltda.        P.O. Box 6877, Guayaquil                                31DEC97
Peru                      Vea Peru, S.A.                             Ave. Javier Prado Este 5235, Lima 12                    31DEC98
Suriname                  Para Rent A Car, Ltd.                      Fred O'kirkstraat 11, Paramaribo, Suriname              31DEC02
Uruguay                   Urucar, S.A.                               Yaguaron 1527, Montevideo                               30SEP99
Venezuela                 Dorado Rent A Car, C.A.                    Ave. Libertador Esq. Ave. Principal                     31DEC01
                                                                     de Bello Campo, Caracas

</TABLE>








<PAGE>



Schedule 3




                                   GUARANTEES



         1.   Guaranty  dated December 31, 1996 in favor of Scotiabank de Puerto
              Rico with respect to the  obligations of Avis Rent A Car de Puerto
              Rico, Inc.

         2.   Guaranty dated 31 August 1995 in favor of the Participants and
              Agents under a Bill Facility Agreement dated 15 April 1994, as
              amended by the Amendment Agreement dated 31 August 1995 with
              respect to the obligations of W.T.H. Pty. Limited.

         3.   Letter  of  Guarantee*  dated  May 14,  1996 in favor of OCBC Bank
              (Malaysia)  Berhad with respect to the  obligations of Sister Sewa
              Kereta (but not exceeding 25% of such obligations).

         4.   Deed of Guarantee and Indemnity*  dated February 15, 1990 in favor
              of Malayan  Banking  Berhad  with  respect to the  obligations  of
              Sister Sewa Kereta (but not exceeding 40% of such obligations).




         ------------
         *Obligations of Avis,  Inc. to be assumed by Avis  Investment  Services
          Limited ("AIS") by Agreement dated 4 April,  1997 among AIS, Avis Rent
          A Car (Hong Kong) Limited and Avis Rent A Car System, Inc.




<PAGE>



Schedule 4


                            WIZCOM TRANSFERRED ASSETS


              (i)          All Wizard System Agreements

              (ii)         All Computer Services Agreements

              (iii)        All Homepage Agreements

              (iv)         The following proprietary software:

                           Fleet System:

                                    Fleet Distribution Model
                                    Fleet Planning
                                    Field Fleet Reporting System
                                    Title Tracking Request
                                    Electronic Repair Order
                                    Fleet Receivables
                                    Invoice System
                                    Fleet Reporting System
                                    Make Model Database
                                    Pre-Delivery Inspection
                                    Vehicle On-Line Transaction System
                                            Purchase Order Database
                                            Vehicle Order Database
                                    Vehicle Order Status
                                    Department of Sanitation System
                                    Fleet Reconciliation System
                                    Group Rate Depreciation System
                                    Harris County Tax System
                                    Insurance System
                                    Licensee Reporting System
                                    Vehicle Damage Claims






<PAGE>



                           SALES AND MARKETING SYSTEM

                                    Pricing Model
                                    IRDB
                                    Coupon Reporting
                                    Worldwide Prestige Insurance
                                    Chairman's Tracking System
                                    CEO Tracking System
                                    Automated Fulfillment System
                                    Brochure Request System
                                    Wizard Credit Link
                                    CAW Corporate Awards System
                                    PSI (for Preferred Supplier Agreements)
                                    Sales Incentive System
                                            EMP Sales Employee Database
                                            STC Sales STC Database






<PAGE>



                           FINANCIAL MANAGEMENT SYSTEM

                                    Accounts  Payable (AP)  General  Ledger (GL)
                                    Money  Management   System  (MMS)  Time  and
                                    Attendance (TAA) Rental Agreement Processing
                                    Rental Number System Balance  Forward System
                                    Register  Miscellaneous  Reporting Open Item
                                    System Travel Agency System Cash Application
                                    System   Invoicing   Licensee    Chargebacks
                                    Country Company  database Club Red Preferred
                                    Supplier AIM International  Direct Sell User
                                    Rental  File  Europe  File  Wizard  Licensee
                                    Billing   BIL  Roll  and   Slide   Reporting
                                    Currency  Data Base Open Rental System Bonus
                                    System Direct  Billing System Daily Business
                                    Reporting





<PAGE>




                             YIELD MANAGEMENT SYSTEM

                                    Yield Management
                                            Data Extraction and Conditioning
                                            Product Forecasting
                                            Revenue Optimization
                                            Graphical User Interface
                                            Supply and Demand
                                            Availability by Length of Rental
                                                     (AVLLOR)
                                            Turndowns and Denials
                                            Reservation and Rental History
                                            Rate Opportunity System
                                            Yield Management Price
                                                     Elasticity System

                                    Rateshop System
                                    Business Mix
                                    Global Distribution System Rate Maintenance
                                    Rate Availability


                              MISCELLANEOUS SYSTEMS

                                    Coupon Tracking System
                                    Worldwide Reporting System
                                    Consumer Sales Incentive
                                    Personal Liability and Property Damage
                                        Insurance Reserve
                                    Operating Lease Commitment Reporting
                                        Facility
                                    Treasury Debt Reporting Facility
                                    Interactive Personnel System
                                    Name Risk System
                                    Credit Club Risk
                                    Standard Interline Passenger Procedure
                                        (SIPP)








<PAGE>



                                TABLE OF CONTENTS


         ARTICLE I

DEFINITIONS....................................................................
         Section 1.1  Definitions..............................................

         ARTICLE II

TRANSFER OF CAR RENTAL BUSINESS................................................
         Section 2.1  Transfer of Assets......................................
         Section 2.2  Assignment and Assumption of  Liabilities................
         Section 2.3  Transfers Not Effected Prior to the Separation Date.....
         Section 2.4  No Representations or Warranties; Consents..............
         Section 2.5  Conveyancing and Stock Assumption Instruments...........

         ARTICLE III

THE SEPARATION...............................................................
         Section 3.1  Cooperation Prior to the Separation......................
         Section 3.3  Holdings Board Action; Conditions Precedent to the
                      Separation......................

         ARTICLE IV

INDEMNIFICATION................................................................
         Section 4.1  ARAC Indemnification of Holdings.........................
         Section 4.2  Holdings Indemnification of ARAC.........................
         Section 4.3  Notice and Payment of Claims.............................
         Section 4.4  Notice and Defense of Third-Party Claims.................
         Section 4.5  Insurance Proceeds.......................................
         Section 4.6  Contribution.............................................
         Section 4.7  Subrogation..............................................
         Section 4.8  No Third-Party Beneficiaries.............................
         Section 4.9  Remedies Cumulative......................................
         Section 4.10 Survival of Indemnities..................................
         Section 4.11 After-Tax Indemnification Payments.......................

         ARTICLE V

CERTAIN ADDITIONAL MATTERS.....................................................
         Section 5.1  Intercompany Payables/Receivables........................
         Section 5.2  Ancillary Agreements.....................................
         Section 5.3  ARAC Officers and Board of Directors.....................
         Section 5.4  ARAC Certificate of Incorporation and By-laws............
         Section 5.5  Credit Facilities........................................
         Section 5.6  Insurance Policies and Claims Administration.............





<PAGE>



         ARTICLE VI

ACCESS TO INFORMATION..........................................................
         Section 6.1  Provision of Corporate Records...........................
         Section 6.2  Access to Information....................................
         Section 6.3  Litigation Cooperation...................................
         Section 6.4  Reimbursement............................................
         Section 6.5  Retention of Records.....................................
         Section 6.6  Confidentiality..........................................
         Section 6.7  Mail.....................................................

         ARTICLE VII

MISCELLANEOUS..................................................................
         Section 7.1  Termination..............................................
         Section 7.2  Expenses.................................................
         Section 7.3  Notices..................................................
         Section 7.4  Amendment and Waiver.....................................
         Section 7.5  Counterparts.............................................
         Section 7.6  Governing Law; Jurisdiction; Forum.......................
         Section 7.7  Entire Agreement.........................................
         Section 7.8  Parties in Interest......................................
         Section 7.9  Tax Disaffiliation Agreement.............................
         Section 7.10 Further Assurances and Consents..........................
         Section 7.11 Exhibits and Schedules...................................
         Section 7.12 Legal Enforceability.....................................
         Section 7.13 Dispute Resolution.......................................
         Section 7.14 Titles and Headings......................................

Schedule 1 - Direct Car Rental Subsidiaries

Schedule 2 - Franchise Agreements

Schedule 3 - Guarantees

Schedule 4 - WizCom Transferred Assets