EXHIBIT 10.4





                         BANDAG, INCORPORATED
                    NONQUALIFIED STOCK OPTION PLAN

                          As Amended November 12, 1996


             1.   PURPOSE.  The purpose of the Bandag, Incorporated
   Nonqualified Stock Option Plan (the "Plan") is to promote the best
   interests of Bandag, Incorporated (the "Company") and its shareholders by
   encouraging key executive officers of the Company to secure or increase on
   reasonable terms their stock ownership in the Company.  The Board of
   Directors of the Company believes the Plan will promote continuity of
   management and increase the incentive and personal interest in the welfare
   of the Company by those who are primarily responsible for shaping and
   carrying out the long-range plans of the Company and securing its
   continued growth and financial success.  It is intended that all of the
   options granted pursuant to the Plan will constitute nonqualified stock
   options. 

             2.   ADMINISTRATION.  The Plan shall be administered
   by the Stock Option Committee (the "Committee") of the Board of Directors
   of the Company (the "Board").  The Committee shall consist of not less
   than two directors, each of whom shall qualify as a "Non-Employee
   Director" for purposes of Rule 16b-3 under the Securities Exchange Act of
   1934, as amended.  If at any time the Committee shall not be in existence,
   the functions of the Committee as specified in the Plan shall be exercised
   by the full Board.  All determinations of the Committee shall be made by
   at least a majority of its members.  Any decision or determina- tion
   reduced to writing and signed by all of the members of the Committee shall
   be fully as effective as if it had been made by unanimous vote at a
   meeting duly called and held.

                  In accordance with the provisions of the Plan,
   the Committee shall select the key executive officers to whom
   and the time or times at which options shall be granted, the
   option periods, limitations on option exercise, the number of
   shares to be subject to each option, and such other provisions
   of the option as the Committee may deem necessary or desir-
   able.  Subject to the express provisions of the Plan, the Com-
   mittee shall also have complete authority to interpret the
   Plan, to prescribe, amend and rescind rules and regulations
   relating to the Plan, to determine the terms and provisions of
   any option agreements (which need not be identical) and to make
   all other determinations necessary or advisable for the
   administration of the Plan.  The interpretation of any
   provision of the Plan by the Committee and any determination on
   the matters referred to in this Section 2 shall be final.

             3.   ELIGIBILITY.  Any key executive officer
   ("Executive") of the Company whose judgment, initiative and
   efforts contribute materially to the successful performance of
   the Company shall be eligible for selection by the Committee to
   receive options under the Plan.  No option may be granted under
   the Plan to any person who is a member of the Committee.

             4.   SHARES SUBJECT TO THE PLAN.  The shares to be
   subject to options under the Plan shall be shares of the
   Company's Common Stock, $1.00 par value ("Stock")*, and may be either
   authorized and unissued or treasury shares.  Subject to adjustment in
   accordance with Section 10, the total number of shares of Stock for which
   options may be granted and which may be purchased pursuant to options
   under the Plan shall not exceed an aggregate of 500,000 shares of Common
   Stock*.  If an option granted under the Plan expires, is canceled or
   terminates unexercised as to any shares of Stock subject thereto, such
   shares shall again be available for the granting of additional options
   under the Plan.

   __________________
   *Due to issuance of the Class A Common Stock dividend in 1992, the shares
   to be subject to options under the Plan shall be Common Stock and Class A
   Common Stock and the total number of shares of such stock for which
   options may be granted and which may be purchased pursuant to options
   under the Plan shall not exceed an aggregate of 500,000 shares of Common
   Stock and 500,000 shares of Class A Common Stock.


             5.   GRANT OF OPTIONS.  Subject to the terms and
   conditions of the Plan, the Committee may, from time to time,
   grant to such Executives as the Committee may determine,
   options to purchase such number of shares of Stock and on such
   terms and conditions as the Committee may determine.  More than
   one option may be granted to the same Executive.  The date on
   which the Committee approves the granting of an option shall be
   considered as the date on which such option is granted.

             6.   OPTION PRICE.  The option price per share of
   Stock shall be determined by the Committee, but shall not be
   less than 100% of the fair market value of a share of Stock on
   the date the option is granted.  Unless otherwise determined by
   the Committee, the "fair market value" of a share of Stock on
   the date an option is granted shall be the closing price for a
   share of Stock on such date or, if such date is not a trading
   date, the next preceding trading date as quoted on the New York
   Stock Exchange Transaction Reporting System.

             7.   OPTION PERIOD.  The Committee shall determine
   the term of each option, but in no event shall such term exceed
   a period of 15 years from the date such option is granted.

             8.   EXERCISE OF OPTIONS.  An option may be
   exercised, subject to its terms and conditions and the terms
   and conditions of the Plan, in full at any time or in part from
   time to time by delivery to the Company at its principal office
   of a written notice of exercise specifying the number of shares
   with respect to which the option is being exercised.  Any
   notice of exercise shall be accompanied by payment in full of
   the option price for the shares being purchased (a) in cash or
   its equivalent; (b) if permitted by the applicable option
   agreement, by delivering to the Company shares of Stock (valued
   at their fair market value as of the date of exercise, as
   determined by the Committee consistent with the method of
   valuation set forth in Section 6); or   if permitted by the
   applicable option agreement, by any combination of (a) and (b).

             9.   TRANSFERABILITY OF OPTIONS.  No option shall be
   assignable or transferable by an Executive other than by will
   or the laws of descent and distribution and may be exercised
   during the life of the Executive only by the Executive or his
   legal guardian or representative.

             10.  CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK.  In
   the event of a capital adjustment resulting from a stock
   dividend (other than a stock dividend in lieu of an ordinary
   cash dividend), stock split, reorganization, recapitalization,
   merger, consolidation, combination or exchange of shares or the
   like, the aggregate number and class of shares of Stock subject
   to the Plan and the aggregate number and class of shares
   subject to each outstanding option agreement and the option
   price for shares subject to each outstanding option shall be
   appropriately adjusted in a manner consistent with such capital
   adjustment; provided, however, that no such adjustment shall
   require the Company to sell any fractional shares and any
   adjustment shall be limited accordingly.  The price of any
   shares under option shall be adjusted so that there will be no
   change in the aggregate purchase price payable upon exercise of
   any such option.  The determination of the Committee as to any
   adjustment shall be final.

             11.  CORPORATE MERGERS AND OTHER CONSOLIDATIONS.  The
   Committee may also grant options having terms and provisions
   which vary from those specified in the Plan; provided that any
   options granted pursuant to this Section 11 are granted in
   substitution for, or in connection with the assumption of,
   existing options granted by another corporation and assumed or
   otherwise agreed to be provided for by the Company pursuant to
   or by reason of a transaction involving a corporate merger,
   consolidation, acquisition or other reorganization to which the
   Company is a party.
                              
             12.  OPTION AGREEMENTS.  All options granted under
   the Plan shall be evidenced by written agreements (which need
   not be identical) in such form as the Committee shall
   determine.

             13.  TRANSFER RESTRICTIONS.  Shares of Stock
   purchased under the Plan and held by any person who is an
   officer or director of the Company, or who directly or
   indirectly controls the Company, may not be sold, offered for
   sale or otherwise disposed of except pursuant to an effective
   Registration Statement under the Securities Act of 1933, or
   except in a transaction which, in the opinion of legal counsel
   for the Company, is exempt from registration under such Act.
   The Committee may waive the foregoing restrictions in whole or
   in part in any particular case or cases, or may terminate such
   restrictions, whenever the Committee determines that such
   restrictions afford no substantial benefit to the Company.

             14.  AMENDMENT, SUSPENSION AND TERMINATION OF PLAN.
   The Board shall have the right to amend, suspend or terminate
   the Plan at any time; provided, however, that, unless approved
   by the shareholders of the Company, no amendment shall be made
   to the Plan which (a) materially modifies the eligibility
   requirements as provided in Section 3; (b) increases the total
   number of shares of Stock (except pursuant to a capital
   adjustment as provided in Section 10) which may be purchased
   under the Plan by Executives as provided in Section 4; or 
   materially increases the benefits accruing to Executives under
   the Plan.

             15.  EFFECTIVE DATE AND TERM OF PLAN.  The effective
   date of the Plan is the date of its adoption by the Board,
   November 13, 1987, subject to the approval of the Plan within
   12 months of such effective date at a meeting of shareholders,
   and all options granted prior to such approval shall be subject
   to such approval and shall not be exercisable until after such
   approval.  The Plan shall terminate on November 13, 1997, or on
   such earlier date as may be determined by the Board.
   Termination of the Plan, however, shall not affect the rights
   of Executives under options previously granted to them, and all
   unexpired options shall continue in force and operation after
   termination of the Plan except as they may lapse, be canceled
   or terminate by their own terms and conditions.

             16.  RIGHTS AS A SHAREHOLDER.  An Executive shall
   have no rights as a shareholder with respect to any shares
   subject to any option until the date the option shall have been
   exercised, the shares shall have been fully paid and a stock
   certificate shall have been issued.

             17.  TAX WITHHOLDING.  The Company may deduct and
   withhold from any cash otherwise payable to the Executive such
   amount as may be required for the purpose of satisfying the
   Company 5 obligation to withhold federal, state or local taxes
   as the result of the exercise of an option.  Further, in the
   event the amount so withheld is insufficient for such purpose,
   the Company may require that the Executive pay to the Company
   upon its demand or otherwise make arrangements satisfactory to
   the Company for payment of, such amount as may be requested by
   the Company in order to satisfy its obligation to withhold any
   such taxes.

                  With the consent of the Committee as set forth
   in the option agreement, an Executive may be permitted to
   satisfy the Company's withholding requirements by electing to
   have the Company withhold shares of Stock otherwise issuable or
   to deliver to the Company shares of Stock having a fair market
   value on the date income is recognized pursuant to the exercise
   of an option equal to the amount required to be withheld.  The
   election shall be made in writing and shall be made according
   to such rules and in such form as the Committee may determine.