Document:

Exhibit 10.1

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                          AGREEMENT AND PLAN OF MERGER

                                  by and among

                              FORD MOTOR COMPANY,

                                FORD FSG, INC.,

                               FORD FSG II, INC.

                                      and

                             THE HERTZ CORPORATION

                          Dated as of January 16, 2001

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                                TABLE OF CONTENTS

                                    ARTICLE I

                                    THE OFFER

SECTION 1.01. The Tender Offer
SECTION 1.02. Company Action
SECTION 1.03. Stockholder Lists

                                   ARTICLE II

                                   THE MERGER

SECTION 2.01.  The Merger
SECTION 2.02.  Effective Time; Closing
SECTION 2.03.  Effect of the Merger
SECTION 2.04.  Certificate of Incorporation; By-laws; Directors
               and Officers

                                   ARTICLE III

              CONVERSION OF COMMON STOCK; EXCHANGE OF CERTIFICATES

SECTION 3.01. Conversion of Common Stock
SECTION 3.02. Exchange of Certificates
SECTION 3.03. Stock Transfer Books
SECTION 3.04. Appraisal

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

SECTION 4.01. Organization and Qualification
SECTION 4.02. Restated Certificate of Incorporation and By-laws
SECTION 4.03. Capitalization
SECTION 4.04. Authority Relative to This Agreement
SECTION 4.05. No Conflict; Required Filings and Consents
SECTION 4.06. SEC Filings; Financial Statements
SECTION 4.07. Options and Employment Contracts
SECTION 4.08. Brokers
SECTION 4.09. Opinion of Financial Advisor
SECTION 4.10. State Takeover Statutes

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                                    ARTICLE V

           REPRESENTATIONS AND WARRANTIES OF FORD, PARENT AND FSG II

SECTION 5.01. Organization and Qualification
SECTION 5.02. Authority Relative to This Agreement
SECTION 5.03. No Conflict; Required Filings and Consents
SECTION 5.04. Financing
SECTION 5.05. Operations of FSG II

                                   ARTICLE VI

                     CONDUCT OF BUSINESS PENDING THE MERGER

SECTION 6.01.  Conduct of Business By the Company Pending the
               Merger
SECTION 6.02.  Notification of Certain Matters

                                   ARTICLE VII

                              ADDITIONAL AGREEMENTS

SECTION 7.01.  Merger Without Stockholders' Meeting
SECTION 7.02.  Stockholder Approval Required
SECTION 7.03.  Covenants Relating to Information Statement
SECTION 7.04.  Access to Information; Confidentiality
SECTION 7.05.  Directors' and Officers' Indemnification and
               Insurance
SECTION 7.06.  Further Action; Consents; Filings
SECTION 7.07   Public Announcements
SECTION 7.08.  Reasonable Best Efforts and Further Assurances

                                  ARTICLE VIII

                            CONDITIONS TO THE MERGER

SECTION 8.01. Conditions to the Obligations of Each Party

                                   ARTICLE IX

                        TERMINATION, AMENDMENT AND WAIVER

SECTION 9.01. Termination
SECTION 9.02. Effect of Termination
SECTION 9.03. Amendment
SECTION 9.04. Waiver

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SECTION 9.05. Expenses

                                    ARTICLE X

                               GENERAL PROVISIONS

SECTION 10.01. Non-Survival of Representations, Warranties and Agreements
SECTION 10.02. Notices
SECTION 10.03. Certain Definitions
SECTION 10.04. Severability
SECTION 10.05. Entire Agreement; Assignment
SECTION 10.06. Parties in Interest
SECTION 10.07. Governing Law
SECTION 10.08. Headings
SECTION 10.09. Counterparts
SECTION 10.10. Consent to Jurisdiction
SECTION 10.11. Waiver of Jury Trial

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          AGREEMENT  AND PLAN OF  MERGER,  dated as of  January  16,  2001 (this
"AGREEMENT"),  by and among Ford Motor Company, a Delaware corporation ("FORD"),
Ford FSG, Inc., a Delaware corporation ("PARENT"), Ford FSG II, Inc., a Delaware
corporation ("FSG II"), and The Hertz Corporation,  a Delaware  corporation (the
"COMPANY").

                               W I T N E S S E T H

          WHEREAS,  the Company has authority to issue (i) 440,000,000 shares of
Class A Common  Stock,  par value $.01 per share (the "CLASS A COMMON  STOCK" or
the  "SHARES"),  40,177,324 of which were  outstanding  as of December 31, 2000,
(ii)  140,000,000  shares of Class B Common Stock, par value $.01 per share (the
"CLASS B COMMON STOCK" and,  together with the Class A Common Stock, the "COMMON
STOCK"),  67,310,167 of which are outstanding,  and (iii)  40,000,000  shares of
Preferred Stock, par value $.01 per share, none of which are outstanding;

          WHEREAS, Parent owns (i) 20,245,833 shares of Class A Common Stock and
all of the  outstanding  Class B Common  Stock  and (ii) all of the  outstanding
stock of FSG II;

          WHEREAS,   Ford,   which  owns  directly  or  indirectly  all  of  the
outstanding  stock of Parent,  has  proposed  to the board of  directors  of the
Company (the "BOARD") that Parent or an affiliate  acquire the remaining Class A
Common Stock not owned by Parent (the "PROPOSAL");

          WHEREAS,  the Board has  established a special  committee of the Board
(the "SPECIAL  COMMITTEE") to consider the Proposal and make a recommendation to
the Board with respect thereto;

          WHEREAS,  it is proposed  that Ford shall  cause  Parent to commence a
tender  offer (the  "TENDER  OFFER") to acquire  any and all of the  outstanding
shares of Class A Common  Stock,  for an amount  equal to $35.50 per Share (such
amount, or any greater amount per Share paid pursuant to the Tender Offer, being
hereinafter  referred to as the "OFFER PRICE"),  net to the seller in cash, upon
the terms and subject to the conditions provided herein;

          WHEREAS,  the Special  Committee (i) has determined that it is fair to
and in the best interests of the Company and its stockholders (other than Parent
and its affiliates) to

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consummate  the Tender Offer and the merger of FSG II with and into the Company,
with the Company being the surviving corporation (the "MERGER"),  upon the terms
and subject to the  conditions  of this  Agreement  and in  accordance  with the
General  Corporation  Law of the State of Delaware  ("DELAWARE  LAW"),  (ii) has
determined  that the  Tender  Offer,  the Merger  and this  Agreement  should be
approved and declared advisable by the Board and (iii) has resolved to recommend
that the Company's  stockholders  accept the Tender  Offer,  tender their Shares
pursuant  thereto  and  approve  and  adopt  this  Agreement  and the  Merger if
submitted for their approval;

          WHEREAS,  based on the  recommendation of the Special  Committee,  the
Board (i) has  determined  that it is fair to and in the best  interests  of the
Company  and  its  stockholders  (other  than  Parent  and  its  affiliates)  to
consummate  the Tender  Offer and the Merger  upon the terms and  subject to the
conditions  of this  Agreement  and in  accordance  with  Delaware Law, (ii) has
approved and declared  advisable the Tender Offer, the Merger and this Agreement
and (iii) has resolved to recommend that the Company's  stockholders  accept the
Tender Offer,  tender their Shares  pursuant  thereto and approve and adopt this
Agreement and the Merger if submitted for their approval; and

          WHEREAS,  the board of  directors of each of Parent and FSG II (i) has
determined  that the  Tender  Offer and the  Merger  are fair to and in the best
interests of Parent and FSG II, respectively,  and their respective stockholders
and (ii) has approved and declared  advisable the Tender  Offer,  the Merger and
this Agreement.

          NOW,  THEREFORE,  in  consideration  of the  foregoing  and the mutual
covenants and  agreements  herein  contained,  and intending to be legally bound
hereby, Ford, Parent, FSG II and the Company hereby agree as follows:

                                   ARTICLE I

                                   THE OFFER

          SECTION 1.01.  THE TENDER OFFER.  (a) Provided that none of the events
set forth in Annex A hereto  shall  have  occurred  or be  existing,  as soon as
practicable  (but in no event later than fifteen  business  days from the public
announcement of the terms of this Agreement) Ford shall cause Parent to commence

                                      -2-
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the Tender Offer.  The initial  expiration date of the Tender Offer shall be the
twentieth  business  day from and after the date the Tender  Offer is  commenced
(the  "INITIAL  EXPIRATION  DATE").  The  obligation  of Ford to cause Parent to
commence the Tender Offer and to accept for payment and pay for Shares  tendered
pursuant to the Tender Offer shall be subject only to the  conditions  set forth
in Annex A hereto,  any of which  conditions may be waived by Parent in its sole
discretion.  Parent expressly reserves the right to amend or make changes to the
terms and conditions of the Tender Offer;  provided,  however, that, without the
prior written consent of the Company  (expressed in a resolution adopted by both
the Special  Committee  and the Board),  Parent shall not (i) decrease the Offer
Price or change the form of consideration  to be paid in the Tender Offer,  (ii)
impose any  additional  conditions  to the Tender  Offer from those set forth in
Annex A hereto, or (iii) otherwise amend the Tender Offer in a manner that would
adversely  affect the holders of Shares.  The Company agrees that no Shares held
by the Company or any subsidiary of the Company will be tendered pursuant to the
Tender  Offer.  Notwithstanding  anything  in this  Agreement  to the  contrary,
without the consent of the  Company,  Parent  shall have the right to extend the
Tender Offer beyond the Initial  Expiration  Date in the following  events:  (i)
from time to time if, at the Initial  Expiration  Date (or  extended  expiration
date of the Tender Offer,  if  applicable),  any of the conditions to the Tender
Offer shall not have been satisfied or waived;  (ii) for any period  required by
any rule, regulation,  interpretation or position of the Securities and Exchange
Commission  (the "SEC") or the staff  thereof  applicable to the Tender Offer or
any period  required by  applicable  law;  (iii) for an aggregate  period not to
exceed ten business days (for all such extensions),  if all of the conditions to
the  Tender  Offer are  satisfied  or waived  but the  number of Shares  validly
tendered and not withdrawn is  insufficient  to result in Parent owning at least
ninety percent of the then outstanding  number of Shares; or (iv) pursuant to an
amendment to the Tender Offer providing for a "subsequent  offering  period" not
to exceed twenty business days to the extent  permitted under, and in compliance
with,  Rule 14d-11 under the  Securities  Exchange Act of 1934,  as amended (the
"EXCHANGE  ACT").  Following the satisfaction or waiver of the conditions to the
Tender Offer, Ford shall cause Parent to accept for payment,  in accordance with
the terms of the Tender  Offer,  all Shares  validly  tendered  pursuant  to the
Tender  Offer and not  withdrawn as soon as it is permitted to do so pursuant to
applicable law.

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          (b) Ford shall cause  Parent to file with the SEC on the date that the
Tender Offer is commenced (i) a Tender Offer  Statement on Schedule TO (together
with any  supplements  or  amendments  thereto,  the  "SCHEDULE  TO") which will
contain,  among other things, the offer to purchase,  form of the related letter
of  transmittal  and summary  advertisement  (together  with any  supplements or
amendments thereto, the "TENDER OFFER DOCUMENTS"),  and (ii) together with Ford,
FSG II and the Company,  a Rule 13e-3  Transaction  Statement on Schedule  13E-3
with  respect to the Tender Offer which shall be filed as a part of the Schedule
TO. The Tender Offer  Documents  shall comply in all material  respects with the
provisions of applicable federal securities laws and, on the date filed with the
SEC  and  on  the  date  first  published,   sent  or  given  to  the  Company's
stockholders,  shall not contain any untrue statement of a material fact or omit
to state any material fact  required to be stated  therein or necessary in order
to make the statements  therein,  in light of the circumstances under which they
were made,  not  misleading,  except that no  representation  is made by Ford or
Parent  with  respect to  information  supplied  by the  Company in writing  for
inclusion in the Tender Offer Documents.  Each of Ford and Parent further agrees
to take all steps necessary to cause the Tender Offer Documents to be filed with
the SEC and to be disseminated to holders of Shares,  in each case as and to the
extent required by applicable  federal securities laws. Each of Ford and Parent,
on the one hand, and the Company,  on the other hand, agrees promptly to correct
any  information  provided by it for use in the Tender Offer Documents if and to
the extent  that it shall  have  become  false and  misleading  in any  material
respect and Ford further  agrees to cause Parent to take all steps  necessary to
cause the Tender Offer Documents as so corrected to be filed with the SEC and to
be disseminated to holders of Shares, in each case as and to the extent required
by  applicable  federal  securities  laws.  The Company and its counsel shall be
given the opportunity to review the initial  Schedule TO before it is filed with
the SEC.  In  addition,  Ford and Parent  agree to provide  the  Company and its
counsel with any  comments or other  communications  that Ford,  Parent or their
counsel may receive  from time to time from the SEC or its staff with respect to
the Tender Offer Documents  promptly after the receipt of such comments or other
communications.

          SECTION  1.02.  COMPANY  ACTION.  The Company  hereby  approves of and
consents to the Tender Offer.  Concurrently  with the filing of the Schedule TO,
the  Company  shall  file  with  the SEC and  mail to the  holders  of  Shares a

                                      -4-
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Solicitation/Recommendation  Statement  on  Schedule  14D-9  (together  with any
supplements or amendments  thereto,  the "SCHEDULE  14D-9").  The Schedule 14D-9
will set forth, and the Company hereby  represents to Ford and Parent,  that (a)
each of the Special  Committee  and the Board of Directors  of the  Company,  at
meetings duly called and held, has (i) determined  that each of the Tender Offer
and  the  Merger  is  fair  to and  in  the  best  interests  of  the  Company's
stockholders  (other  than  Parent  and  its  affiliates);  (ii)  approved  this
Agreement  and  the  transactions   contemplated  hereby,   including,   without
limitation the Tender Offer and the Merger; and (iii) resolved to recommend that
the Company's stockholders accept the Tender Offer, tender their Shares pursuant
thereto and approve and adopt this  Agreement  and the Merger if  submitted  for
their approval;  provided, however, that such recommendation may be withdrawn or
modified  to the  extent  that the  Board,  based on the  recommendation  of the
Special  Committee,  determines  in good  faith,  based on the advice of outside
counsel,  that such  recommendation  would be  inconsistent  with its  fiduciary
duties to the Company's stockholders under applicable law; and (b) Lazard Freres
& Co. LLC, the financial  advisor to the Special  Committee  ("LAZARD LLC"), has
delivered to the Special  Committee  and the Board its written  opinion that the
consideration  to be received  by the  stockholders  of the Company  (other than
Parent and its  affiliates)  pursuant to each of the Tender Offer and the Merger
is fair to such  stockholders from a financial point of view. The Schedule 14D-9
will comply in all material  respects with the provisions of applicable  federal
securities  laws  and,  on the date  filed  with  the SEC and on the date  first
published,  sent or given to the Company's  stockholders,  shall not contain any
untrue  statement of a material fact or omit to state any material fact required
to be stated  therein or necessary in order to make the statements  therein,  in
light of the  circumstances  under which they were made, not misleading,  except
that no  representation  is made by the  Company  with  respect  to  information
supplied by Ford or Parent in writing for inclusion in the Schedule  14D-9.  The
Company  further agrees to take all steps  necessary to cause the Schedule 14D-9
to be filed with the SEC and to be  disseminated  to holders of Shares,  in each
case as and to the extent required by applicable  federal  securities laws. Each
of the Company,  on the one hand, and Ford and Parent, on the other hand, agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the  extent  that it shall have  become  false and  misleading  in any
material  respect and the Company  further agrees to take all steps necessary to
cause the  Schedule  14D-9 as so  corrected  to be filed  with the SEC and to be
disseminated  to  holders  of the

                                      -5-
<PAGE>

Shares,  in each  case  as and to the  extent  required  by  applicable  federal
securities laws. Parent and its counsel shall be given the opportunity to review
the initial  Schedule  14D-9 before it is filed with the SEC. In  addition,  the
Company  agrees to provide  Ford,  Parent and their counsel with any comments or
other  communications  that the Company or its counsel may receive  from time to
time from the SEC or its staff with respect to the Schedule 14D-9 promptly after
the receipt of such comments or other communications.

          SECTION 1.03.  STOCKHOLDER LISTS. In connection with the Tender Offer,
the Company shall promptly furnish Parent with mailing labels, security position
listings  of Shares  held in stock  depositories  and any  available  listing or
computer  file  containing  the names and  addresses  of the  record  holders of
Shares,  each as of the most recent practicable date, and shall promptly furnish
Parent  with  such   additional   information,   including   updated   lists  of
stockholders,  mailing  labels and lists of securities  positions and such other
information  and  assistance as Parent or its agents may  reasonably  request in
connection  with  communicating  to the record and beneficial  holders of Shares
with respect to the Tender Offer and the Merger.

                                   ARTICLE II

                                   THE MERGER

          SECTION 2.01. THE MERGER. Upon the terms and subject to the conditions
set forth in Article VIII, and in accordance with Delaware Law, at the Effective
Time (as defined below), FSG II shall be merged with and into the Company.  As a
result of the Merger, the separate corporate existence of FSG II shall cease and
the Company  shall  continue  as the  surviving  corporation  of the Merger (the
"SURVIVING CORPORATION").

          SECTION 2.02.  EFFECTIVE TIME; CLOSING. As promptly as practicable and
in no event later than the third business day following the  satisfaction or, if
permissible,  waiver of the  conditions set forth in Article VIII (or such other
date as may be agreed in writing by the  parties  hereto),  the  parties  hereto
shall cause the Merger to be  consummated by filing a certificate of merger or a
certificate of ownership and merger, as appropriate (either, the "CERTIFICATE OF
MERGER") with the  Secretary of State of the State of Delaware,  in such form as
is required by, and executed in  accordance  with,  the relevant  provisions  of
Delaware  Law. The term  "EFFECTIVE  TIME" means the

                                      -6-
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date and time of the filing with the Secretary of State of the State of Delaware
of the  Certificate  of Merger  (or such  later  time as may be  agreed  upon in
writing by the  parties  hereto and  specified  in the  Certificate  of Merger).
Immediately  prior to the filing of the  Certificate  of Merger,  a closing (the
"CLOSING")  will  be held at the  principal  office  of  Parent  located  at One
American Road, Dearborn, Michigan (or such other place as the parties hereto may
agree).

          SECTION 2.03.  EFFECT OF THE MERGER. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing,  and subject  thereto,  at the
Effective Time, all the property, rights,  privileges,  powers and franchises of
FSG II and the Company shall vest in the Surviving  Corporation,  and all debts,
liabilities,  obligations,  restrictions,  disabilities and duties of FSG II and
the Company  shall  become the debts,  liabilities,  obligations,  restrictions,
disabilities and duties of the Surviving Corporation.

          SECTION 2.04.  CERTIFICATE OF  INCORPORATION;  BY-LAWS;  DIRECTORS AND
OFFICERS.  (a) At the Effective Time, the Restated  Certificate of Incorporation
of the Company,  as in effect  immediately prior to the Effective Time, shall be
the Restated  Certificate of  Incorporation of the Surviving  Corporation  until
thereafter amended in accordance with Delaware Law and such Restated Certificate
of Incorporation.

          (b) At the Effective  Time,  the By-laws of the Company,  as in effect
immediately  prior to the Effective Time,  shall be the By-laws of the Surviving
Corporation  until  thereafter  amended in  accordance  with  Delaware  Law, the
Restated  Certificate of  Incorporation  of the Surviving  Corporation  and such
By-laws.

          (c) From and after  the  Effective  Time,  until  successors  are duly
elected or appointed and qualified in accordance  with  applicable  law, (i) the
directors  of the Company at the  Effective  Time shall be the  directors of the
Surviving Corporation and (ii) the officers of the Company at the Effective Time
shall be the officers of the Surviving Corporation.

                                      -7-
<PAGE>

                                   ARTICLE III

              CONVERSION OF COMMON STOCK; EXCHANGE OF CERTIFICATES

          SECTION 3.01.  CONVERSION OF COMMON STOCK.  At the Effective  Time, by
virtue of the Merger and without  any action on the part of any party  hereto or
the holders of Common Stock:

          (a) each  share of Common  Stock  issued and  outstanding  immediately
     prior to the Effective Time (other than any Dissenting  Shares,  as defined
     in Section 3.04, and any shares to be canceled pursuant to Section 3.01(b))
     shall be  converted  into the right to receive the Offer Price in cash (the
     "MERGER CONSIDERATION"); and

          (b) each share of Common  Stock held in the treasury of the Company or
     owned by Parent or any direct or indirect wholly-owned subsidiary of Parent
     or the Company  immediately  prior to the Effective  Time shall be canceled
     and  extinguished   without  any  conversion  thereof  and  no  payment  or
     distribution shall be made with respect thereto; and

          (c) each share of common  stock,  par value $.01 per share,  of FSG II
     issued and  outstanding  immediately  prior to the Effective  Time shall be
     converted  into  one  share  of  Class  A  Common  Stock  of the  Surviving
     Corporation.

          SECTION 3.02. EXCHANGE OF CERTIFICATES. (a) PAYING AGENT. Prior to the
Effective Time,  Parent shall designate a bank or trust company to act as paying
agent in the Merger (the  "PAYING  AGENT") and shall  deposit or cause FSG II to
deposit  with  the  Paying  Agent  immediately  available  funds  in  an  amount
sufficient for the payment of the aggregate Merger  Consideration upon surrender
of Certificates  (as hereinafter  defined)  representing  shares of Common Stock
converted pursuant to Section 3.01(a) (such funds being hereinafter  referred to
as the "EXCHANGE FUND").

          (b) EXCHANGE  PROCEDURES.  Promptly after the Effective  Time,  Parent
shall cause the Paying Agent to mail to each holder of record (other than Parent
or any direct or indirect wholly-owned subsidiary of Parent) of a certificate or
certificates that immediately prior to the Effective Time represented  shares of
Common  Stock (the  "CERTIFICATES"),  (i) a letter of  transmittal  (which shall
specify  that  delivery  shall

                                      -8-
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be effected,  and risk of loss and title to the  Certificates  shall pass,  only
upon delivery of the Certificates to the Paying Agent and shall be in a form and
have  such  other  provisions  as  Parent  may  reasonably   specify)  and  (ii)
instructions  for use in effecting the surrender of the Certificates in exchange
for the Merger  Consideration.  Upon surrender of a Certificate for cancellation
to the Paying  Agent or to such  other  agent or agents as may be  appointed  by
Parent, together with such letter of transmittal,  duly executed, and such other
documents as may reasonably be required by the Paying Agent,  the holder of such
Certificate  shall be entitled to receive in exchange  therefor,  and the Paying
Agent  shall  pay,  the  Merger  Consideration  for each  share of Common  Stock
formerly evidenced by such Certificate,  and such Certificate shall thereupon be
canceled. If payment of the Merger Consideration is to be made to a person other
than the person in whose name the  surrendered  Certificate is registered on the
stock transfer  books of the Company,  it shall be a condition of payment to the
holder of a Certificate  that it be endorsed  properly or otherwise be in proper
form for transfer and that the person  requesting  such payment  shall have paid
all  transfer  and other  taxes  required by reason of the payment of the Merger
Consideration to a person other than the registered holder thereof or shall have
established to the satisfaction of the Surviving Corporation that such taxes are
not  applicable.  Until  surrendered as  contemplated by this Section 3.02, each
Certificate  shall be deemed at any time after the  Effective  Time to represent
only the right to receive  upon such  surrender  the Merger  Consideration  into
which the shares  theretofore  represented by such  Certificate  shall have been
converted  pursuant to Section 3.01(a).  No interest will be paid or will accrue
on the cash payable upon the surrender of any Certificate.

          (c)  TERMINATION  OF EXCHANGE  FUND.  Any portion of the Exchange Fund
which remains undistributed for six (6) months after the Effective Time shall be
delivered to Parent,  upon demand, and any holders of shares of Common Stock who
have not theretofore  complied with this Article III shall  thereafter look only
to Parent for payment of the Merger  Consideration  to which they are  entitled,
without  any  interest  thereon.  Any  portion of the  Exchange  Fund  remaining
unclaimed as of a date which is  immediately  prior to such time as such amounts
would otherwise escheat to or become property of any government entity shall, to
the extent  permitted by applicable  law, become the property of Parent free and
clear of any claims or interest of any person previously entitled thereto.

                                      -9-
<PAGE>

          (d) NO LIABILITY.  Neither Parent nor the Surviving  Corporation shall
be liable to any holder of shares of Common Stock for any amounts delivered to a
public official pursuant to any abandoned property, escheat or similar law.

          (e) WITHHOLDING RIGHTS. Each of the Surviving Corporation,  Parent and
the Paying Agent shall be entitled to deduct and withhold from the consideration
otherwise  payable  pursuant to this Agreement to any holder of shares of Common
Stock such amounts as it is required to deduct and withhold  with respect to the
making of any payment  under the Internal  Revenue Code of 1986, as amended (the
"CODE"),  or any provision of state or local tax law. To the extent that amounts
are so withheld by the Surviving Corporation, Parent or the Paying Agent, as the
case may be, such  withheld  amounts  shall be treated for all  purposes of this
Agreement  as having  been paid to the holder of the  shares of Common  Stock in
respect  of which  such  deduction  and  withholding  was made by the  Surviving
Corporation, Parent or the Paying Agent, as the case may be.

          (f) LOST CERTIFICATES. If any Certificate shall have been lost, stolen
or  destroyed,  upon the  making  of an  affidavit  of that  fact by the  person
claiming such  Certificate  to be lost,  stolen or destroyed and, if required by
Parent or the  Surviving  Corporation,  the posting by such person of a bond, in
such reasonable  amount as Parent or the Surviving  Corporation  may direct,  as
indemnity  against  any claim that may be made  against it with  respect to such
Certificate,  the Paying Agent will issue in exchange  for such lost,  stolen or
destroyed Certificate, the Merger Consideration, without any interest thereon.

          (g)  INVESTMENT  OF FUNDS.  The Paying  Agent  shall  invest the funds
constituting  the  Exchange  Fund as directed by Parent.  Any  interest or other
income resulting from such investment shall be paid to Parent.

          SECTION 3.03.  STOCK TRANSFER  BOOKS. At the Effective Time, the stock
transfer  books of the Company  shall be closed with respect to shares of Common
Stock outstanding  immediately prior to the Effective Time and there shall be no
further  registration  of transfers of such shares  thereafter on the records of
the Company.  From and after the Effective Time, the holders of shares of Common
Stock  outstanding  immediately  prior to the Effective Time shall cease to have
any rights with

                                      -10-
<PAGE>

respect to such  shares,  except as otherwise  provided in this  Agreement or by
law.

          SECTION 3.04. APPRAISAL. Notwithstanding anything in this Agreement to
the  contrary,  each share of Common  Stock issued and  outstanding  immediately
prior to the Effective  Time and held by a person (a  "DISSENTING  STOCKHOLDER")
who has neither  voted in favor of the Merger nor  consented in writing  thereto
and who complies with all the  requirements of Delaware Law concerning the right
of  stockholders to seek appraisal of their shares  ("DISSENTING  SHARES") shall
not be converted as described in this Article III but shall  instead  become the
right to  receive  such  consideration  as may be  determined  to be due to such
Dissenting  Stockholder  pursuant to Section 262 of the Delaware  Law. If, after
the Effective Time, such Dissenting  Stockholder withdraws his or her demand for
appraisal or fails to perfect or otherwise  loses his or her right of appraisal,
in any case  pursuant  to  Delaware  Law,  each  share of  Common  Stock of such
Dissenting  Stockholder shall be deemed to be converted as of the Effective Time
into the  right to  receive  the  Merger  Consideration  (without  any  interest
thereon). The Company shall give Parent prompt notice of any demands received by
the Company for appraisal of any shares of Common  Stock,  and Parent shall have
the right to participate in and direct all  negotiations  and  proceedings  with
respect to such demands.  The Company  shall not,  except with the prior written
consent of  Parent,  make any  payment  with  respect  to, or settle or offer to
settle, any such demands, or agree to do any of the foregoing.

                                   ARTICLE IV

                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company hereby  represents and warrants to Ford, Parent and FSG II
that:

          SECTION 4.01. ORGANIZATION AND QUALIFICATION.  Each of the Company and
its subsidiaries is a corporation  duly organized,  validly existing and in good
standing under the laws of the jurisdiction of its  incorporation,  except where
the failure of any  subsidiaries to be in good standing could not,  individually
or in the aggregate,  reasonably be expected to have a Company  Material Adverse
Effect (as hereinafter  defined).  Each of the Company and its  subsidiaries has
the  requisite  corporate  power and  authority  to own,  lease and  operate its

                                      -11-
<PAGE>

properties  and to carry on its business as it is now being  conducted.  Each of
the  Company  and  its  subsidiaries  has  all  necessary   licenses,   permits,
authorizations,  and  governmental  approvals  to own,  lease  and  operate  its
properties  and to carry on its  business as it is  currently  being  conducted,
except  where the failure to have such  licenses,  permits,  authorizations  and
governmental  approvals could not, individually or in the aggregate,  reasonably
be expected to have a Company Material Adverse Effect (as hereinafter  defined).
Each of the Company and its  subsidiaries is duly qualified and in good standing
to do  business  in each  jurisdiction  in  which  the  nature  of the  business
conducted  by it or the  ownership  or  leasing  of its  properties  makes  such
qualification  necessary,  other than where the failure to be so duly  qualified
and in good standing could not, individually or in the aggregate,  reasonably be
expected to have a Company Material Adverse Effect.  The term "COMPANY  MATERIAL
ADVERSE  EFFECT",  as used in this  Agreement,  means any change or effect that,
individually  or when taken together with all other such changes or effects,  is
or is  reasonably  likely to be materially  adverse to the financial  condition,
assets,  liabilities,  business,  operations  or earnings of the Company and its
subsidiaries,  taken as a whole,  other than any such  effect  arising out of or
resulting  from  general  economic  conditions  or from  changes in or generally
affecting the industry in which the Company  operates or any effect  arising out
of this  Agreement  or,  except in the case of Section  4.05,  the  transactions
contemplated hereby or the public announcement hereof.

          SECTION 4.02. RESTATED  CERTIFICATE OF INCORPORATION AND BY-LAWS.  The
Company has  heretofore  furnished  to Parent a complete and correct copy of the
Restated Certificate of Incorporation and the By-laws,  each as amended to date,
of the Company.  Such Restated  Certificate of Incorporation  and By-laws are in
full force and  effect.  None of the  Company or any of its  subsidiaries  is in
violation of any  provision  of its Restated  Certificate  of  Incorporation  or
By-laws (or equivalent organizational documents).

          SECTION  4.03.  CAPITALIZATION.  The  authorized  capital stock of the
Company  consists of  440,000,000  shares of Class A Common  Stock,  140,000,000
shares of Class B Common Stock and  40,000,000  shares of Preferred  Stock,  par
value $.01 per share (the "COMPANY PREFERRED  STOCK").  As of December 31, 2000,
(i) 40,177,324  shares of Class A Common Stock and 67,310,167  shares of Class B
Common Stock are issued and outstanding,  all of which are validly issued, fully
paid and nonassessable,  and no shares

                                      -12-
<PAGE>

of Company  Preferred Stock are issued and  outstanding,  (ii) 779,534 shares of
Class A Common Stock, no shares of Class B Common Stock and no shares of Company
Preferred  Stock are held in the  treasury of the  Company  and (iii)  6,657,776
shares of Class A Common  Stock  are  reserved  for  future  issuance  under the
Company's  Long-Term Equity  Compensation  Plan, 75,000 shares of Class A Common
Stock are reserved for future issuance under the Company's Non-employee Director
Stock Option Plan and 379,228  shares of Class A Common Stock have been reserved
for issuance under the Company's  Employee  Stock Purchase Plan.  Since December
31, 2000, except for the issuance of Common Stock resulting from the exercise of
employee stock options  outstanding on such date, the Company has not issued any
shares of capital stock or voting securities of the Company or securities of the
Company  convertible  into or exchangeable for shares of capital stock or voting
securities of the Company. Except as set forth in Section 4.03 of the disclosure
schedule  delivered by the Company to Parent  concurrently with the execution of
this Agreement (the "COMPANY DISCLOSURE SCHEDULE") or as otherwise  contemplated
by this Agreement,  there are no options, warrants or other rights,  agreements,
arrangements or commitments of any character  relating to the issued or unissued
capital  stock of the  Company  or any of its  subsidiaries  or  obligating  the
Company or any of its  subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, the Company or any of its subsidiaries. Except
as set forth in Section 4.03 of the Company  Disclosure  Schedule,  there are no
outstanding contractual obligations of the Company or any of its subsidiaries to
repurchase,  redeem or  otherwise  acquire  any shares of  capital  stock of the
Company  or any of  its  subsidiaries  or to  provide  funds  to,  or  make  any
investment (in the form of a loan,  capital  contribution  or otherwise) in, any
person.

          SECTION 4.04.  AUTHORITY  RELATIVE TO THIS AGREEMENT.  (a) The Company
has all  necessary  corporate  power and  authority  to execute and deliver this
Agreement,   to  perform  its  obligations   hereunder  and  to  consummate  the
transactions  contemplated  hereby. The execution and delivery of this Agreement
by the  Company  and  the  consummation  by  the  Company  of  the  transactions
contemplated  hereby  have been duly and  validly  authorized  by all  necessary
corporate action, and no other corporate  proceedings on the part of the Company
are  necessary to authorize  this  Agreement or to consummate  the  transactions
contemplated  hereby  (other than,  with respect to the Merger and to the extent
required by Delaware Law, the adoption of this Agreement by the

                                      -13-
<PAGE>

affirmative  vote of the  holders  entitled  to  cast a  majority  of the  votes
represented by the  outstanding  Common Stock and the filing and  recordation of
appropriate  merger  documents as required by Delaware Law).  This Agreement has
been duly and validly  executed and  delivered by the Company and,  assuming the
due  authorization,   execution  and  delivery  by  Ford,  Parent  and  FSG  II,
constitutes a legal,  valid and binding  obligation  of the Company  enforceable
against the Company in accordance with its terms.

          (b)  (i)  The  Special   Committee  has  been  duly   authorized   and
constituted,  (ii) the Special  Committee,  at a meeting thereof duly called and
held on January 16, 2001, (A) determined that this  Agreement,  the Tender Offer
and the  Merger are fair to and in the best  interests  of the  Company  and its
stockholders  (other than Parent and its  affiliates),  (B) determined that this
Agreement,  the Tender  Offer and the Merger  should be  approved  and  declared
advisable  by the  Board  and (C)  resolved  to  recommend  that  the  Company's
stockholders  accept the Tender Offer,  tender their Shares pursuant thereto and
approve and adopt this Agreement and the Merger if submitted for their approval,
and (iii) the Board,  at a meeting  thereof  duly called and held on January 16,
2001, (A)  determined  that this Agreement and the Merger are fair to and in the
best  interests of the Company and its  stockholders  (other than Parent and its
affiliates),  (B) approved and declared  advisable  this  Agreement,  the Tender
Offer  and  the  Merger  and  (C)  resolved  to  recommend  that  the  Company's
stockholders  accept the Tender Offer,  tender their Shares pursuant thereto and
approve and adopt this Agreement and the Merger if submitted for their approval.

          SECTION 4.05.  NO CONFLICT;  REQUIRED  FILINGS AND  CONSENTS.  (a) The
execution  and  delivery  of this  Agreement  by the  Company  do  not,  and the
performance  of this  Agreement by the Company  will not,  (i) conflict  with or
violate the Restated  Certificate of  Incorporation or By-laws of the Company or
equivalent  organizational  documents of any of its subsidiaries,  (ii) assuming
that all consents,  approvals,  authorizations,  and other actions  described in
Section  4.05(b) have been  obtained or made,  conflict with or violate any law,
statute,  ordinance,  rule, regulation,  order,  injunction,  judgment or decree
("LAW")  applicable  to the Company or any of its  subsidiaries  or by which any
property or asset of the Company or any of its subsidiaries is bound or affected
or (iii) result in any breach of or  constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others

                                      -14-
<PAGE>

any  rights of  termination,  amendment,  acceleration  or  cancellation  of, or
require payment under, or result in the creation of a lien or other  encumbrance
on any property or asset of the Company or any of its subsidiaries  pursuant to,
or  trigger  any  right  of first  refusal  under,  any  note,  bond,  mortgage,
indenture,  contract,  agreement,  lease,  license,  permit,  franchise or other
instrument or obligation  to which the Company or any of its  subsidiaries  is a
party  or by  which  the  Company  or any of its  subsidiaries  or any of  their
respective  properties is bound,  except, in the case of clauses (ii) and (iii),
for any thereof that could not, individually or in the aggregate,  reasonably be
expected to have a Company  Material  Adverse  Effect or could not reasonably be
expected to prevent or materially delay the consummation of the Merger.

          (b) The  execution  and  delivery of this  Agreement by the Company do
not, and the performance of this Agreement by the Company will not,  require any
consent,  approval,  authorization  or permit of, or filing with or notification
to,  any  domestic,  foreign  or  supranational   governmental,   regulatory  or
administrative  authority,  agency  or  commission  or any  court,  tribunal  or
arbitral body ("GOVERNMENTAL ENTITY"), except for (i) applicable requirements of
the Exchange  Act, the  Securities  Act of 1933, as amended  (together  with the
rules and  regulations  promulgated  thereunder,  the  "SECURITIES  ACT")  state
securities or "blue sky" laws ("BLUE SKY LAWS"),  the rules and  regulations  of
the New York Stock Exchange, Inc. (the "NYSE") and the filing and recordation of
appropriate merger documents as required by Delaware Law and (ii) such consents,
approvals,  authorizations,  permits,  filings or  notifications  the failure of
which to  receive  or to  make,  could  not,  individually  or in the  aggregate
reasonably be expected to have a Company  Material  Adverse  Effect or could not
reasonably be expected to prevent or materially  delay the  consummation  of the
transactions   contemplated  hereby.

          SECTION 4.06. SEC FILINGS;  FINANCIAL STATEMENTS.  (a) The Company has
filed all forms,  reports and documents  required to be filed by it with the SEC
since December 31, 1999 (such forms,  reports and other documents being referred
to herein, collectively,  as the "COMPANY SEC REPORTS"). The Company SEC Reports
(i) were prepared in accordance with the  requirements of the Securities Act and
the Exchange Act, as the case may be, (ii) did not, at the time they were filed,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements  made
therein,  in the light of the  circumstances  under

                                      -15-
<PAGE>

which they were made, not  misleading,  and (iii) were filed in a timely manner.
No  subsidiary  of the Company  was or is  required to file any form,  report or
other document with the SEC.

          (b) Since  September 30, 2000 and through the date of this  Agreement,
there has not been any Company  Material  Adverse  Effect,  it being  agreed for
purposes of this  representation that "Company Material Adverse Effect" shall be
limited to the effect, if any, on the Company's  financial  statements as of and
for the year ended  December  31, 2000.

          SECTION  4.07.  OPTIONS  AND  EMPLOYMENT  CONTRACTS.   (a)  Except  as
contemplated hereby, the Company has taken no action with respect to any options
to purchase shares of stock of the Company  ("COMPANY STOCK OPTIONS") that would
result in an  acceleration of vesting of the Company Stock Options in connection
with the execution  and delivery of this  Agreement or the  consummation  of any
transactions  contemplated  hereby or  otherwise.

          (b) Neither the execution,  delivery or performance of this Agreement,
nor the consummation of the Merger or any of the other transactions contemplated
by this  Agreement,  will result in any bonus,  golden  parachute,  severance or
other payment or obligation to any current or former employee or director of the
Company  (whether or not under any Plan),  or  materially  increase the benefits
payable or provided under any Plan, or result in any acceleration of the time of
payment  or  vesting  of any such  benefits.  The term  "Plan,"  as used in this
Agreement,  means (i) all employee  benefit plans (within the meaning of Section
3(3)  of the  Employee  Retirement  Income  Security  Act of  1974,  as  amended
("ERISA"))  and all bonus,  stock  option,  stock  purchase,  restricted  stock,
incentive,   deferred   compensation,   retiree   medical  or  life   insurance,
supplemental   retirement,   severance  or  other  benefit  plans,  programs  or
arrangements, and all employment,  termination,  severance or other contracts or
agreements  to which  the  Company  or any  trade or  business  (whether  or not
incorporated)  under common control with the Company under Sections 414(b), (c),
(m) or (o) of the Code (the  "CONTROLLED  GROUP") is a party,  with  respect to,
which  the  Company  or any  Controlled  Group has any  obligation  or which are
maintained,  contributed to or sponsored by the Company or any Controlled  Group
for the  benefit of any current or former  employee,  officer or director of the
Company or any  Controlled  Group and (ii) each employee  benefit plan for which
the Company or any  Controlled  Group could incur any  liability  or  contingent

                                      -16-
<PAGE>

liability  not  otherwise  provided for in the  Company's  financial  statements
contained in the Company SEC Reports under  Section 4069 of ERISA,  in the event
such plan were  terminated,  or under Section 4212(c) of ERISA, or in respect of
which the Company or any  Controlled  Group  remains  secondarily  liable  under
Section 4204 of ERISA.

          SECTION 4.08. BROKERS.  No broker,  finder or investment banker (other
than  Lazard LLC as set forth in Section  4.09) is  entitled  to any  brokerage,
finder's or other fee or commission  in connection  with the Tender Offer or the
Merger  based upon  arrangements  made by or on behalf of the  Company.

          SECTION 4.09. OPINION OF FINANCIAL ADVISOR.  The Special Committee has
received the written  opinion of Lazard LLC dated the date of this  Agreement to
the effect  that,  as of the date of this  Agreement,  the  consideration  to be
received  by  the  stockholders  of the  Company  (other  than  Parent  and  its
affiliates)  pursuant to each of the Tender  Offer and the Merger is fair to the
stockholders  of the  Company  (other  than  Parent and its  affiliates)  from a
financial point of view and such opinion has not been withdrawn.  A copy of such
opinion has been  delivered to Parent and FSG II.

          SECTION 4.10.  STATE TAKEOVER  STATUTES.  Neither the  restrictions on
business  combinations  contained  in Section 203 of the  Delaware  Law, nor any
other state takeover  statute or similar statute or  regulations,  will apply to
the  Tender  Offer,  the  Merger,  this  Agreement  or any  of the  transactions
contemplated  hereby,  or to any of the parties hereto or their  affiliates as a
result of such transactions.

                                    ARTICLE V

           REPRESENTATIONS AND WARRANTIES OF FORD, PARENT AND FSG II

          Ford,  Parent and FSG II hereby  represent  and warrant to the Company
that:

          SECTION 5.01. ORGANIZATION AND QUALIFICATION. Each of Ford, Parent and
FSG II is a corporation  duly organized,  validly  existing and in good standing
under the laws of the State of Delaware and has the  requisite  corporate  power
and  authority  to own,  lease and  operate its  properties  and to carry on its
business as it is now being conducted. Each of Ford and Parent is duly qualified
and in good standing to do business in each

                                      -17-
<PAGE>

jurisdiction  in  which  the  nature  of  the  business  conducted  by it or the
ownership or leasing of its properties makes such qualification necessary, other
than where the failure to be so duly  qualified and in good standing  could not,
individually  or  in  the  aggregate,  reasonably  be  expected  to  prevent  or
materially  delay the  consummation  of the Tender Offer or the Merger.  Each of
Ford,  Parent and FSG II has  heretofore  furnished to the Company  complete and
correct copies of its certificate of incorporation and by-laws,  each as amended
to the date of this Agreement.

          SECTION 5.02. AUTHORITY RELATIVE TO THIS AGREEMENT.  (a) Each of Ford,
Parent and FSG II has all necessary corporate power and authority to execute and
deliver this Agreement,  to perform its obligations  hereunder and to consummate
the Tender Offer, the Merger and the other transactions contemplated hereby. The
execution  and  delivery of this  Agreement  by Ford,  Parent and FSG II and the
consummation by Ford, Parent and FSG II of the transactions  contemplated hereby
have been duly and validly authorized by all necessary  corporate action, and no
other corporate  proceedings on the part of Ford, Parent or FSG II are necessary
to authorize  this  Agreement or to  consummate  the  transactions  contemplated
hereby (other than,  with respect to the Merger,  the execution of a stockholder
written consent by Parent as sole  stockholder of FSG, to the extent required by
Delaware Law, and the filing and recordation of appropriate  merger documents as
required by Delaware Law). This Agreement has been duly and validly executed and
delivered  by  Ford,  Parent  and FSG II and,  assuming  the due  authorization,
execution and delivery by the Company,  constitutes  a legal,  valid and binding
obligation  of Ford,  Parent and FSG II  enforceable  against them in accordance
with its terms.

          (b) The board of  directors of FSG II, by written  consent  adopted on
January 16, 2001, (i) determined that this  Agreement,  the Tender Offer and the
Merger are fair to and in the best interests of FSG II and its  stockholder  and
(ii) approved and declared  advisable this  Agreement,  the Tender Offer and the
Merger.

          SECTION 5.03.  NO CONFLICT;  REQUIRED  FILINGS AND  CONSENTS.  (a) The
execution and delivery of this Agreement by Ford,  Parent and FSG II do not, and
the  performance  of this  Agreement  by Ford,  Parent and FSG II will not,  (i)
conflict with or violate the respective  certificate of incorporation or by-laws
of Ford,  Parent  or FSG II,  or (ii)  assuming  that all

                                      -18-
<PAGE>

consents,  approvals,  authorizations,  and other  actions  described in Section
5.03(b) have been obtained or made,  conflict with or violate any law applicable
to Ford,  Parent or FSG II or by which any property or asset of Ford,  Parent or
FSG II is bound or affected  or (iii)  result in any breach of or  constitute  a
default  (or an event that with  notice or lapse of time or both would  become a
default)  under,  or  give to  others  any  rights  of  termination,  amendment,
acceleration  or  cancellation  of or require  payment  under,  or result in the
creation of a lien or other  encumbrance  on any  property or asset of Parent or
FSG II or any of its  subsidiaries  pursuant  to, or trigger  any right of first
refusal under, any note, bond, mortgage, indenture,  contract, agreement, lease,
license,  permit, franchise or other instrument or obligation to which Parent or
FSG II or any of its subsidiaries is a party or by which Parent or FSG II or any
of their respective properties is bound, except, in the case of clauses (ii) and
(iii),  for any  thereof  that  could  not,  individually  or in the  aggregate,
reasonably be expected to prevent or materially  delay the  consummation  of the
Tender Offer or the Merger.

          (b) The execution and delivery of this  Agreement by Ford,  Parent and
FSG II do not, and the performance of this Agreement by Ford,  Parent and FSG II
will not,  require any consent,  approval,  authorization or permit of or filing
with or  notification  to, any  Governmental  Entity,  except (i) for applicable
requirements  of the Exchange Act, the Securities  Act, Blue Sky Laws, the NYSE,
and the filing and  recordation of appropriate  merger  documents as required by
Delaware  Law and (ii)  for  such  other  consents,  approvals,  authorizations,
permits,  filings  or  notifications,  which if not  obtained  or made would not
reasonably be expected to prevent or materially  delay the  consummation  of the
Tender Offer or the Merger.

          SECTION 5.04. FINANCING. Either Ford or Parent has, or will have prior
to the  expiration of the Tender Offer,  sufficient  funds  available to pay the
aggregate  consideration  payable as a result of the  consummation of the Tender
Offer, the Merger and other transactions contemplated hereby and to pay all fees
and expenses  incurred by it related to the  transactions  contemplated  by this
Agreement.

          SECTION 5.05.  OPERATIONS OF FSG II. FSG II has been formed solely for
the purpose of engaging in the  transactions  contemplated by this Agreement and
prior to the Effective  Time will have engaged in no other  business  activities
and will have

                                      -19-
<PAGE>

incurred no liabilities or obligations other than as contemplated herein.

                                   ARTICLE VI

                     CONDUCT OF BUSINESS PENDING THE MERGER

          SECTION 6.01.  CONDUCT OF BUSINESS BY THE COMPANY  PENDING THE MERGER.
(a) The Company hereby  covenants and agrees that,  prior to the Effective Time,
unless  otherwise  expressly  contemplated  by this Agreement or consented to in
writing  by  Ford,  Parent  or FSG II,  the  Company  will and  will  cause  its
subsidiaries  to (i)  operate  its  business  in the usual and  ordinary  course
consistent with past practices, (ii) use its reasonable best efforts to preserve
substantially  intact  its  business  organization,   maintain  its  rights  and
franchises,  retain the services of its  respective  principal  officers and key
employees  and  maintain  its  relationships   with  its  respective   principal
customers,  suppliers and other persons with which it or any of its subsidiaries
has  significant  business  relations,  (iii) use its reasonable best efforts to
maintain and keep its  properties  and assets in as good repair and condition as
at  present,  ordinary  wear and tear  excepted,  and (iv) take no  action  with
respect to the Company  Stock  Options that would result in an  acceleration  of
vesting of the  Company  Stock  Options in  connection  with the  execution  and
delivery of this Agreement or the consummation of any transactions  contemplated
hereby or otherwise.

          (b) Except as expressly  contemplated  by this Agreement and except as
set forth in Section 6.01(b) of the Company  Disclosure  Schedule,  or otherwise
consented  to in writing by Ford,  Parent or FSG II, from the date hereof  until
the  Effective  Time,  the  Company  will not do, and will not permit any of its
subsidiaries to do, any of the following:

               (i)  (A)  increase  the  compensation  payable  to or  to  become
                    payable to any director or executive officer of the Company,
                    except for increases in salary,  wages or bonuses payable or
                    to become  payable in the  ordinary  course of business  and
                    consistent  with past  practice;  (B) grant any severance or
                    termination  pay (other than pursuant to existing  severance
                    arrangements  or  policies  as in effect on the date of this
                    Agreement)

                                         -20-
<PAGE>

                    to, or enter  into any  employment  or  severance  agreement
                    with, any director or executive  officer of the Company;  or
                    (C) adopt,  amend or terminate any employee  benefit plan or
                    arrangement  affecting any director or executive  officer of
                    the Company, except as may be required by applicable law;

               (ii) declare  or  pay  any   dividend   on,  or  make  any  other
                    distribution in respect of outstanding shares of its capital
                    stock except for regular quarterly  dividends payable on the
                    Common  Stock in an amount not to exceed  $0.05 per quarter,
                    provided that the foregoing shall not prohibit  dividends or
                    distributions   between  or  among  the   Company   and  its
                    subsidiaries;

               (iii)(A) redeem,  repurchase or otherwise reacquire any shares of
                    its  capital  stock  or  any   securities   or   obligations
                    convertible  into or  exchangeable  for any shares of its or
                    its   subsidiaries'    capital   stock;   (B)   effect   any
                    reorganization or  recapitalization  of the Company;  or (C)
                    split,  combine or reclassify  any of the Company's  capital
                    stock or issue or  authorize  or propose the issuance of any
                    other   securities   in   respect  of  in  lieu  of,  or  in
                    substitution for, shares of its capital stock;

               (iv) (A) issue,  deliver,  award,  grant or sell, or authorize or
                    propose  the  issuance,   delivery,  award,  grant  or  sale
                    (including  the  grant  of any  security  interest,  pledge,
                    mortgage,  lien, charge,  adverse claim of ownership or use,
                    or other encumbrance of any kind) of, any shares of stock of
                    the  Company  (including  shares  held  in  treasury),   any
                    securities  convertible  into or exercisable or exchangeable
                    for any such shares,  or any rights,  warrants or options to
                    acquire any such shares  (except for the  issuance of shares
                    upon the exercise of

                                      -21-
<PAGE>

                    Company  Stock  Options  outstanding  on the  date  of  this
                    Agreement);  or (B) amend or  otherwise  modify the terms of
                    any such  rights,  warrants  or options  the effect of which
                    shall be to make such terms more  favorable  to the  holders
                    thereof;

               (v)  acquire or agree to  acquire,  by  merging or  consolidating
                    with, by  purchasing  an equity  interest in or a portion of
                    the assets of or by any other  manner,  any  business or any
                    corporation,  partnership,  association  or  other  business
                    organization  or division  thereof or  otherwise  acquire or
                    agree to acquire any assets of any other person  (other than
                    the  purchase of assets in the  ordinary  course of business
                    and  consistent  with  past   practice),   except  that  the
                    foregoing  restrictions shall not apply to any action by the
                    Company  that would not  require  the  approval of the Board
                    under the Board  policy set forth in Section  6.01(b) of the
                    Company Disclosure Schedule;

               (vi) make or commit to make any capital expenditures, except that
                    the foregoing  restrictions shall not apply to any action by
                    the Company that would not require the approval of the Board
                    under the Board  policy set forth in Section  6.01(b) of the
                    Company Disclosure Schedule;

               (vii)sell, lease, exchange,  mortgage,  pledge, transfer, license
                    or  otherwise  dispose  of or  encumber,  or  agree to sell,
                    lease,  exchange,  mortgage,  pledge,  transfer,  license or
                    otherwise dispose of or encumber, any of its material assets
                    or any material assets of any of its subsidiaries,  measured
                    on a consolidated basis with the Company, or any substantial
                    right therein;

             (viii) propose  or  adopt  any   amendments   to  its   Restated
                    Certificate of Incorporation or its By-laws;

                                      -22-
<PAGE>

               (ix) (A) change any of its  methods  of  accounting  in effect at
                    December 31, 1999, (B) write down in any material amount the
                    value of the intangible assets of the Company or (C) make or
                    rescind any express or deemed  election  relating to federal
                    income taxes, settle or compromise any claim,  action, suit,
                    litigation, proceeding, arbitration, investigation, audit or
                    controversy  relating to federal income taxes, or change any
                    of its methods of reporting income or deductions for federal
                    income tax purposes from those  employed in the  preparation
                    of the  federal  income tax  returns  for the  taxable  year
                    ending  December  31,  1999,  except as may be  required  by
                    applicable law or generally accepted accounting principles;

               (x)  incur any  obligation for borrowed money other than purchase
                    money  indebtedness,  whether  or not  evidenced  by a note,
                    bond,  debenture  or  similar  instrument,   except  in  the
                    ordinary course of business, or prepay, before the scheduled
                    maturity thereof, any of its long-term debt; or

               (xi) agree in writing or otherwise to do any of the foregoing.

          SECTION 6.02.  NOTIFICATION OF CERTAIN MATTERS.  (a) The Company shall
give prompt notice to Parent and FSG II of (i) the  occurrence or  nonoccurrence
of any event the occurrence or  nonoccurrence  of which would be likely to cause
(A) any  representation or warranty  contained in this Agreement to be untrue or
inaccurate  or (B)  any  covenant,  condition  or  agreement  contained  in this
Agreement  not to be  complied  with or  satisfied  and (ii) any  failure of the
Company to comply with or satisfy any  covenant,  condition  or  agreement to be
complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery
of any notice pursuant to this Section 6.02 shall not limit or otherwise  affect
the remedies available hereunder to Parent and FSG II.

          (b) The Company shall give prompt  written notice to Parent and FSG II
of any proposal,  offer or other  communication  from any person (i) relating to
any acquisition or purchase of

                                      -23-
<PAGE>

all or  substantially  all of the  capital  stock of the  Company  or any of its
subsidiaries or all or substantially  all of the assets of the Company or any of
its subsidiaries,  (ii) to enter into any business  combination with the Company
or any of its  subsidiaries  or  (iii) to enter  into  any  other  extraordinary
business  transaction  involving or otherwise  relating to the Company or any of
its  subsidiaries.  The Company  shall notify  Parent and FSG II promptly if any
such  proposal or offer,  or any inquiry or other  contact  with any person with
respect  thereto,  is made and shall,  in any such  notice to Parent and FSG II,
indicate in reasonable  detail the identity of the person making such  proposal,
offer, inquiry or contact and the terms and conditions of such proposal,  offer,
inquiry or other contact.

                                  ARTICLE VII

                             ADDITIONAL AGREEMENTS

          SECTION 7.01. MERGER WITHOUT STOCKHOLDERS' MEETING. If, as a result of
the  purchase of Shares  pursuant to the Tender  Offer and  compliance  with the
terms of this  Section  7.01,  Parent owns in the  aggregate at least 90% of the
Shares  outstanding upon completion of the Tender Offer and continues to hold at
least 90% of the outstanding  Class B Common Stock,  the parties hereto agree to
take all  necessary  and  appropriate  action  to cause  the  Merger  to  become
effective  as soon as  practicable  after  the  satisfaction  or  waiver  of the
conditions  to the  Merger  set forth in  Article  VIII  without  a  meeting  of
stockholders  of the  Company,  in  accordance  with  Section 253 of the DGCL (a
"SHORT-FORM  MERGER").  In  connection  therewith,  if following the purchase of
Shares pursuant to the Tender Offer,  Parent owns in the aggregate less than 90%
of the Shares  outstanding,  Parent  agrees to convert  such number of shares of
Class B Common Stock into Class A Common Stock to the extent that,  after giving
effect to such conversion, Ford and Parent would own in the aggregate the number
of Shares necessary to effect a Short-Form Merger.

               SECTION  7.02.  STOCKHOLDER  APPROVAL  REQUIRED.  If  required by
applicable  law in order to  consummate  the  Merger:  (a) The  Company  (acting
through its Board in accordance with its Restated  Certificate of  Incorporation
and By-laws  and acting as soon as  practicable  following  the  acceptance  for
payment and  purchase of Shares by Parent  pursuant to the Tender  Offer)  shall
take all action  necessary  to seek  approval of the Merger and adoption of this
Agreement  at a duly  called  and  noticed  meeting

                                      -24-
<PAGE>

of the  stockholders of the Company,  which meeting shall be held as promptly as
practicable  following the  consummation of the Tender Offer and the preparation
of the  Information  Statement  (as defined in Section  7.02(b)),  or by written
consent of the  stockholders  of the  Company in lieu of such a meeting.  Parent
shall vote or grant its consent,  as the case may be, with respect to all shares
of Common  Stock owned by it, to the approval of the Merger and adoption of this
Agreement.

          (b) As promptly as  practicable  after the  acceptance for payment and
purchase of Shares by Parent pursuant to the Tender Offer, (i) Ford, Parent, FSG
II and the Company shall cooperate in preparing,  and the Company shall cause to
be filed with the SEC, a proxy  statement,  consent  solicitation  statement  or
information  statement that meets the  requirements  of the Exchange Act and the
regulations promulgated thereunder,  including without limitation, Schedules 14C
and 13E-3  (together with any amendments  thereof or  supplements  thereto,  the
"INFORMATION  STATEMENT") to seek the approval and adoption of this Agreement by
the stockholders of the Company.  Each of Ford,  Parent,  FSG II and the Company
shall furnish all  information  as the other parties may  reasonably  request in
connection with such actions and the preparation of the Information Statement.

          SECTION  7.03.  COVENANTS  RELATING TO  INFORMATION  STATEMENT.  If an
Information Statement is required pursuant to Section 7.02 hereof:

          (a) The Information Statement shall include the recommendations of the
Special  Committee and the Board of Directors of the Company to the stockholders
of the Company to approve and adopt this Agreement;  PROVIDED, HOWEVER, that the
Special  Committee  and the Board of  Directors  of the Company may, at any time
prior to the Effective Time, withdraw,  modify or change any such recommendation
to the  extent  that the  Special  Committee  or the Board of  Directors  of the
Company  determines in good faith,  after  consultation  with independent  legal
counsel (who may be the Company's  regularly  engaged legal counsel),  that such
withdrawal,  modification  or  change  of  recommendation  is  required  by  its
fiduciary duties to the Company's  stockholders  under applicable law;  PROVIDED
FURTHER  that  nothing  in this  Section  7.03(a)  shall  affect  the  Company's
obligation to solicit the approval of the Merger and adoption of this  Agreement
by the  stockholders of the Company as contemplated by Section 7.02  (regardless
of whether the recommendation of the Special

                                      -25-
<PAGE>

Committee or the Board of Directors  of the Company  shall have been  withdrawn,
modified or changed).

          (b) No amendment or supplement to the  Information  Statement  will be
made by the  Company,  Ford,  Parent or FSG II without the approval of the other
parties  (such  approval not to be  unreasonably  withheld or delayed).  Each of
Ford,  Parent,  FSG II and the Company will advise the other,  promptly after it
receives  notice  thereof,  of any  request  by the  SEC  for  amendment  of the
Information  Statement or comments thereon and responses  thereto or requests by
the SEC for additional information.

          (c) The  information  supplied  by the Company  for  inclusion  in the
Information  Statement  or any  other  documents  to be  filed  with  the SEC in
connection with the Merger shall not, at the time the  Information  Statement is
first  mailed to the  stockholders  of the  Company  or at the  Effective  Time,
contain any untrue  statement  of a material  fact or fail to state any material
fact required to be stated  therein or necessary in order to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.  If,  at any  time  prior  to  the  Effective  Time,  any  event  or
circumstance  relating  to the  Company  or any of its  subsidiaries,  or  their
respective  officers or directors,  should be  discovered by the Company  which,
pursuant to the  Securities  Act or the Exchange Act,  should be set forth in an
amendment  or a  supplement  to the  Information  Statement,  the Company  shall
promptly  inform Parent and FSG II thereof.  All  documents  that the Company is
responsible for filing with the SEC in connection with the Merger will comply as
to form and substance in all material respects with the applicable  requirements
of the Securities Act and the Exchange Act.

          (d) The information  supplied by Ford, Parent and FSG II for inclusion
in the Information  Statement or any other documents to be filed with the SEC in
connection with the Merger shall not, at the time the  Information  Statement is
first  mailed to the  stockholders  of the  Company  or at the  Effective  Time,
contain any untrue  statement  of a material  fact or fail to state any material
fact required to be stated  therein or necessary in order to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.  If,  at any  time  prior  to  the  Effective  Time,  any  event  or
circumstance relating to Ford, Parent or FSG II, or their respective officers or
directors, should be discovered by Ford, Parent or FSG II which, pursuant to the
Securities  Act or the  Exchange  Act,

                                      -26-
<PAGE>

should  be  set  forth  in an  amendment  or a  supplement  to  the  Information
Statement, Ford, Parent or FSG II shall promptly inform the Company thereof. All
documents that Ford,  Parent or FSG II is responsible for filing with the SEC in
connection  with the Merger will comply as to form and substance in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act.

          SECTION 7.04. ACCESS TO INFORMATION; CONFIDENTIALITY. (a) As permitted
by applicable  law, from the date of this  Agreement to the Effective  Time, the
Company  shall,  and  shall  use its best  efforts  to cause  its  subsidiaries,
officers, directors and employees to: (i) provide to Ford, Parent and FSG II and
their officers, directors, employees,  accountants,  consultants, legal counsel,
agents and other  representatives  (collectively,  "REPRESENTATIVES")  access at
reasonable  times  upon  prior  notice  to  its  officers,   employees,  agents,
properties,  offices and other  facilities and to its books and records and (ii)
furnish   promptly  such  information   concerning  its  business,   properties,
contracts,  assets, liabilities and personnel as Ford, Parent or FSG II or their
Representatives may reasonably request.

          (b) Each of Ford,  Parent and FSG II agrees  to,  and shall  cause its
Representatives to: (i) treat and hold as confidential all information  relating
to the Company and its subsidiaries,  (ii) in the event that Ford, Parent or FSG
II or any of their  Representatives  becomes  legally  compelled to disclose any
such  information,  provide  the  Company  with  prompt  written  notice of such
requirement  so that the Company may seek a protective  order or other remedy or
waive  compliance  with this  Section  7.04,  and  (iii) in the event  that such
protective  order  or  other  remedy  is not  obtained,  or the  Company  waives
compliance   with  this  Section  7.04,   furnish  only  that  portion  of  such
confidential  information  which is legally required to be provided and exercise
its best  efforts  to obtain  assurances  that  confidential  treatment  will be
accorded such information, PROVIDED, HOWEVER, that this sentence shall not apply
to any information  that, at the time of disclosure,  is available  publicly and
was not disclosed in breach of this Agreement. The parties agree and acknowledge
that remedies at law for any breach of their obligations under this Section 7.04
are  inadequate and that in addition  thereto  parties shall be entitled to seek
equitable relief, including injunction and specific performance, in the event of
any such breach.

                                      -27-
<PAGE>

          (c) No  investigation  pursuant to this  Section 7.04 shall affect any
representation  or  warranty  in  this  Agreement  of any  party  hereto  or any
condition to the obligations of the parties hereto.

          SECTION 7.05. DIRECTORS' AND OFFICERS'  INDEMNIFICATION AND INSURANCE.
(a) The Restated Certificate of Incorporation of the Surviving Corporation shall
contain the provisions with respect to indemnification that are set forth in the
Restated  Certificate  of  Incorporation  of the  Company  on the  date  of this
Agreement, which provisions shall not be amended, repealed or otherwise modified
for a period of six years  from the  Effective  Time in any  manner  that  would
affect  adversely the rights  thereunder of  individuals  who at or prior to the
Effective  Time were  directors or officers of the Company in respect of actions
or  omissions  occurring  at  or  prior  to  the  Effective  Time,  unless  such
modification shall be required by law.

          (b) From and after  the  Effective  Time,  the  Surviving  Corporation
shall, to the fullest extent  permitted  under Delaware Law,  indemnify and hold
harmless,  each present and former  director and officer of the Company and each
subsidiary of the Company and each such  individual who served at the request of
the Company or any  subsidiary of the Company as a director,  officer,  trustee,
partner, fiduciary, employee or agent of another corporation, partnership, joint
venture,   trust,   pension  or  other  employee   benefit  plan  or  enterprise
(collectively,  the  "INDEMNIFIED  PARTIES")  against  all  costs  and  expenses
(including  attorneys'  fees),   judgments,   fines,  losses,  claims,  damages,
liabilities and settlement  amounts paid in connection  with any claim,  action,
suit, proceeding or investigation (whether arising before or after the Effective
Time) whether civil,  administrative  or  investigative,  based on the fact that
such person is or was a director or officer of the Company and arising out of or
pertaining to any action or omission  occurring at or before the Effective  Time
(including the  transactions  contemplated by this Agreement) (and shall pay any
expenses in advance of the final  disposition  of such action or  proceeding  to
each Indemnified  Party to the fullest extent permitted under Delaware Law, upon
receipt  from  the  Indemnified  Party  to whom  expenses  are  advanced  of any
undertaking to repay such advances required under Delaware Law). In the event of
any such claim,  action,  suit,  proceeding or investigation,  (i) the Surviving
Corporation  shall pay the reasonable  fees and expenses of counsel  selected by
the Indemnified Parties,  which counsel shall be reasonably  satisfactory to the
Surviving Corporation,

                                      -28-
<PAGE>

promptly  after  statements   therefor  are  received  and  (ii)  the  Surviving
Corporation  shall  cooperate  in the  defense  of any  such  matter;  PROVIDED,
HOWEVER,  that the Surviving  Corporation shall not be liable for any settlement
effected  without its written  consent (which consent shall not be  unreasonably
withheld);  and PROVIDED  FURTHER that the  Surviving  Corporation  shall not be
obligated  pursuant to this Section 7.05(b) to pay the fees and expenses of more
than one counsel  other than local  counsel for all  Indemnified  Parties in any
single action unless a conflict of interest shall be caused thereby.

          (c) Ford shall  provide or  maintain  in effect for six years from the
Effective  Time  directors'  and officers'  liability  insurance  covering those
persons who are covered by the  directors'  and  officers'  liability  insurance
policy  currently  provided for  directors  and officers of the Company on terms
comparable to such existing insurance coverage; PROVIDED, HOWEVER, that Ford has
no  obligation  to provide or maintain  levels of coverage in excess of those to
which directors and officers of Ford are at the time entitled.

          (d) If the Surviving  Corporation  or any of its successors or assigns
(i)  consolidates  with or  merges  into any other  person  and shall not be the
continuing or surviving  corporation or entity of such  consolidation or merger,
or (ii)  transfers or conveys all or  substantially  all of its  properties  and
assets to any  person,  then,  and in each such case,  to the extent  necessary,
proper  provision  shall  be made so that  the  successors  and  assigns  of the
Surviving  Corporation,  as the case may be, shall assume the obligations of the
Surviving Corporation set forth in this Section 7.05.

          (e) The rights of each Indemnified Party under this Section 7.05 shall
be in  addition  to any rights  such  person may have under the  certificate  of
incorporation  or  bylaws  of the  Company  or any  of its  subsidiaries,  under
Delaware  Law or any  other  applicable  laws  or  under  any  agreement  of any
Indemnified  Party with the  Company or any of its  subsidiaries.  These  rights
shall survive  consummation of the Merger and are intended to benefit, and shall
be enforceable by, each Indemnified Party.

          SECTION 7.06. FURTHER ACTION;  CONSENTS;  FILINGS.  Upon the terms and
subject to the  conditions  hereof,  each of the  parties  hereto  shall use its
reasonable  best  efforts  to (a) take,  or cause to be taken,  all  appropriate
action and do, or cause to be done,  all things  necessary,  proper or advisable

                                      -29-
<PAGE>

under  applicable  Law or otherwise to consummate  and make effective the Tender
Offer and the Merger and the other transactions  contemplated by this Agreement,
(b) obtain from Governmental Entities any consents,  licenses, permits, waivers,
approvals,  authorizations  or orders  required  to be obtained or made by Ford,
Parent,  FSG II or the Company or any of their  subsidiaries  in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the  Tender  Offer and the  Merger and (c) make all  necessary  filings,  and
thereafter make any other required submissions,  with respect to this Agreement,
the Tender Offer and the Merger and the other transactions  contemplated by this
Agreement  that are required  under the Exchange Act and the  Securities Act and
any other applicable  federal or state securities laws, and any other applicable
Law. The parties hereto shall  cooperate with each other in connection  with the
making of all such filings,  including by providing copies of all such documents
to the nonfiling  party and its advisors  prior to filing and, if requested,  by
accepting all reasonable additions, deletions or changes suggested in connection
therewith.

          SECTION  7.07.  PUBLIC  ANNOUNCEMENTS.  Ford,  Parent,  FSG II and the
Company  shall  consult  with each other  before  issuing  any press  release or
otherwise  making any public  statements  with  respect to this  Agreement,  the
Tender  Offer or the Merger  and shall not issue any such press  release or make
any such public statement  without the prior consent of the other parties hereto
(which consent shall not be unreasonably withheld or delayed),  except as may be
required by Law or any listing  agreement with the NYSE to which Ford, Parent or
the  Company is a party.  The  parties  have agreed on the text of a joint press
release by which announcement of the execution of this Agreement will be made.

          SECTION 7.08. REASONABLE BEST EFFORTS AND FURTHER ASSURANCES.  Subject
to the terms and conditions hereof,  each of the parties to this Agreement shall
use its reasonable best efforts to effect the transactions  contemplated  hereby
and to fulfill and cause to be fulfilled the  conditions to the Tender Offer and
the Merger under this  Agreement.  Subject to the terms and  conditions  hereof,
each party hereto,  at the  reasonable  request of another  party hereto,  shall
execute and deliver  such other  instruments  and do and perform such other acts
and  things as may be  necessary  or  desirable  for  effecting  completely  the
consummation of this Agreement and the transactions contemplated hereby.

                                      -30-
<PAGE>

                                  ARTICLE VIII

                            CONDITIONS TO THE MERGER

          SECTION  8.01.  CONDITIONS  TO THE  OBLIGATIONS  OF  EACH  PARTY.  The
obligations of Ford, Parent, FSG II and the Company to consummate the Merger are
subject to the  satisfaction  or waiver  (where  permissible)  of the  following
conditions:

               (a)  STOCKHOLDER  APPROVAL.  If required by  Delaware  law,  this
          Agreement  shall  have been  approved  and  adopted  by the  requisite
          affirmative vote of the stockholders of the Company in accordance with
          Delaware Law and the Company's Restated Certificate of Incorporation.

               (b) NO ORDER. No Governmental Entity shall have enacted,  issued,
          promulgated,  enforced  or entered any Law,  executive  order or award
          (whether  temporary,  preliminary  or permanent)  (an "ORDER") that is
          then in effect  and has the  effect of making  the  Merger  illegal or
          otherwise prohibiting consummation of the Merger.

               (c)  PURCHASE  OF  SHARES.  Parent  shall have  purchased  Shares
          pursuant to the Tender  Offer,  except where the reason for failure to
          purchase Shares pursuant to the Tender Offer is the absence of tenders
          of Shares.

                                   ARTICLE IX

                        TERMINATION, AMENDMENT AND WAIVER

          SECTION 9.01.  TERMINATION.  This  Agreement may be terminated and the
Tender Offer and the Merger may be abandoned at any time prior to the  Effective
Time,  notwithstanding  any requisite approval and adoption of this Agreement by
the stockholders of the Company, as follows:

               (a) by mutual  written  consent duly  authorized by the Boards of
          Directors of each of Parent, FSG II and the Company;

               (b) by Parent,  FSG II or the Company if any Governmental  Entity
          shall have enacted, issued, promulgated, enforced or entered any Order
          or  taken  any

                                      -31-
<PAGE>

          other  action  restraining,  enjoining or  otherwise  prohibiting  the
          consummation of the Tender Offer or the Merger and such Order or other
          action shall have become final and nonappealable;

               (c) by  Parent  or FSG II if  the  Special  Committee  withdraws,
          modifies or changes its  recommendation of this Agreement,  the Tender
          Offer or the  Merger in a manner  adverse to Parent or FSG II or shall
          have resolved to do any of the foregoing;

                    (d) prior to the  purchase of Shares  pursuant to the Tender
          Offer,  by  Parent  or FSG II  upon a  breach  of any  representation,
          warranty,  covenant or  agreement on the part of the Company set forth
          in this Agreement, or if any representation or warranty of the Company
          shall have become  untrue  ("TERMINATING  COMPANY  BREACH");  PROVIDED
          that,  if such  Terminating  Company  Breach is curable by the Company
          through the exercise of its reasonable  efforts and for as long as the
          Company continues to exercise such reasonable efforts,  Parent and FSG
          II may not terminate this Agreement under this Section 9.01(d); or

               (e) prior to the purchase of Shares pursuant to the Tender Offer,
          by the Company upon a breach of any representation, warranty, covenant
          or  agreement  on the  part  of  Parent  or FSG II set  forth  in this
          Agreement,  or if any  representation  or warranty of Parent or FSG II
          shall have become untrue ("TERMINATING PARENT BREACH"); PROVIDED that,
          if such  Terminating  Parent  Breach is curable by Parent or FSG II as
          the case may be,  through the exercise of its  reasonable  efforts and
          for as long as  Parent  or FSG II,  as the case may be,  continues  to
          exercise such reasonable  efforts,  the Company may not terminate this
          Agreement under this Section 9.01(e).

               (f) by the Company (as agreed to by the Special Committee) if due
          to an  occurrence  or  circumstance,  not  involving  a breach  by the
          Company of its obligations hereunder,  which would result in a failure
          to  satisfy  any of the  conditions  set  forth in  Annex A hereto  or
          otherwise,  Parent  shall have  failed to  commence  the Tender  Offer
          within  fifteen  business days  following the date of this  Agreement,
          terminated  the Tender Offer or  permitted  the Tender Offer to expire
          without the purchase of Shares thereunder.

                                      -32-
<PAGE>

               (g) By Parent or FSG II after June 30, 2001,  if Parent shall not
          have theretofore  purchased Shares pursuant to the Tender Offer solely
          as a result of a failure of any of the conditions set forth in Annex A
          hereto.

          The right of any party hereto to terminate this Agreement  pursuant to
this Section 9.01 shall remain operative and in full force and effect regardless
of any  investigation  made by or on  behalf  of any party  hereto,  any  person
controlling  any such party or any of their  respective  officers or  directors,
whether prior to or after the execution of this Agreement.

          SECTION  9.02.  EFFECT OF  TERMINATION.  Except as provided in Section
9.01, in the event of termination  of this  Agreement  pursuant to Section 9.01,
this Agreement  shall forthwith  become void,  there shall be no liability under
this  Agreement  on the part of Ford,  Parent,  FSG II or the  Company or any of
their respective  officers or directors,  and all rights and obligations of each
party hereto shall cease;  PROVIDED,  HOWEVER, that nothing herein shall relieve
any party from liability for the willful  breach of any of its  representations,
warranties, covenants or agreements set forth in this Agreement.

          SECTION 9.03.  AMENDMENT.  To the fullest extent permitted by Delaware
Law, this  Agreement may be amended by the parties  hereto by action taken by or
on  behalf of their  respective  Boards of  Directors  at any time  prior to the
Effective  Time;  PROVIDED,  HOWEVER,  that any such  amendment that changes the
Offer  Price or the Merger  Consideration  must also be  approved by the Special
Committee.  This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.

          SECTION 9.04.  WAIVER.  At any time prior to the Effective  Time,  any
party hereto may (a) extend the time for the  performance  of any  obligation or
other  act  of  another   party  hereto,   (b)  waive  any   inaccuracy  in  the
representations  and  warranties  of another  party  contained  herein or in any
document  delivered  pursuant hereto and (c) waive compliance with any agreement
of another party or condition to its own obligations contained herein; PROVIDED,
HOWEVER, that, if the Company seeks to make such extension or waiver as provided
in clause  (a),  (b) or (c) above,  it must first  obtain  the  approval  of the
Special  Committee.  Any such extension or waiver shall be valid if set forth in
an instrument in writing signed by the party or parties to be bound thereby.

                                      -33-
<PAGE>

          SECTION 9.05.  EXPENSES.  All Expenses (as defined below)  incurred in
connection  with  this  Agreement  and  the  transactions  contemplated  by this
Agreement shall be paid by the party incurring such expenses, whether or not the
Tender Offer, the Merger or any other transaction is consummated.  "EXPENSES" as
used in this  Agreement  shall  include all  reasonable  out-of-pocket  expenses
(including,  without limitation, all fees and expenses of counsel,  accountants,
investment  bankers,   experts  and  consultants  to  a  party  hereto  and  its
affiliates)  incurred by a party or on its behalf in connection  with or related
to the  authorization,  preparation,  negotiation,  execution and performance of
this Agreement, the preparation, printing, filing and mailing of the Information
Statement,  the  solicitation  of  stockholder  approvals  and all other matters
related  to  the  closing  of  the  Tender  Offer,  the  Merger  and  the  other
transactions contemplated by this Agreement.

                                    ARTICLE X

                               GENERAL PROVISIONS

          SECTION  10.01.   NON-SURVIVAL  OF  REPRESENTATIONS,   WARRANTIES  AND
AGREEMENTS. The representations, warranties and agreements in this Agreement and
in any  certificate  delivered  pursuant hereto shall terminate at the Effective
Time or upon the termination of this Agreement  pursuant to Section 9.01, as the
case may be,  except that this  Section  10.01  shall not limit any  covenant or
agreement of the parties which by its terms  contemplates  performance after the
Effective Time or after termination of this Agreement.

          SECTION 10.02.  NOTICES. All notices,  requests,  claims,  demands and
other  communications  hereunder  shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon  receipt)  by delivery
in person,  by facsimile,  by courier service or by registered or certified mail
(postage  prepaid,  return receipt  requested) to the respective  parties at the
following  addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 10.02):

          if to Ford, Parent or FSG II:

               Ford FSG, Inc.
               One American Road

                                      -34-
<PAGE>

               Dearborn, Michigan  48126
               Attn:  Peter Sherry, Jr., Esquire

          with a copy to:

               Morris, Nichols, Arsht & Tunnell
               1201 North Market Street
               Wilmington, Delaware  19801
               Attn:  Lewis S. Black, Jr., Esquire

          if to the Company:

               The Hertz Corporation
               225 Brae Boulevard
               Park Ridge, New Jersey  07656-0713
               Attn:  Harold E. Rolfe, Esquire

          with a copy to:

               Wachtell, Lipton, Rosen & Katz
               51 West 52nd Street
               New York, New York  10019-6150
               Attn:  Andrew R. Brownstein, Esquire

          SECTION 10.03.  CERTAIN  DEFINITIONS.  For purposes of this Agreement,
the term:

               (a) "AFFILIATE" of a specified person means a person who directly
          or  indirectly  through  one  or  more  intermediaries   controls,  is
          controlled by, or is under common control with such specified person;

               (b) "BUSINESS  DAY" means any day on which the principal  offices
          of the SEC in Washington,  D.C. are open to accept filings, or, in the
          case of  determining  a date when any payment is due, any day on which
          banks are not required or authorized to close in The City of New York;

               (c) "CONTROL"  (including  the terms  "CONTROLLED  BY" and "UNDER
          COMMON CONTROL WITH") means the possession,  directly or indirectly or
          as trustee or executor,  of the power to direct or cause the direction
          of the  management  and  policies  of a person,  whether  through  the
          ownership of voting securities, as trustee or executor, by contract or
          credit arrangement or otherwise;

                                      -35-
<PAGE>

               (d)  "PERSON"  means  an  individual,  corporation,  partnership,
          limited partnership, syndicate, person (including, without limitation,
          a "PERSON" as defined in Section 13d(3) of the Exchange  Act),  trust,
          association or entity or government,  political subdivision, agency or
          instrumentality of a government; and

               (e)  "SUBSIDIARY"  or  "SUBSIDIARIES"  of any  person  means  any
          corporation, partnership, joint venture or other legal entity of which
          such  person  (either  alone or  through  or  together  with any other
          subsidiary) owns,  directly or indirectly,  more than 50% of the stock
          or other equity interests, the holders of which are generally entitled
          to vote for the election of the board of directors or other  governing
          body of such  corporation  or other legal entity;  PROVIDED,  HOWEVER,
          that for purposes of the  representations  and the warranties of Ford,
          Parent and FSG II in Article V, and the covenants and other agreements
          of  Ford,  Parent  and  FSG II in  Article  VI,  except  as  otherwise
          specifically  provided therein, the "subsidiaries" of Ford, Parent and
          FSG II shall  not  include  the  Company  or any  subsidiaries  of the
          Company.

          SECTION 10.04.  SEVERABILITY.  If any term or other  provision of this
Agreement is invalid,  illegal or incapable of being enforced by any rule of law
or public policy,  all other  conditions and provisions of this Agreement  shall
nevertheless  remain in full force and effect as long as the  economic  or legal
substance of the Merger is not affected in any manner materially  adverse to any
party.  Upon such  determination  that any term or other  provision  is invalid,
illegal or incapable of being  enforced,  the parties hereto shall  negotiate in
good faith to modify this  Agreement so as to effect the original  intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.

          SECTION 10.05. ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including
the Company  Disclosure  Schedule)  constitutes the entire agreement between the
parties  with  respect to the subject  matter  hereof and  supersedes  all prior
agreements and undertakings,  both written and oral,  between the parties,  with
respect to the subject  matter hereof.  This Agreement  shall not be assigned by
operation of law or  otherwise,  except that Parent may assign all or any of its
rights and  obligations  hereunder to any affiliate of Parent,

                                      -36-
<PAGE>

PROVIDED  that  no such  assignment  shall  relieve  Parent  of its  obligations
hereunder if such assignee does not perform such obligations.

          SECTION 10.06.  PARTIES IN INTEREST.  This Agreement  shall be binding
upon and inure  solely to the  benefit  of each  party  hereto,  and,  except as
provided in Section 7.05(e),  nothing in this Agreement,  express or implied, is
intended to or shall confer upon any other  person any right,  benefit or remedy
of any nature whatsoever under or by reason of this Agreement.

          SECTION 10.07. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance  with,  the laws of the State of Delaware  applicable to
contracts executed in and to be performed in that State.

          SECTION 10.08.  HEADINGS.  The descriptive  headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.

          SECTION  10.09.  COUNTERPARTS.  This  Agreement  may be  executed  and
delivered (including by facsimile transmission) in one or more counterparts, and
by each party hereto in separate  counterparts,  each of which when executed and
delivered  shall be deemed to be an  original  but all of which  taken  together
shall constitute one and the same agreement.

          SECTION 10.10. CONSENT TO JURISDICTION.  (a) Each of Ford, Parent, FSG
II and the Company hereby irrevocably  submits to the exclusive  jurisdiction of
the courts of the State of Delaware  sitting in the County of New Castle and the
United States District Court for the State of Delaware, and the appellate courts
having  jurisdiction of appeals in such courts, for the purpose of any action or
proceeding  arising  out of or  relating  to this  Agreement  and  each of Ford,
Parent,  FSG II and the  Company  hereby  irrevocably  agrees that all claims in
respect to such action or proceeding may be heard and determined  exclusively in
any such court.

          (b) Each of Ford, Parent, FSG II and the Company irrevocably  consents
to the service of the summons and  complaint  and any other process in any other
action  or  proceeding  relating  to  the  transactions   contemplated  by  this
Agreement,  on behalf of itself or its property,  by personal delivery of copies
of such process to such party.  Nothing in this  Section  10.10 shall

                                      -37-
<PAGE>

affect the right of either  party to serve  legal  process  in any other  manner
permitted by law.

          SECTION 10.11.  WAIVER OF JURY TRIAL. EACH OF FORD, PARENT, FSG II AND
THE COMPANY HEREBY  IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING  OR  COUNTERCLAIM  (WHETHER  BASED ON  CONTRACT,  TORT OR  OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF FORD, PARENT, FSG
II  OR  THE  COMPANY  IN  THE  NEGOTIATION,   ADMINISTRATION,   PERFORMANCE  AND
ENFORCEMENT THEREOF.

                  [remainder of page intentionally left blank]

                                      -38-
<PAGE>

       IN  WITNESS  WHEREOF,  each of the  parties  hereto  has  caused  this
       Agreement to be executed as of the date first written above by
               its respective officers thereunto duly authorized.

                                                  FORD MOTOR COMPANY

                                                  By:/S/ HENRY D.G. WALLACE
                                                     ----------------------
                                                     Name:  Henry D.G. Wallace
                                                     Title: Chief Financial
                                                            Officer

                                                  FORD FSG, INC.

                                                  By:/S/ PETER SHERRY, JR.
                                                     ---------------------
                                                     Name:  Peter Sherry, Jr.
                                                     Title: Assistant Secretary
                                                  FORD FSG II, INC.

                                                  By:/S/ DAVID J. PRYSTASH
                                                     ---------------------
                                                     Name:  David J. Prystash
                                                     Title: Vice President and
                                                            Treasurer

                                                  THE HERTZ CORPORATION

                                                  By:/S/ CRAIG R. KOCH
                                                     -----------------
                                                     Name:  Craig R. Koch
                                                     Title: President and Chief
                                                            Executive Officer

                                      -39-
<PAGE>

                                                                         ANNEX A

                         CONDITIONS TO THE TENDER OFFER

          Notwithstanding  any  other  provision  of the  Tender  Offer,  and in
addition to (and not in limitation  of) Parent's  rights to extend and amend the
Tender Offer at any time in its sole  discretion in accordance with the terms of
this Agreement,  Parent shall not be required to accept for payment, purchase or
pay for,  subject  to any  applicable  regulations  of the SEC,  including  Rule
14e-1(c) under the Exchange Act, and may delay the acceptance for payment of or,
subject to the  restriction  referred to above,  the payment  for,  any tendered
Shares (whether or not any Shares  theretofore have been accepted for payment or
paid for pursuant to the Tender Offer), and may terminate the Tender Offer as to
any Shares not then paid for,  if at any time on or after  January  16, 2001 and
prior to the time of payment for any such Shares,  any of the  following  events
shall occur:

          (a) there shall have been any  statute,  rule,  regulation,  judgment,
order or injunction promulgated,  entered, enforced, enacted, issued or rendered
applicable to the Tender Offer or the Merger by any domestic or foreign  federal
or state governmental  regulatory or administrative agency or authority or court
or  legislative  body or commission  which (i) prohibits or imposes any material
limitations  on, Ford's or Parent's  ownership or operation of all or a material
portion of the Company's  businesses or assets,  (ii) prohibits or makes illegal
the  acceptance  for  payment,   payment  for  or  purchase  of  Shares  or  the
consummation  of the Tender  Offer or the  Merger,  (iii)  results in a material
delay in or restricts the ability of Parent, or renders Parent unable, to accept
for  payment,  pay for or purchase  some or all of the Shares,  or (iv)  imposes
material  limitations  on the ability of Parent  effectively  to  exercise  full
rights of ownership of the Shares, including,  without limitation,  the right to
vote  the  Shares  purchased  by it on all  matters  properly  presented  to the
Company's  stockholders,  provided  that Parent  shall have used all  reasonable
efforts to cause any such judgment, order or injunction to be vacated or lifted;

          (b) the representations and warranties of the Company set forth in the
Agreement  shall not be true and correct as of the date of  consummation  of the
Tender Offer as though made on or as of such date,  except for such  failures to
be true or correct that have not had or would not be reasonably expected to

<PAGE>

have a Company  Material  Adverse Effect,  or the Company shall have breached or
failed  in  any  material  respect  to  perform  or  comply  with  any  material
obligation,  agreement or covenant  required by the Agreement to be performed or
complied with by it;

          (c) the Board of Directors of the Company, based on the recommendation
of the Special  Committee,  shall have  (including  by amendment to the Schedule
14D-9) withdrawn,  amended or modified in a manner adverse to Ford or Parent its
approval or  recommendation  of the Tender Offer, the Merger or the Agreement or
shall have resolved to do any of the foregoing;

          (d) the Company,  acting  through its Board of Directors (as agreed to
by the Special  Committee),  Ford and Parent shall have agreed that Parent shall
terminate the Tender Offer or postpone the  acceptance for payment of or payment
for Shares thereunder; or

          (e) the Agreement  shall have been  terminated in accordance  with its
terms.

          The foregoing  conditions are for the sole benefit of Ford, Parent and
their respective  affiliates and may be asserted by Ford or Parent,  in whole or
in part,  at any time and from  time to time in the sole  discretion  of Ford or
Parent.

          The failure by Ford or Parent at any time to exercise its rights under
any of the foregoing  conditions shall not be deemed a waiver of any such rights
and each such right  shall be deemed an ongoing  right  which may be asserted at
any time or from time to time. Should the Tender Offer be terminated pursuant to
any of the foregoing  provisions,  all tendered Shares not theretofore  accepted
for payment shall forthwith be returned to the tendering stockholders.

                                      -2-
<PAGE><PAGE>

                                                                   Exhibit 10(a)

                             EMPLOYMENT AGREEMENT

     This Employment Agreement ("Agreement") between Tidewater Inc., a Delaware
corporation ("Company"), and William C. O'Malley ("Employee") is effective as of
September 27, 2000 (the "Agreement Date") and supersedes the employment
agreement between the Company and the Employee dated September 19, 1997.

     The Company and the Employee agree as follows:

     1.   Employment Capacity and Term.
          ----------------------------

          (a)  Capacity and Term.  The Employee will serve as the President and
               -----------------
Chief Executive Officer of the Company for the period beginning September 27,
2000 through March 28, 2002. The period from September 27, 2000 through March
28, 2002 is referred to in this Agreement as the "Employment Term."

          (b)  Duties.  As the President and Chief Executive Officer, the
               ------
Employee shall perform such duties, consistent with the Employee's job title, as
may be prescribed from time to time by the Board of Directors of the Company
(the "Board") and shall perform such duties as are described in the Company's
Bylaws.

          (c)  Chairman.  Employee has been elected a director of the Company
               --------
and serves as the Chairman of the Board. If the Employee hereafter ceases for
any reason to be the President and Chief Executive Officer of the Company, the
Employee will, if requested by the Company, resign as the Chairman of the Board
and as a director of the Company.

     2.   Term of Agreement.
          -----------------

     Subject to Section 7A hereof, the term of this Agreement shall commence on
the Agreement Date and shall continue through the last day of the Employment
Term, subject to any earlier termination of Employee's status as an employee
pursuant to the terms of this Agreement. Unless otherwise agreed by the parties,
Employee shall retire from his position as President, Chief Executive Officer
and Chairman of the Board on March 28, 2002. Subject to Section 7A hereof,
following the term of this Agreement, each party shall have the right to enforce
all rights, and shall be bound by all obligations, of such party that are
continuing rights and obligations under the terms of this Agreement.

                                      -1-
<PAGE>

     3.   Devotion to Responsibilities.
          ----------------------------

     During the Employment Term, the Employee will devote all of his time and
attention to the business of the Company, and he will not engage in or be
employed by any other business activity or business, whether or not such
business activity or business is for gain, profit or other pecuniary advantage;
provided, however, that nothing herein contained shall prohibit the Employee
from (i) serving as a member of the Board of Directors, Board of Trustees or the
like of any for profit or non-profit entity, or performing services of any type
for any civic or community entity, whether or not the Employee receives
compensation therefor, (ii) investing his assets in such form or manner as will
require no more than nominal services on the part of the Employee in the
operation of the business of the entity in which such investment is made, or
(iii) serving in various capacities with, and attending meetings of, industry or
trade groups and associations, including without limitation the industry or
trade groups and associations with which the Employee is currently involved, as
long as the Employee's engaging in any activities permitted by virtue of clauses
(i), (ii) and (iii) above does not materially and unreasonably interfere with
the ability of the Employee to perform the services and discharge the
responsibilities required of him under this Agreement. Notwithstanding clause
(ii) above, during the Employment Term, the Employee may not beneficially own
more than 2% of the outstanding shares of any class of equity security of a
business organization required to file periodic reports with the Securities and
Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange
Act") and may not beneficially own more than 5% of the outstanding shares of any
class of equity security of a business organization that competes with the
Company. For purposes of this paragraph, "beneficially own" shall have the same
meaning ascribed to that term in Rule 13d-3 under the Exchange Act.

     4.   Compensation and Benefits.  The Company will provide the Employee with
          -------------------------
the compensation and benefits described below:

          (a)  Salary.  An annual salary during the Employment Term of $700,000
               ------
("Annual Base Compensation"), payable to the Employee in equal semi-monthly
installments.

          (b)  Bonus.  An annual incentive bonus, payable, if at all, only with
               -----
respect to services provided by the Employee during the Employment Term.  The
annual incentive bonus will be determined, accrued and paid in accordance with
the terms of the Company's Executive Officer Annual Incentive Plan (the
"Incentive Plan") that covers certain executive officers designated by the
Compensation Committee of the Board (the "Committee") or any incentive or bonus
compensation plan that is a successor or substitute therefor.  The parties
acknowledge and agree that this Section 4(b) imposes no obligation on the
Company to award a bonus to the Employee.  A copy of the Incentive Plan in
effect for fiscal year 2001 is attached as Appendix A.

          (c)  Stock Options.  The outstanding options to purchase shares of the
               -------------
common stock of the Company held by Employee have the vesting terms and post-
retirement exercise periods described on Appendix B hereto.  Options granted to
Employee by the Company in the future during the Employment Term shall vest upon
retirement at age 65 or later and shall have a post-retirement exercise period
of at least five years.

                                      -2-
<PAGE>

          (d)  Compensating Retirement Benefit.  In addition to any benefits
               -------------------------------
payable to Employee after his retirement by virtue of his participation in the
Tidewater defined benefit pension plan and Supplemental Executive Retirement
Plan, the Company shall, from and after the date of the Employee's normal
retirement on or after age 65 (the "Retirement Date"), pay to the Employee, from
time to time, such additional amounts as are necessary to make the Employee's
total retirement benefits payable after the Retirement Date (including
retirement benefits provided by Employee's prior employer and benefits paid
prior to the Retirement Date under the Tidewater defined benefit plan and
Supplemental Executive Retirement Plan) not less in amount than the retirement
benefits to which the Employee would have been entitled under the terms of any
qualified and non-qualified defined benefit pension plans of his immediate prior
employer, assuming that Employee's employment by his immediate prior employer
had terminated on the Retirement Date. In addition to any benefits payable to
Employee by virtue of his participation in the Tidewater defined benefit pension
plan and Supplemental Executive Retirement Plan, in the event his employment
with the Company is terminated for any reason (including his death) prior to age
65, the Company shall pay to the Employee from time to time, such additional
amounts as are necessary to make the Employee's total retirement benefits
payable after such termination of employment (including retirement benefits
provided by Employee's prior employer and benefits paid prior to the date of
termination of employment under the Tidewater defined benefit plan and
Supplemental Executive Retirement Plan) not less than the amount that the
Employee would have been entitled to receive under the defined benefit pension
plans of his immediate prior employer, assuming that Employee's employment by
his immediate prior employer had terminated on the same date his employment with
the Company is terminated. In making any benefit calculation contemplated
hereby, it shall be assumed that the Employee's compensation for purposes of
such plans was, for periods prior to the date his employment with the Company
commenced (the "Commencement Date"), his covered compensation with such prior
employer and, for periods after the Commencement Date, his compensation under
this Agreement or a predecessor agreement between the Company and the Employee.
This compensating retirement benefit will be paid in the same manner as payments
are made under the Company's Supplemental Executive Retirement Plan and will be
based on calculations using the same actuarial assumptions used in the Company's
defined benefit plan. The Employee has provided the Company with copies of all
documents related to retirement compensation available to the Employee from the
prior employer, which documents are attached hereto as Appendix C. Attached as
Appendix D is the calculation of the additional amount that Employee shall be
paid following retirement on or after the Retirement Date in order that his
retirement benefits will be no less than the retirement benefits that he would
have been entitled to receive following retirement on the Retirement Date under
the terms of the qualified and non-qualified defined benefit pension plans of
his immediate prior employer, which amount is subject to adjustment if and to
the extent that the assumptions relied upon for such calculation (as stated in
Appendix D) differ from the facts at the time of Employee's retirement.

          (e)  Indemnification.  Under its Bylaws, the Company provides, as of
               ---------------
the Agreement Date, certain indemnification rights to its officers and directors
that will be applicable to the Employee with respect to his acts and omissions
in his capacity as an officer and director of the Company.  The Company agrees
to provide indemnification rights to the Employee identical to

                                      -3-
<PAGE>

those provided for in its Bylaws as in existence on the Agreement Date as to all
suits or proceedings to which the Employee is or is threatened to be made a
party that arise out of or are connected to his services during the Employment
Term, without regard to whether such actions, suits or proceedings are made,
asserted or arise during or after the Employment Term.

          (f)  Other Benefits.  During the Employment Term, the Employee shall
               --------------
be entitled to all benefits and perquisites provided to senior executive
employees of the Company, including but not limited to the benefits referred to
in Appendix E hereof.

     5.   Expenses.  The Employee will be reimbursed for out-of-pocket expenses
          --------
incurred from time to time on behalf of the Company or any subsidiary in the
performance of his duties under this Agreement, upon the presentation of such
supporting invoices, documents and forms as the Company reasonably requests.

     6.   Termination of Employment.
          -------------------------

          (a)  Death or Disability.  The Employee's status as an employee will
               -------------------
terminate immediately and automatically upon the Employee's death during the
Employment Term.  If (i) the Employee is rendered incapable because of physical
or mental illness of satisfactorily discharging his duties and responsibilities
under this Agreement for a period of 60 consecutive days and (ii) a duly
qualified physician chosen by the Company and acceptable to the Employee or his
legal representatives so certifies in writing, the Board shall have the power to
determine that the Employee has become disabled.  If the Board makes such a
determination, the Company shall have the continuing right and option, during
the period that such disability continues, and by notice given in the manner
provided in Section 15, to terminate the status of Employee as an employee.  Any
such termination shall become effective thirty days after such notice of
termination is given (the "Disability Effective Date"), unless within such
thirty day period, the Employee becomes capable of rendering services of the
character contemplated hereby (and a physician chosen by the Company and
acceptable to the Employee or his legal representatives so certifies in writing)
and the Employee in fact resumes such services.  The Employee's death or the
Employee's incapacity due to physical or mental illness to discharge the
responsibilities assigned by this Agreement shall not constitute a breach of
this Agreement by the Employee.

          (b)  Cause.  The Company may terminate the Employee's status as an
               -----
employee for Cause.  As used herein, termination by the Company of the
Employee's status as an employee for "Cause" shall mean termination as a result
of (i) the willful and continuing failure by the Employee to perform the
services contemplated by this Agreement (other than any such failure resulting
from the Employee's disability of the type specified in Section 6(a)), (ii) the
Employee's breach of or failure to comply with the covenants set forth in
Sections 8, 9 or 11 of this Agreement, or (iii) the willful engaging by the
Employee in gross misconduct injurious to the Company; provided that, no act, or
failure to act, on the Employee's part shall be considered "willful" for
purposes of this Agreement unless done, or omitted to be done, without a
reasonable belief that such action or omission was in, or not opposed to, the
best interests of the Company.  Any act, or failure to act, by the Employee that
is based upon authority given pursuant to a resolution duly adopted by

                                      -4-
<PAGE>

the Board or based upon the advice of counsel for the Company shall be presumed
to be done, or omitted to be done, by the Employee in good faith and in the best
interests of the Company.

          (c)  Good Reason.  The Employee may terminate his status as an
               -----------
employee for Good Reason. The termination by the Employee of his status as an
employee for Good Reason shall be deemed to be a justifiable termination and
shall excuse the Employee from the obligation to render services under or
relating to this Agreement. As used herein, the term "Good Reason" shall mean:

               (i)   The occurrence of any of the following during the
Employment Term:

                     (A) the assignment by the Board to the Employee of any
duties or responsibilities which are inconsistent with the Employee's status,
title and position as President and Chief Executive Officer of the Company;

                     (B) any removal of the Employee from, or any failure to
reappoint or reelect the Employee to, the position of President and Chief
Executive Officer of the Company, except in connection with a termination by the
Company of the Employee's employment for Cause or on account of disability or
death of the Employee, or the termination by the Employee of his employment
other than for Good Reason;

                     (C) the Company's requiring the Employee to be based
anywhere other than in New Orleans, Louisiana, except for required travel in the
ordinary course of the Company's business;

               (ii)  a reduction in the Employee's annual salary or a failure by
the Company to pay to the Employee any installment of the annual salary or to
pay any other amounts required to be paid under this Agreement, which failure
continues for a period of ten days after written notice thereof is given by the
Employee to the Company;

               (iii) the failure by the Company to obtain the assumption of its
obligations under this Agreement by any successor or assign as contemplated in
Paragraph 13 of the Agreement;

               (iv)  any purported termination by the Company of the Employee's
status as an employee which is not effected pursuant to a Notice of Termination
satisfying the requirements of Paragraph 6(d) hereof, or which is not justified
as a termination based on Cause; or

               (v)   any breach of this Agreement by the Company.

          (d)  Notice of Termination.  Any purported notice of termination of
               ---------------------
the Employee's status as an employee must be communicated in a writing delivered
to the other party as provided in Paragraph 15 hereof (a notice of termination
complying with this sentence is referred to in this Agreement as a "Notice of
Termination"). Any such Notice of Termination that purports to terminate
Employee's employment for Cause or for Good Reason shall specify the provision
or

                                      -5-
<PAGE>

provisions of this Agreement relied upon by the party giving such notice and
shall set forth in reasonable detail the facts and circumstances claimed by such
party to provide a basis for termination of the Employee's employment under the
provision(s) so indicated.

          (e)  Date of Termination.  "Date of Termination" means (i) if
               -------------------
Employee's employment is terminated by the Company for Cause, or by Employee for
Good Reason, the date of delivery of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Employee's employment is
terminated by the Company other than for Cause or disability, the Date of
Termination shall be the date on which the Company notifies the Employee of such
termination and (iii) if Employee's employment is terminated by reason of his
death or disability, the Date of Termination shall be the date of death of
Employee or the Disability Effective Date, as the case may be.

     7.   Obligations of the Company Upon Termination.
          -------------------------------------------

          (a)  Good Reason, Other than for Cause, Death or Disability.  If (i)
               ------------------------------------------------------
the Company terminates the Employee's status as an employee other than for
Cause, death or disability, or (ii) the Employee shall terminate his employment
for Good Reason, then the Company shall pay to the Employee in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts:

                    (A)  the sum of (1) the amount of the Employee's Annual Base
Compensation earned through the Date of Termination, to the extent not
theretofore paid and (2) any compensation previously deferred by the Employee
(together with any accrued interest on earnings thereon) and any accrued
vacation pay, in each case to the extent not previously paid (the sum of the
amounts described in clauses (1) and (2) being hereinafter referred to as the
"Accrued Obligations").

                    (B)  the aggregate amount of the Employee's Annual Base
Compensation for the period beginning the day of the Date of Termination and
continuing through the last day of the Employment Term (such amount being
referred to herein as the "Non-Accrued Compensation").

                    (C)  to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Employee any other amounts required
to be paid or provided or which the Employee is eligible to receive under any
plan, program, policy or practice of the Company (such other amounts being
referred to herein as the "Other Benefits").

          (b)  Death.  If the Employee's status as an employee is terminated by
               -----
reason of the Employee's death, this Agreement shall terminate without further
obligations to the Employee's legal representatives under this Agreement, other
than for payment of (i) Accrued Obligations, (ii) 50% of the Non-Accrued
Compensation (the "Death Cash Payment") and (iii) the timely payment or
provision of Other Benefits.  The sum of the Accrued Obligations and the Death
Cash Payment shall be paid to the Employee's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other

                                      -6-
<PAGE>

Benefits as used in this Section 7(b) shall include, without limitation, and the
Employee's estate and/or beneficiaries shall be entitled to receive, benefits at
least equal to the most favorable benefits provided by the Company to the
estates and beneficiaries of its senior executive officers under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect on the date of Employee's death.

          (c)  Disability.  If Employee's status as an employee is terminated by
               ----------
reason of Employee's disability, this Agreement will terminate without further
obligation to the Employee, other than the payment of (i) Accrued Obligations,
(ii) 50% of the Non-Accrued Compensation (the "Disability Cash Payment") and
(iii) the timely payment or provision of Other Benefits.  The sum of Accrued
Obligations and the Disability Cash Payment will be paid to the Employee in a
lump sum in cash within 30 days of the Date of Termination.  With respect to the
provision of Other Benefits, the term Other Benefits as used in this Section
7(c) shall include, and the Employee will be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company to disabled executive
officers and their families in accordance with such plans, programs, practices
and policies related to disability that are in effect on the Disability
Effective Date.

          (d)  Cause, Other than for Good Reason.  If the Employee's status as
               ---------------------------------
an employee shall be terminated for Cause by Employer, or voluntarily terminated
by Employee other than for Good Reason, this Agreement shall terminate without
further obligation to the Employee other than for (i) Accrued Obligations, which
shall be paid in a lump sum in cash within 30 days of the Date of Termination,
and (ii) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Employee his accrued, vested benefits under any
benefit plan or program of the Company.

     7A.  Obligations of the Company and the Employee in the Event of a Change
          --------------------------------------------------------------------
          of Control
          ----------

          (a)  Upon and following a Change of Control of the Company (as defined
in Section 7A(b) hereof), the rights and obligations of the Employee and the
Company shall not be governed by this Agreement, but shall be as provided in the
Change of Control Agreement between the Employee and the Company dated effective
October 1, 1999 and any amendments thereto or any subsequent change of control
agreement between the Employee and the Company (including any rights or
obligations in this Agreement which are specifically incorporated by reference
therein).  Upon the occurrence of a Change of Control, the term of the Agreement
shall end, and the provisions of the Agreement (including, without limitation,
the Employee's covenant not to compete) shall be null and void, and of no
further force and effect, except that compensation, benefit and indemnification
obligations accrued by the Company with respect to the Employee prior to the
Change of Control and during the term of the Agreement shall remain valid and
enforceable.

          (b)  Change of Control.  As used in this Section 7A, "Change of
Control" shall mean:

                                      -7-
<PAGE>

               (i)   the acquisition by any "Person" (as defined in Section
7A(c) hereof) of "Beneficial Ownership" (as defined in Section 7A(c) hereof) of
30% or more of the outstanding Shares of the Company's Common Stock, $0.10 par
value per share (the "Common Stock") or 30% or more of the combined voting power
of the Company's then outstanding securities; provided, however, that for
purposes of this subsection 7A(b)(i), the following shall not constitute a
Change of Control:

                     (A) any acquisition (other than a "Business Combination"
(as defined in Section 7A(b)(iii) hereof) which constitutes a Change of Control
under Section 7A(b)(iii) hereof) of Common Stock directly from the Company,

                     (B) any acquisition of Common Stock by the Company or its
subsidiaries,

                     (C) any acquisition of Common Stock by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or

                     (D) any acquisition of Common Stock by any corporation
pursuant to a Business Combination which does not constitute a Change of Control
under Section 7A(b)(iii) hereof; or

               (ii)  individuals who, as of the effective date of this amendment
to the Agreement, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the effective date of this
amendment whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered a member of the
Incumbent Board, unless such individual's initial assumption of office occurs as
a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Incumbent Board;
or

               (iii) consummation of a reorganization, merger or consolidation
(including a merger or consolidation of the Company or any direct or indirect
subsidiary of the Company), or sale or other disposition of all or substantially
all of the assets of the Company (a "Business Combination"), in each case,
unless, immediately following such Business Combination,

                     (A) the individuals and entities who were the Beneficial
Owners of the Company's outstanding Common Stock and the Company's voting
securities entitled to vote generally in the election of directors immediately
prior to such Business Combination have direct or indirect Beneficial Ownership,
respectively, of more than 50% of the then outstanding shares of common stock,
and more than 50% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, of the Post-
Transaction Corporation (as defined in Section 7A(c) hereof), and

                                      -8-
<PAGE>

                     (B) except to the extent that such ownership existed prior
to the Business Combination, no Person (excluding the Post-Transaction
Corporation and any employee benefit plan or related trust of either the
Company, the Post-Transaction Corporation or any subsidiary of either
corporation) Beneficially Owns, directly or indirectly, 30% or more of the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or 30% or more of the combined voting power of the then
outstanding voting securities of such corporation, and

                     (C) at least a majority of the members of the board of
directors of the Post-Transaction Corporation were members of the Incumbent
Board at the time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or

               (iv)  approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

          (c)  Other Definitions.  As used in Section 7A(b) hereof, the
following words or terms shall have the meanings indicated:

               (i)   Affiliate:  "Affiliate" (and variants thereof) shall mean a
Person that controls, or is controlled by, or is under common control with,
another specified Person, either directly or indirectly.

               (ii)  Beneficial Owner:  "Beneficial Owner" (and variants
thereof), with respect to a security, shall mean a Person who, directly or
indirectly (through any contract, understanding, relationship or otherwise), has
or shares (i) the power to vote, or direct the voting of, the security, and/or
(ii) the power to dispose of, or to direct the disposition of, the security.

               (iii) Person: "Person" shall mean a natural person or company,
and shall also mean the group or syndicate created when two or more Persons act
as a syndicate or other group (including, without limitation, a partnership or
limited partnership) for the purpose of acquiring, holding, or disposing of a
security, except that "Person" shall not include an underwriter temporarily
holding a security pursuant to an offering of the security.

               (iv)  Post-Transaction Corporation:  Unless a Change of Control
includes a Business Combination (as defined in Section 7A(b)(iii) hereof),
"Post-Transaction Corporation" shall mean the Company after the Change of
Control.  If a Change of Control includes a Business Combination, "Post-
Transaction Corporation" shall mean the corporation resulting from the Business
Combination unless, as a result of such Business Combination, an ultimate parent
corporation controls the Company or all or substantially all of the Company's
assets either directly or indirectly, in which case, "Post-Transaction
Corporation" shall mean such ultimate parent corporation."

     8.   Trade Secrets, Etc.  The Employee shall hold in a fiduciary capacity
          -------------------
for the benefit of the Company all secret or confidential information, knowledge
or data relating to the Company or any of its subsidiaries or corporate
affiliates and their respective businesses and operations, which

                                      -9-
<PAGE>

shall have been obtained by the Employee during the Employee's employment
(whether prior to or after the Commencement Date) and which shall not have
become public knowledge (other than by acts of the Employee or any of his
representatives in violation of this Agreement). At the end of the Employment
Term, the Employee agrees (i) not, without the prior written consent of the
Company or as may be otherwise required by law or legal process, to communicate
or divulge any such information, knowledge or data to any party other than the
Company and (ii) to deliver promptly to the Company any confidential
information, knowledge or data in his possession, whether produced by the
Company or any of its subsidiaries and corporate affiliates or by the Employee,
that relates to the business of the Company or any of its subsidiaries and joint
ventures or any past, current or prospective activity of the Company or any of
its subsidiaries and joint ventures. The Employee shall be permitted to retain
copies of such data as are necessary in order to enable the Employee to assert
any rights under this Agreement, provided that such data shall be used solely
for such purpose.

     9.   Customer Lists.  The Employee recognizes and acknowledges that any
          --------------
written list or lists of the customers of the Company or any of its subsidiaries
and joint ventures ("customer lists"), as such customer lists may exist from
time to time, are valuable, special and unique assets of the Company.  The
Employee agrees that he will not use for his own personal benefit or disclose
such customer lists to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever.  Personal and social contacts with
past, present or future customers of the Company shall not be prohibited hereby.

     10.  Limited Covenant Not to Compete.  For a period of two years commencing
          -------------------------------
with the expiration of the term of this Agreement, the Employee will not,
directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management,
operation or control of any company or other business enterprise engaged in the
business of providing vessel services for the offshore oil and gas industry,
within any parish of the State of Louisiana (as set forth in Appendix F), or any
other jurisdiction (whether within or outside the United States), in which the
Company or any of its subsidiaries or joint ventures carries on the business of
vessel services for the offshore oil and gas industry, so long as the Company or
any of its subsidiaries or joint ventures carries on a like line of business
therein; provided, however, that nothing contained herein shall (a) prohibit the
Employee from making investments in any publicly held company which do not
exceed in the aggregate two percent of the equity interest of such company or
(b) prohibit the Employee from continuing to hold any of the director or officer
positions held by him as of the date of this Agreement that are disclosed on
Appendix G hereto.

     11.  Certain Proprietary Rights.  The Employee agrees to and hereby does
          --------------------------
assign to the Company all his right, title and interest in and to all
inventions, business plans, work models or procedures, whether or not
patentable, which are made or conceived solely or jointly by him:

          (a)  At any time during the term of his employment by the Company, or

          (b)  With the use of time or materials of the Company.  The Employee
agrees to communicate to the Company or its representatives all facts known to
him concerning such matters, to sign all necessary instruments, make all
necessary oaths and generally, at the Company's expense,

                                      -10-
<PAGE>

to do everything reasonably practicable (without expense to the Employee) to aid
the Company in obtaining and enforcing proper legal protection for all such
matters in all countries and in vesting title to such matters in the Company. At
the Company's request (during or after the term of this Agreement) and expense,
the Employee will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.

     12.  Injunctive Relief.  In the event of a breach or threatened breach by
          -----------------
the Employee of the provisions of Sections 8, 9, 10 or 11 of this Agreement
during or after the term of this Agreement, the Company shall be entitled to
injunctive relief restraining the Employee from violation of such paragraph.
Nothing herein shall be construed as prohibiting the Company from pursuing any
other remedy at law or in equity it may have in the event of breach or
threatened breach of this Agreement by the Employee.

     13.  Binding Effect.
          --------------

          (a)  This Agreement shall be binding upon and inure to the benefit of
the Company and any of its successors or assigns.

          (b)  This Agreement is personal to the Employee and shall not be
assignable by the Employee without the consent of the Company (there being no
obligation to give such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.

          (c)  The Company will require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to agree to perform all of
the obligations under this Agreement in the same manner and to the same extent
as would have been required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing reasonably satisfactory
to the Employee.  In the event of any such assignment or succession, the term
"Company" as used in this Agreement shall refer also to such successor or
assign.

     14.  Notices.  Any notice or other communication required under this
          -------
Agreement shall be in writing, shall be deemed to have been given and received
when delivered in person, or, if mailed, shall be deemed to have been given when
deposited in the United States mail, first class, registered or certified,
return receipt requested, with proper postage prepaid, and shall be deemed to
have been received on the third business day thereafter, and shall be addressed
as follows:

                                      -11-
<PAGE>

     If to the Company, addressed to:

     Tidewater Inc.
     Pan American Life Center
     601 Poydras Street, Suite 1900
     New Orleans, Louisiana  70130
     Attn:  Cliffe F. Laborde
            Senior Vice President and Secretary

     If to the Employee, addressed to:

     William C. O'Malley
     Pan American Life Center
     601 Poydras Street, Suite 1900
     New Orleans, Louisiana  70130

or such other address as to which any party hereto may have notified the other
in writing.

     15.  Governing Law.  This Agreement shall be governed by and interpreted in
          -------------
accordance with the laws of the State of Louisiana.

     16.  Entire Agreement.  This Agreement, including Appendices A through G,
          ----------------
inclusive, all of which are herein incorporated by reference and made a part
hereof, and the documents referred to herein, contain or refer to the entire
arrangement or understanding between the Employee and the Company relating to
the employment of the Employee by the Company.  No provision of the Agreement,
including the Appendices, may be modified or amended except by an instrument in
writing signed by or for both parties hereto.

     17.  Severability.  If any term or provision of this Agreement, or the
          ------------
application thereof to any person or circumstance, shall at any time or to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.

     18.  Waiver of Breach.  The waiver by either party of a breach of any
          ----------------
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.

     19.  Remedies Not Exclusive.  No remedy specified herein shall be deemed to
          ----------------------
be such party's exclusive remedy, and accordingly, in addition to all of the
rights and remedies provided for in this Agreement, the parties shall have all
other rights and remedies provided to them by applicable law, rule or
regulation.

                                      -12-
<PAGE>

     20.  Beneficiaries.  Whenever this Agreement provides for any payment to be
          -------------
made to the Employee or his estate, such payment may be made instead to such
beneficiary or beneficiaries as the Employee may have designated in writing and
filed with the Company.  The Employee shall have the right to revoke any such
designation from time to time and to redesignate any beneficiary or
beneficiaries by written notice to the Company.

     21.  Company's Reservation of Rights.  Employee acknowledges and
          -------------------------------
understands that the Employee serves at the pleasure of the Board and that the
Company has the right at any time to terminate Employee's status as an employee
of the Company, or to change or diminish his status as the Chief Executive
Officer during the Employment Term, subject to the rights of the Employee to
claim the benefits conferred by Section 7(a) hereof if such action constitutes a
termination by the Company without Cause or a termination by the Employee for
Good Reason.

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

                                        TIDEWATER INC.

Date of Execution: Oct. 12, 2000        By: /s/ Robert H. Boh
                  -----------------         ------------------------------------
                                            Name:  Robert H. Boh
                                            Title: Director and Chairman of the
                                                   Compensation Committee of the
                                                   Board of Directors

                                        EMPLOYEE:

Date of Execution: Oct. 16, 2000        /s/ William C. O'Malley
                   ----------------    -----------------------------------------
                              Name:    William C. O'Malley

                                      -13-

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