10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-7541

THE HERTZ CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	13-1938568
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

225 Brae Boulevard, Park Ridge, New Jersey 07656-0713
(Address of principal executive offices)
(Zip Code)

(201) 307-2000
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)

The Registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format as permitted.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ  No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes o  No þ

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes o  No þ

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of November 7, 2005: Common Stock, $0.01 par value — 100 shares.

THE HERTZ CORPORATION AND SUBSIDIARIES
INDEX

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements (Unaudited)
Report of Independent Registered Public Accounting Firm	1
Condensed Consolidated Balance Sheet as of September 30, 2005 and December 31, 2004	2
Condensed Consolidated Statement of Operations for the quarter ended September 30, 2005 and 2004	3
Condensed Consolidated Statement of Operations for the nine months ended September 30, 2005 and 2004	4
Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2005 and 2004	5
Notes to Condensed Consolidated Financial Statements	6 -- 19
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20 -- 38
ITEM 4. Controls and Procedures	39
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	40
ITEM 5. Other Information	40
ITEM 6. Exhibits	40
SIGNATURES	41
EXHIBIT INDEX	42
EX-12: CONSOLIDATED COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EX-15: LETTER FROM PRICEWATERHOUSECOOPERS LLP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION
EX-99.1: STOCK PURCHASE AGREEMENT

PART I — FINANCIAL INFORMATION

ITEM l. Condensed Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

     Stockholder of The Hertz Corporation:

We have reviewed the accompanying condensed consolidated balance sheet of The Hertz Corporation and its subsidiaries (the “Company”) as of September 30, 2005, and the related condensed consolidated statements of operations for each of the three-month and nine-month periods ended September 30, 2005 and September 30, 2004 and the condensed consolidated statement of cash flows for the nine-month periods ended September 30, 2005 and September 30, 2004. These interim financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet as of December 31, 2004, and the related consolidated statements of operations, of stockholder’s equity and of cash flows for the year then ended (not presented herein), and in our report dated March 21, 2005, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2004, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

As discussed in Note 1A to the condensed consolidated financial statements, the Company has restated its condensed consolidated statement of operations for the three-month and nine-month periods ended September 30, 2004.

PricewaterhouseCoopers LLP
Florham Park, New Jersey
November 7, 2005

1

THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
Unaudited

ASSETS

	September 30,			December 31,
	2005			2004
Cash and equivalents (Notes 3 and 7)	$	776,595		$	680,866
Short-term investments (Notes 3 and 11)		269,113			556,997
Receivables, less allowance for doubtful accounts of $19,819 and $30,447 (Note 7)		1,350,705			1,282,290
Due from affiliates (Note 11)		447,571			445,235
Inventories, at lower of cost or market		105,088			83,287
Prepaid expenses and other assets		186,091			144,168
Revenue earning equipment, at cost (Notes 6, 7 and 11):
Cars		9,409,591			8,380,688
Less accumulated depreciation		(835,420	)		(783,499	)
Other equipment		2,746,271			2,378,673
Less accumulated depreciation		(770,371	)		(852,947	)
Total revenue earning equipment		10,550,071			9,122,915
Property and equipment, at cost:
Land, buildings and leasehold improvements		1,350,199			1,296,196
Service equipment		1,321,188			1,232,739
		2,671,387			2,528,935
Less accumulated depreciation		(1,364,850	)		(1,292,764	)
Total property and equipment		1,306,537			1,236,171
Goodwill and other intangible assets (Note 4)		546,808			544,445
Total assets	$	15,538,579		$	14,096,374
LIABILITIES AND STOCKHOLDER’S EQUITY
Accounts payable (Note 11)	$	888,291		$	786,037
Accrued liabilities (Note 7)		840,173			835,680
Accrued taxes		588,907			130,062
Debt (Notes 7, 11 and 12)		10,597,923			8,428,031
Public liability and property damage		377,357			391,696
Deferred taxes on income		533,600			849,700
Total liabilities		13,826,251			11,421,206
Minority interest (Note 1)		10,331			4,921
Stockholder’s equity (Notes 7 and 11):
Common Stock, $0.01 par value, 3,000 shares authorized, 100 shares issued		—			—
Additional capital paid-in		983,132			983,132
Retained earnings		619,513			1,479,217
Accumulated other comprehensive income (Note 10)		99,352			207,898
Total stockholder’s equity		1,701,997			2,670,247
Total liabilities and stockholder’s equity	$	15,538,579		$	14,096,374

The accompanying notes are an integral part of this statement.

2

THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands of Dollars)
Unaudited

	Quarter
	Ended September 30,
				2004
	2005			Restated
Revenues:
Car rental	$	1,701,524		$	1,538,357
Industrial and construction equipment rental		390,850			316,331
Other		31,256			24,509
Total revenues (Note 1A)		2,123,630			1,879,197
Expenses:
Direct operating		1,120,285			994,164
Depreciation of revenue earning equipment (Note 6)		432,466			370,738
Selling, general and administrative		165,419			161,059
Interest, net of interest income of $9,312 and $6,741 (Note 7)		141,164			102,372
Total expenses (Note 1A)		1,859,334			1,628,333
Income before income taxes and minority interest		264,296			250,864
Provision for taxes on income (Note 5)		(54,623	)		(64,968	)
Minority interest (Note 1)		(4,452	)		(1,456	)
Net income	$	205,221		$	184,440

The accompanying notes are an integral part of this statement.

3

THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands of Dollars)
Unaudited

	Nine Months
	Ended September 30,
				2004
	2005			Restated
Revenues:
Car rental	$	4,526,063		$	4,090,276
Industrial and construction equipment rental		1,020,944			838,588
Other		79,525			62,699
Total revenues (Note 1A)		5,626,532			4,991,563
Expenses:
Direct operating		3,145,768			2,775,993
Depreciation of revenue earning equipment (Note 6)		1,188,903			1,084,480
Selling, general and administrative		484,324			453,428
Interest, net of interest income of $26,175 and $15,751 (Note 7)		353,208			285,078
Total expenses (Note 1A)		5,172,203			4,598,979
Income before income taxes and minority interest		454,329			392,584
Provision for taxes on income (Note 5)		(119,560	)		(114,505	)
Minority interest (Note 1)		(9,473	)		(1,456	)
Net income	$	325,296		$	276,623

The accompanying notes are an integral part of this statement.

4

THE HERTZ CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
Unaudited

	Nine Months
	Ended September 30,
	2005			2004
Cash flows from operating activities:
Net income	$	325,296		$	276,623
Adjustments to reconcile net income to net cash provided by operating activities		1,418,909			1,533,282
Net cash provided by operating activities (Note 1)		1,744,205			1,809,905
Cash flows from investing activities:
Proceeds from sales (purchases) of short-term investments, net		287,884			(154,536	)
Revenue earning equipment expenditures		(10,018,051	)		(8,899,161	)
Proceeds from disposal of revenue earning equipment		7,191,204			6,103,751
Property and equipment expenditures		(279,736	)		(218,668	)
Proceeds from disposal of property and equipment		49,330			51,984
Available-for-sale securities:
Purchases		—			(9,461	)
Sales		245			9,220
Changes in investment in joint venture		—			2,000
Net cash used in investing activities (Note 1)		(2,769,124	)		(3,114,871	)
Cash flows from financing activities:
Issuance of an intercompany note (Notes 7 and 11)		1,185,000			—
Proceeds from issuance of long-term debt		24,316			1,958,691
Repayment of long-term debt		(517,783	)		(909,913	)
Short-term borrowings:
Proceeds		3,617,020			1,212,299
Repayments		(2,132,654	)		(593,568	)
Ninety day term or less, net (Note 11)		182,269			(428,187	)
Dividends paid (Notes 7 and 11)		(1,185,000	)		—
Net cash provided by financing activities		1,173,168			1,239,322
Effect of foreign exchange rate changes on cash		(52,520	)		(8,058	)
Net increase (decrease) in cash and equivalents during the period		95,729			(73,702	)
Cash and equivalents at beginning of year		680,866			609,986
Cash and equivalents at end of period	$	776,595		$	536,284
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest (net of amounts capitalized)	$	349,648		$	272,069
Income taxes		12,036			(3,952	)

The accompanying notes are an integral part of this statement.

5

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 1 — Basis of Presentation

The Hertz Corporation, together with its subsidiaries, referred to herein as “we,” “our” and “us,” is an indirect wholly owned subsidiary of Ford Motor Company, or “Ford.” See Note 11 — Relationship with Ford.

On September 12, 2005, Ford entered into a definitive agreement, or the “Stock Purchase Agreement,” with CCMG Holdings, Inc., or “CCMG,” under which Ford will sell to CCMG all its shares of our common stock. CCMG is owned by private equity funds managed by Clayton, Dubilier & Rice, Inc., The Carlyle Group and Merrill Lynch Global Private Equity. The sale is subject to customary conditions, including applicable regulatory approvals, and is anticipated to be completed by year-end 2005.

The Stock Purchase Agreement contemplates a number of transactions including, among other things, the termination of the existing tax sharing agreement between Ford and us. The cancellation or settlement of related intercompany balances and other consequences of the sale, which are subject to the completion of our sale by Ford to CCMG, have not been reflected in these condensed consolidated financial statements.

The summary of accounting policies set forth in Note 1 to our audited consolidated financial statements contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2004, or the “10-K,” filed with the Securities and Exchange Commission, or “SEC,” on March 21, 2005, has been followed in preparing the accompanying condensed consolidated financial statements.

In our opinion, all adjustments (which include only normal recurring adjustments) necessary for a fair statement of the results of operations for the interim periods have been made. Results for interim periods are not necessarily indicative of results for a full year.

Certain prior period amounts have been reclassified to conform with current reporting. For the nine months ended September 30, 2004, revenue earning equipment expenditures and proceeds from disposals have been reclassified from operating activities to investing activities in our condensed consolidated statement of cash flows. A summary of the reclassifications in our condensed consolidated statement of cash flows is as follows (in thousands of dollars):

	Nine Months Ended
	September 30, 2004
	As
	Previously			As
	Reported			Reclassified
Net cash flows (used in) provided by operating activities	$	(985,505	)	$	1,809,905
Net cash used in investing activities	$	(319,461	)	$	(3,114,871	)
Net decrease in cash and equivalents during the period	$	(73,702	)	$	(73,702	)

On July 1, 2004, we increased our joint venture ownership interest in Navigation Solutions LLC, or “Navigation Solutions,” from 40% to 65%. This change resulted from an equity distribution by Navigation Solutions to the other member of Navigation Solutions, effectively reducing its ownership interest to 35%. Based upon this ownership change, we began consolidating 100% of the balance sheet and results of operations of Navigation Solutions into our financial statements and deducting the minority interest share relating to the 35% member. For those periods prior to July 1, 2004, the results of operations and investment in this joint venture had been reported using the equity method of accounting.

6

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 1A — Restatement of Consolidated Statement of Operations

In our 10-K, we announced that we were restating our previously issued consolidated statements of operations for the years ended December 31, 2003 and 2002 and the condensed consolidated statements of operations for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004, or the “Restatement.” The Restatement corrected certain of our historical accounting policies to conform with generally accepted accounting principles.

As a result of the Restatement, total revenues and expenses in the previously issued condensed consolidated statement of operations for the quarter and nine months ended September 30, 2004 have each been increased by $218.1 million and $604.8 million, respectively. Because previously reported revenues and expenses for the quarter and nine months ended September 30, 2004 were increased by equal amounts, the Restatement did not result in a change in our previously reported income before income taxes and minority interest or net income nor has it changed our liquidity or financial condition. Additionally, the Restatement had no effect on our condensed consolidated balance sheet or statement of cash flows. A more complete description of the Restatement is set forth in Note 1A to our consolidated financial statements contained in our 10-K.

A summary of the effects of the Restatement on our previously issued condensed consolidated statement of operations is as follows (in thousands of dollars):

	Quarter Ended
	September 30, 2004
	As
	Previously			As
	Reported			Restated
Revenues:
Car rental	$	1,363,814		$	1,538,357
Industrial and construction equipment rental		277,047			316,331
Other		20,239			24,509
Total revenues		1,661,100			1,879,197
Expenses:
Direct operating		778,384			994,164
Depreciation of revenue earning equipment		370,738			370,738
Selling, general and administrative		158,742			161,059
Interest, net of interest income of $6,741		102,372			102,372
Total expenses		1,410,236			1,628,333
Income before income taxes and minority interest		250,864			250,864
Provision for taxes on income		(64,968	)		(64,968	)
Minority interest		(1,456	)		(1,456	)
Net income	$	184,440		$	184,440

7

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

	Nine Months Ended
	September 30, 2004
	As
	Previously			As
	Reported			Restated
Revenues:
Car rental	$	3,604,214		$	4,090,276
Industrial and construction equipment rental		730,470			838,588
Other		52,100			62,699
Total revenues		4,386,784			4,991,563
Expenses:
Direct operating		2,176,727			2,775,993
Depreciation of revenue earning equipment		1,084,480			1,084,480
Selling, general and administrative		447,915			453,428
Interest, net of interest income of $15,751		285,078			285,078
Total expenses		3,994,200			4,598,979
Income before income taxes and minority interest		392,584			392,584
Provision for taxes on income		(114,505	)		(114,505	)
Minority interest		(1,456	)		(1,456	)
Net income	$	276,623		$	276,623

Note 2 — Recent Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board, or “FASB,” issued FASB Staff Position No. 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004,” or “FSP 109-2”. FSP 109-2 provides accounting guidance for the one-time tax deduction of 85% of non-U.S. earnings that are repatriated in excess of a base amount as defined in the American Jobs Creation Act of 2004, or “the Act.” Statement of Financial Accounting Standards, or “SFAS,” No. 109, “Accounting for Income Taxes,” requires a company to reflect in the period of enactment the effect of a new tax law. Due to the lack of clarification on certain provisions within the Act, FSP 109-2 allowed companies time beyond the financial reporting period of enactment to evaluate the effect of the Act. We are in the process of evaluating the impact of the Act and we are unable to estimate its effects.

In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections — a replacement of Accounting Principles Board, or “APB,” Opinion No. 20 and FASB Statement No. 3.” Previously, APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” required the inclusion of the cumulative effect of changes in accounting principle in net income of the period of the change. SFAS No. 154 requires companies to recognize changes in accounting principle, including changes required by a new accounting pronouncement when the pronouncement does not include specific transition provisions, retrospectively to prior periods’ financial statements. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We are required to adopt the provisions of SFAS No. 154, as applicable, beginning in fiscal year 2006. We do not expect any impact on our financial position, results of operations or cash flows.

Note 3 — Cash and Equivalents and Short-term Investments

Cash and equivalents includes time deposits, marketable securities and other investments that are readily convertible into cash and have original maturities of three months or less. As of September 30, 2005 and December 31, 2004, our short-term investments of $269.1 million and $557.0 million, respectively, consisted of investments with a related party investment fund that pools and invests excess cash balances of certain Ford subsidiaries to maximize returns. See Note 11 — Relationship with Ford.

8

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 4 — Goodwill and Other Intangible Assets

We account for goodwill under SFAS No. 142, “Goodwill and Other Intangible Assets.” Under SFAS No. 142, goodwill is no longer amortized, but instead must be tested for impairment at least annually. We conducted the required annual goodwill impairment test in the second quarter of 2005, and determined that there was no impairment. Certain other intangible assets are amortized over their estimated useful lives.

The following summarizes the changes in our goodwill, by segment, and other intangible assets (in thousands of dollars):

	December 31, 2004		Change(1)			September 30, 2005
Goodwill
Car rental	$	365,607	$	(1,517	)	$	364,090
Industrial and construction equipment rental		177,268		(5,546	)		171,722
Total Goodwill		542,875		(7,063	)		535,812
Other intangible assets		1,570		9,426			10,996
Total	$	544,445	$	2,363		$	546,808

⁽¹⁾ The change in goodwill resulted primarily from the translation of foreign currencies at different exchange rates on December 31, 2004 and September 30, 2005. The change in other intangible assets resulted from the acquisitions of domestic car rental licensees and the amortization of certain other intangible assets. The largest acquisition of a domestic car rental licensee in 2005 resulted in $9.0 million of other intangibles which are not subject to amortization.

Note 5 — Income Taxes

The provision for taxes on income is based upon the expected effective tax rate applicable to the full year. The effective tax rate for the quarter and nine months ended September 30, 2005 of 20.7% and 26.3%, respectively, are lower than the U.S. federal statutory rate of 35% primarily due to the reversal of a valuation allowance on foreign tax credit carryforwards of $35.0 million in the quarter ended September 30, 2005 and the mix of pretax operating results among countries with different tax rates. The nine months ended September 30, 2004 included favorable foreign tax adjustments of $23.3 million.

Note 6 — Depreciation of Revenue Earning Equipment

Depreciation of revenue earning equipment includes the following (in thousands of dollars):

	Quarter Ended
	September 30,
	2005			2004
Depreciation of revenue earning equipment	$	443,678		$	390,051
Adjustment of depreciation upon disposal of the equipment		(16,138	)		(22,016	)
Rents paid for vehicles leased		4,926			2,703
Total	$	432,466		$	370,738

9

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

	Nine Months Ended
	September 30,
	2005			2004
Depreciation of revenue earning equipment	$	1,232,451		$	1,122,248
Adjustment of depreciation upon disposal of the equipment		(57,378	)		(47,440	)
Rents paid for vehicles leased		13,830			9,672
Total	$	1,188,903		$	1,084,480

The adjustment of depreciation upon disposal of revenue earning equipment for the quarters ended September 30, 2005 and 2004 included net gains of $6.9 million and $15.3 million, respectively, on the disposal of vehicles in our car rental operations and net gains of $9.2 million and $6.7 million, respectively, on the disposal of equipment in our industrial and construction equipment rental operations. Depreciation rates being used to compute the provision for depreciation of revenue earning equipment were decreased in our domestic car rental operations (effective April 1, and July 1, 2005) and our North American industrial and construction equipment rental operations (effective January 1, and July 1, 2005) to reflect changes in the estimated residual values to be realized when revenue earning equipment is sold, resulting in net reductions in depreciation expense for the quarter ended September 30, 2005 of $5.5 million and $4.3 million, respectively.

The adjustment of depreciation upon disposal of revenue earning equipment for the nine months ended September 30, 2005 and 2004 included net gains of $26.1 million and $27.8 million, respectively, on the disposal of vehicles in our car rental operations and net gains of $31.3 million and $19.6 million, respectively, on the disposal of equipment in our industrial and construction equipment rental operations. Cumulative changes to depreciation rates being used to compute the provision for depreciation of revenue earning equipment in our domestic car rental operations and North American industrial and construction equipment rental operations resulted in net reductions in depreciation expense for the nine months ended September 30, 2005 of $15.6 million and $9.1 million, respectively.

Note 7 — Debt

Debt as of September 30, 2005 and December 31, 2004 consisted of the following (in thousands of dollars):

	September 30,		December 31,
	2005		2004
Notes payable, including commercial paper, average interest rate: 2005, 4.7%; 2004, 2.4%	$	2,449,753	$	993,856
Promissory notes, average interest rate: 2005, 6.3%; 2004, 6.1% (effective average interest rate: 2005, 6.4%; 2004, 6.1%); net of unamortized discount: 2005, $9,384; 2004, $10,964; due 2005 to 2028		5,184,231		5,700,443
Intercompany Note Payable to Ford Holdings LLC, average interest rate: 5.8%; due 2010		1,185,000		—
Foreign subsidiaries’ debt, including commercial paper: in millions (2005, $229.3; 2004, $787.7); and other borrowings; average interest rate: 2005, 3.7%; 2004, 3.0%		1,778,939		1,733,732
Total	$	10,597,923	$	8,428,031

The aggregate amounts of payments to be made upon the maturity of debt for each of the twelve-month periods ending September 30, in millions, are as follows: 2006, $4,335.7 (including $3,974.6 of commercial paper, demand and other short-term borrowings); 2007, $1,276.8; 2008, $855.9; 2009, $470.9; 2010, $1,885.1; after 2010, $1,800.1.

10

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

On September 30, 2003, we issued $500.0 million of 4.7% Senior Promissory Notes, or the “4.7% Notes,” due on October 2, 2006. On June 3, 2004, we issued $600.0 million of 6.35% Senior Promissory Notes, or the “6.35% Notes,” due on June 15, 2010. Effective September 30, 2003 and June 3, 2004, we entered into interest rate swap agreements, or “Swaps,” relating to the 4.7% Notes and 6.35% Notes, respectively. Under these agreements, we pay interest at a variable rate in exchange for fixed rate receipts, effectively transforming the 4.7% Notes and the 6.35% Notes to floating rate obligations with effective interest rates as of September 30, 2005 of 5.66% and 5.70%, respectively. The Swaps are designated as fair value hedges with no ineffectiveness, as defined by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The carrying amounts of the Swaps are adjusted to their fair value for changes in market interest rates, with an offsetting adjustment to the fixed rate debt. As of September 30, 2005, the fair value adjustments relating to the Swaps on the 4.7% Notes and the 6.35% Notes were $9.3 million and $3.9 million, respectively. The fair value adjustment relating to the Swaps on the 4.7% Notes and the 6.35% Notes was reflected in the condensed consolidated balance sheet in “Accrued liabilities” with an offsetting decrease in “Debt.”

During 2002, we established an Asset Backed Securitization, or “ABS,” program to reduce our borrowing costs and enhance financing resources for our domestic car rental fleet. All debt issued under the ABS program is collateralized by the assets of the special purpose entities consisting of revenue earning vehicles we use in our car rental business, restricted cash and certain receivables related to revenue earning vehicles. The ABS program provided for the initial issuance of asset backed commercial paper (up to $1.0 billion) and the subsequent issuance of asset backed medium-term notes. These instruments are issued by wholly owned and consolidated special purpose entities and are included in “Debt” in our condensed consolidated balance sheet.

On March 31, 2004, we issued $600.0 million of asset backed medium-term notes, or the “Medium-Term Notes,” under the ABS program. Of the $600.0 million of the Medium-Term Notes, $500.0 million has fixed interest rates ranging from 2.4% to 3.2% and maturities ranging from 2007 to 2009 and the remaining $100.0 million has a variable interest rate based on the one-month LIBOR rate plus nine basis points (3.9% as of September 30, 2005) and matures in 2007. Payments of principal and interest relating to the Medium-Term Notes are insured to the extent provided in a note guaranty insurance policy issued by MBIA Insurance Corporation.

Under our ABS program, a committed letter of credit facility has been arranged to provide up to $215.0 million of letters of credit for credit enhancement. As of September 30, 2005, a $200.0 million letter of credit had been issued under this facility, the full amount of which was undrawn.

As of September 30, 2005, $849.5 million of asset backed commercial paper was outstanding under the ABS program. The average interest rate as of September 30, 2005 was 3.7%. The collateralized commercial paper has a maximum term of 58 days when issued. As of September 30, 2005, $600.0 million of asset backed Medium-Term Notes were outstanding. The average interest rate as of September 30, 2005 was 3.0%. As of September 30, 2005, the outstanding commercial paper and Medium-Term Notes were collateralized by $1,440.9 million net book value of revenue earning vehicles, $69.4 million of receivables and $4.5 million of restricted cash. The restricted cash is to be used for the purchase of revenue earning vehicles or for the repayment of outstanding indebtedness under the ABS program. Restricted cash is included in “Cash and equivalents” in our condensed consolidated balance sheet.

On July 2, 2004, we established a Euro Medium-Term Note Program under which we and/or Hertz Finance Centre plc, or “HFC,” a wholly owned subsidiary of ours, can issue up to Euro 650.0 million in Medium-Term Notes, or the “Euro Notes.” On July 16, 2004, HFC issued Euro 200.0 million of Euro Notes under this program. The Euro Notes are fully guaranteed by us, mature in July 2007, and have a variable interest rate based on the three-month EURIBOR rate plus 110 basis points. As of September 30, 2005, the interest rate on the Euro Notes was 3.22%.

On August 5, 2004, we issued $500.0 million of Promissory Notes consisting of $250.0 million of floating rate notes at the three-month LIBOR rate plus 120 basis points due on August 5, 2008, and $250.0 million

11

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

of 6.90% fixed rate notes due on August 15, 2014. As of September 30, 2005, the interest rate on the $250.0 million floating rate notes was 4.93%.

We have launched tender offers for various series of our outstanding notes in connection with our pending sale to CCMG. See Note 12 — Subsequent Events.

On May 26, 2005, we entered into a Credit Agreement, or the “Interim Credit Facility,” with an aggregate availability of up to $3.0 billion from external financial institutions. The Interim Credit Facility, as amended on July 5, 2005, provides a term facility of up to $1,650.0 million and a revolving credit facility of up to $700.0 million available to The Hertz Corporation and a term facility of up to $350.0 million and a revolving credit facility of up to $300.0 million available to our Canadian subsidiary, Hertz Canada Limited, guaranteed by The Hertz Corporation, with unutilized capacity under the Canadian tranches available to be borrowed by The Hertz Corporation. Amounts under the term facilities were fully drawn. Amounts under the revolving facilities are available to be borrowed throughout the term of the Interim Credit Facility. Effective July 26, 2005, $1,825.0 million of the Interim Credit Facility commitments provided by the three initial external financial institutions were syndicated and allocated to eight additional external financial institutions. The Interim Credit Facility matures on November 23, 2005. We may elect a combination of per annum interest rates on the Interim Credit Facility including the federal funds rate plus 0.50%, JPMorgan Chase Bank, N.A.’s prime rate, LIBOR and, for loans made to Hertz Canada Limited, a Canadian base rate or Canadian prime rate, plus, in each case, a margin based on our then-current Standard & Poors Rating Services, a division of McGraw-Hill Companies, Inc., or “S&P,” and Moody’s Investors Service, Inc., or “Moody’s,” debt ratings. We are also required to pay to the lenders a quarterly facility fee equal to a rate per annum of 0.175% of the total amount of the Interim Credit Facility (such rate based upon our current S&P and Moody’s debt ratings). As of September 30, 2005, we had net outstanding borrowings of approximately $1.2 billion and C$550.0 million under the Interim Credit Facility, which as of September 30, 2005, consisted of $1,850.0 million available to The Hertz Corporation and $650.0 million available to Hertz Canada Limited. The Interim Credit Facility is to be replaced and refinanced pursuant to a commitment letter dated October 11, 2005. See Note 12 — Subsequent Events.

On June 10, 2005, we declared and paid a dividend of $1,185.0 million on our outstanding common stock to our sole shareholder, Ford Holdings LLC, in the form of an Intercompany Note, or the “Intercompany Note.” So long as the Interim Credit Facility remains in effect, the Intercompany Note is subordinated in right of payment to all of our existing and future senior indebtedness. The Intercompany Note matures on June 10, 2010, but may be prepaid in whole at any time or in part from time to time. Interest on the Intercompany Note will be payable in cash quarterly or on or before the maturity date of the Intercompany Note, subject to certain limitations on payment contained in the Interim Credit Facility. The Intercompany Note has a per annum interest rate equal to three-month LIBOR plus a spread of 200 basis points. As of September 30, 2005, the interest rate on the Intercompany Note was 5.8%. See Note 11 — Relationship with Ford.

As of September 30, 2005, we had standby letters of credit totaling $208.7 million, primarily to support self-insurance programs required to be fronted by licensed insurance companies in the United States, Canada and in Europe and to support airport concession obligations in the United States and Canada.

As of September 30, 2005, approximately $303.0 million of our consolidated stockholder’s equity was free of dividend limitations pursuant to our existing debt agreements. See Note 11 — Relationship with Ford.

12

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 8 — Employee Retirement Benefits

The following table sets forth net periodic pension and postretirement health care and life insurance expense (in millions of dollars):

	Quarter Ended September 30,
													Health Care & Life
	Pension Benefits												Insurance (U.S.)
	2005						2004						2005		2004
	U.S.			Non-U.S.			U.S.			Non-U.S.
Components of Net Periodic Benefit Cost:
Service cost	$	6.3		$	2.0		$	6.6		$	1.1		$	0.1	$	0.1
Interest cost		5.1			1.6			5.3			1.2			0.2		0.3
Expected return on plan assets		(5.5	)		(1.7	)		(5.5	)		(0.9	)		—		—
Amortization:
Amendments		0.2			—			0.3			—			—		—
Losses and other		0.8			0.4			1.0			0.5			0.1		0.1
Net pension/post retirement expense	$	6.9		$	2.3		$	7.7		$	1.9		$	0.4	$	0.5

	Nine Months Ended September 30,
													Health Care & Life
	Pension Benefits												Insurance (U.S.)
	2005						2004						2005		2004
	U.S.			Non-U.S.			U.S.			Non-U.S.
Components of Net Periodic Benefit Cost:
Service cost	$	18.5		$	5.5		$	16.1		$	3.9		$	0.3	$	0.3
Interest cost		14.9			4.9			13.5			4.1			0.7		0.7
Expected return on plan assets		(16.2	)		(4.4	)		(13.7	)		(3.3	)		—		—
Amortization:
Amendments		0.4			—			0.5			—			—		—
Losses and other		2.7			1.4			1.4			1.2			0.2		0.2
Settlement loss		1.1			—			—			—			—		—
Net pension/post retirement expense	$	21.4		$	7.4		$	17.8		$	5.9		$	1.2	$	1.2

Our policy for funded plans is to contribute annually, at a minimum, amounts required by applicable laws, regulations, and union agreements. For the nine months ended September 30, 2005, we contributed $36.6 million to our worldwide pension plans including a discretionary contribution of $28.0 million to our U.S. defined benefit pension plan and benefit payments made through unfunded plans.

We have non-qualified pension plans for certain of our executives that provide benefits in excess of The Hertz Corporation Account Balance Defined Benefit Pension Plan. For one of these plans, the Supplemental Executive Retirement Plan, a pension settlement loss of $1.1 million was recognized in the quarter ended June 30, 2005 in accordance with the provisions of SFAS No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.”

Note 9 — Segment Information

We follow SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” The statement requires companies to disclose segment data based on how management makes decisions about allocating resources to segments and measuring their performance. The segment revenue information below for 2004 has been restated to reflect the effect of our Restatement as discussed in Note 1A — Restatement of Consolidated Statement of Operations.

We have identified two significant segments: rental of cars and light trucks, or “car rental,” and rental of industrial, construction and material handling equipment, or “industrial and construction equipment rental.” The contributions of these segments, as well as “corporate and other,” to revenues and income before income taxes and minority interest for the quarter and nine months ended September 30, 2005 and 2004

13

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

are summarized below (in thousands of dollars). Corporate and other includes general corporate expenses, certain interest expense, as well as other business activities such as claim management services.

	Quarter Ended September 30,
					Income (Loss) Before Income
	Revenues				Taxes and Minority Interest
			2004
	2005		Restated		2005			2004
Car rental	$	1,730,941	$	1,561,471	$	191,898	(a)	$	207,345
Industrial and construction equipment rental		390,944		316,331		95,417	(b)		48,400
Corporate and other		1,745		1,395		(23,019	)(c)		(4,881	)
Total	$	2,123,630	$	1,879,197	$	264,296		$	250,864

	Nine Months Ended September 30,
					Income (Loss) Before Income
	Revenues				Taxes and Minority Interest
			2004
	2005		Restated		2005			2004
Car rental	$	4,599,954	$	4,148,469	$	325,249	(a)	$	354,667	(d)
Industrial and construction equipment rental		1,021,142		838,586		167,289	(b)		54,404
Corporate and other		5,436		4,508		(38,209	)(c)		(16,487	)
Total	$	5,626,532	$	4,991,563	$	454,329		$	392,584

(a)	Includes a $5.5 million and $15.6 million decrease in depreciation expense related to a change in revenue earning vehicle depreciation rates in our domestic car rental operations for the quarter and nine months ended September 30, 2005, respectively.
(b)	Includes a $4.3 million and $9.1 million decrease in depreciation expense related to a change in revenue earning equipment depreciation rates in our North American equipment rental operations for the quarter and nine months ended September 30, 2005, respectively.
(c)	Includes interest expense of $16.3 million and $20.0 million on the Intercompany note payable to Ford Holdings LLC (relating to the dividend declared and paid June 10, 2005) for the quarter and nine months ended September 30, 2005, respectively.
(d)	Includes $7.0 million received from business interruption claims we made relating to the terrorist attacks of September 11, 2001.

The increase in total assets from December 31, 2004 to September 30, 2005 in our condensed consolidated balance sheet was primarily due to an increase in revenue earning vehicles in our car rental segment.

14

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Note 10 — Comprehensive Income

Accumulated other comprehensive income as of September 30, 2005 and December 31, 2004 includes an accumulated translation gain (in thousands of dollars) of $114,473 and $223,018, respectively. Comprehensive income for the quarter and nine months ended September 30, 2005 and 2004 was as follows (in thousands of dollars):

	Quarter Ended
	September 30,
	2005			2004
Net income	$	205,221		$	184,440
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		(2,347	)		21,113
Unrealized (loss) gain on available-for-sale securities		(15	)		227
Total other comprehensive (loss) income		(2,362	)		21,340
Comprehensive income	$	202,859		$	205,780

	Nine Months
	Ended September 30,
	2005			2004
Net income	$	325,296		$	276,623
Other comprehensive loss, net of tax:
Foreign currency translation adjustments		(108,545	)		(10,772	)
Unrealized loss on available-for-sale securities		(1	)		(91	)
Total other comprehensive loss		(108,546	)		(10,863	)
Comprehensive income	$	216,750		$	265,760

Note 11 — Relationship with Ford

We are an indirect wholly owned subsidiary of Ford. We and certain of our subsidiaries have entered into contracts, or other transactions or relationships, with Ford or subsidiaries of Ford, the most significant of which are described below.

Car purchases/repurchases and advertising arrangements

On July 5, 2005, we, one of our wholly owned subsidiaries and Ford signed a Master Supply and Advertising Agreement, effective July 5, 2005 and expiring August 31, 2010, that covers the 2005 through 2010 vehicle model years. This agreement replaces and supersedes previously existing joint advertising and vehicle supply agreements that would have expired August 31, 2007. The terms of the Master Supply and Advertising Agreement only apply to our fleet requirements and advertising in the United States and to “Ford,” “Lincoln” or “Mercury” brand vehicles, or “Ford Vehicles,” and include Ford’s agreement to pay to us one-half of our advertising costs each year subject to a minimum purchase obligation by us and the number of Ford Vehicles acquired. Under the Master Supply and Advertising Agreement, Ford has agreed to supply to us and we have agreed to purchase from Ford, during each of the 2005 through 2010 vehicle model years, a specific number of Ford Vehicles. To be eligible for cost reimbursement under the Master Supply and Advertising Agreement, the advertising must meet certain conditions, including the condition that we feature Ford Vehicles in a manner and with a prominence that is reasonably satisfactory to Ford. It further provides that the amounts Ford will be obligated to pay to us for our advertising costs will be increased or reduced according to the number of Ford Vehicles acquired by us in any model year, provided Ford will not be required to pay any amount for our advertising costs for any year if the number of Ford Vehicles acquired in the corresponding model year is less than a specified minimum except to the extent that our failure to acquire the specified minimum number of Ford Vehicles is attributable to the availability of Ford Vehicles or Ford vehicle production is disrupted for reasons beyond the control of Ford.

15

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

The advertising contributions paid by Ford for the 2005 vehicle model year under the Master Supply and Advertising Agreement were less than the advertising contributions we received from Ford for the 2004 model year. Based on the Master Supply and Advertising Agreement, advertising contributions in future years could be lower than those for 2005.

Under the terms of the Master Supply and Advertising Agreement we will be able to enter into vehicle advertising and supply agreements with other automobile manufacturers in the United States and in other countries, and we intend to explore those opportunities. However, there can be no assurance that we will be able to obtain advertising contributions from other automobile manufacturers that will mitigate the reduction in Ford’s advertising contributions.

Ford subsidiaries and affiliates also supply other brands of cars, including “Jaguar,” “Volvo,” “Mazda,” and “Land Rover” cars, to us in the United States under arrangements separate from the Master Supply and Advertising Agreement. In addition, Ford, its subsidiaries and affiliates are significant suppliers of cars to our international operations.

During the nine months ended September 30, 2005, we purchased cars from Ford and its subsidiaries at a cost of approximately $4,074.9 million and sold cars to Ford and its subsidiaries under various repurchase programs for approximately $2,377.6 million.

Stock option plan

Certain of our employees participate in the stock option plan of Ford under Ford’s 1998 Long-Term Incentive Plan.

Financial arrangements

In February 1997, Ford extended to us a line of credit of $500.0 million, which currently expires June 30, 2007. This line of credit has an evergreen feature that provides on an annual basis for automatic one-year extensions of the expiration date, unless notice is provided by Ford at least one year prior to the then scheduled expiration date. The line of credit automatically terminates however, at any time Ford ceases to own, directly or indirectly, our capital stock having more than 50% of the total voting power of all of our outstanding capital stock. Our obligations under this agreement would rank pari passu with our senior debt securities. A commitment fee of 0.2% per annum is payable on the unused available credit. As of September 30, 2005, the line of credit was not being utilized.

We maintain agreements with Ford Financial Services, Inc, or “FFS,” a NASD registered broker/dealer and an indirect wholly owned subsidiary of Ford, whereby FFS acts as sales agent for our secured and unsecured domestic commercial paper programs. On July 13, 2005, we entered into a letter agreement with FFS which amended the agreements to provide that they will automatically terminate at any time Ford ceases to own, directly or indirectly, shares of capital stock having more than 50% of the total voting power of all of our outstanding capital stock. We, through our subsidiary Hertz Australia Pty. Limited, have a similar agreement with Ford Credit Australia Limited, also an indirect wholly owned subsidiary of Ford. Hertz Australia Pty. Limited no longer maintains an active commercial paper program.

As of September 30, 2005 and December 31, 2004, Ford owed us and our subsidiaries $447.6 million and $445.2 million, respectively. The balance as of September 30, 2005 and December 31, 2004 includes $251.3 million and $250.7 million, respectively, which represents amounts due under a tax sharing agreement with Ford discussed below and amounts due under various car repurchase and warranty programs. As of September 30, 2005 and December 31, 2004, we and our subsidiaries owed Ford $137.4 million and $76.5 million, respectively (which amounts are included in “Accounts payable” in our condensed consolidated balance sheet), relating to vehicles purchased, and includes the liability for Ford stock-based employee compensation.

We have made short-term investments with a related party investment fund that pools and invests excess cash balances of certain Ford subsidiaries to maximize returns. These short-term investments totaled $269.1 million and $557.0 million as of September 30, 2005 and December 31, 2004, respectively, and will be held until the funds are required for operating purposes or used to reduce indebtedness.

16

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

Taxes

We and our domestic subsidiaries file consolidated Federal income tax returns with Ford. We have entered into a tax sharing agreement with Ford, dated as of March 10, 1997, which provides that we and Ford will make payments to each other such that, with respect to any period, the amount of taxes to be paid by us (subject to certain adjustments) will be determined as though we were to file separate federal, state and local income tax returns as the common parent of an affiliated group of corporations filing combined, consolidated or unitary federal, state and local returns, rather than as a consolidated subsidiary of Ford, with respect to federal, state and local income taxes. With respect to foreign tax credits, the agreement provides that our right to reimbursement will be determined based on usage of such foreign tax credits by the consolidated group.

Other relationships

We also engage in other transactions in the ordinary course of our respective businesses with Ford. These include our rental to Ford of cars and industrial and construction equipment and the financing of purchases, by Ford Motor Credit Company, of used cars sold by us. In addition, we are named as an additional insured under certain of Ford’s insurance policies, for which we pay our allocated portion of the premiums, and have granted affiliates of Ford franchises to operate car and industrial and construction equipment rental businesses in certain Scandinavian countries.

Ford’s Investment In Us

On September 12, 2005, Ford entered into the Stock Purchase Agreement with CCMG under which Ford will sell to CCMG all its shares of our common stock. CCMG is owned by private equity funds managed by Clayton, Dubilier & Rice, Inc., The Carlyle Group and Merrill Lynch Global Private Equity. The sale is subject to customary conditions, including applicable regulatory approvals, and is anticipated to be completed by year-end 2005.

The Stock Purchase Agreement contemplates a number of transactions including, among other things, the termination of the existing tax sharing agreement between Ford and us. The cancellation or settlement of related intercompany balances and other consequences of the sale, which are subject to the completion of our sale by Ford to CCMG, have not been reflected in the accompanying condensed consolidated financial statements.

Dividends

On June 10, 2005, we declared and paid a dividend of $1,185.0 million on our outstanding common stock to our sole shareholder, Ford Holdings LLC, in the form of the Intercompany Note. So long as the Interim Credit Facility remains in effect, the Intercompany Note is subordinated in right of payment to all of our existing and future senior indebtedness. The Intercompany Note matures on June 10, 2010, but may be prepaid in whole at any time or in part from time to time. Interest on the Intercompany Note will be payable in cash quarterly or on or before the maturity date of the Intercompany Note, subject to certain limitations on payment contained in the Interim Credit Facility. The Intercompany Note has a per annum interest rate equal to three-month LIBOR plus a spread of 200 basis points.

We previously announced a plan to commence paying semi-annual dividends to Ford in June 2005. That plan was based on the assumption that Ford would continue to own 100% of our outstanding capital stock. As a result of Ford’s planned divestiture of us, the dividend plan was suspended.

Note 12 — Subsequent Events

Commitment Letter

On October 11, 2005, we entered into a commitment letter, or the “Commitment Letter,” with JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc., Citigroup Global Markets Inc., Goldman Sachs Credit Partners L.P. and Deutsche Bank AG New York Branch under which these initial lenders have severally committed, subject to the terms and conditions set forth in the Commitment Letter, to provide us with up to $2.575 billion to replace and refinance in full the indebtedness under the Interim Credit Facility and to use for general corporate purposes. Effective November 23, 2005, up to an aggregate amount of $1.150 billion is expected to be available in the form of a single draw term credit facility and up to an aggregate

17

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

amount of $775.0 million is expected to be available in the form of a revolving credit facility, up to an aggregate amount of $350.0 million is expected to be available to either Hertz Canada Limited or us in the form of a single draw term facility and up to an aggregate amount of $300.0 million is expected to be available to either Hertz Canada Limited or us in the form of a revolving Credit Facility. The portions of these credit facilities available to Hertz Canada Limited will be guaranteed by us. The credit facilities are expected to mature on February 28, 2006, but would be expected to be repaid at the time CCMG acquires all our common stock, through financing being arranged by CCMG. See Note 1 — Basis of Presentation.

We will be expected to prepay loans and permanently reduce commitments under the credit facilities under certain limited circumstances, including upon certain issuances of securities or incurrence of indebtedness, certain sales of assets and a change of control. The credit facilities are expected to have terms, including restrictive covenants, substantially similar to the terms of the Interim Credit Agreement. In addition, the credit facilities will contain restrictions on our ability to pay dividends and other like payments to, repay indebtedness to, or make investments in Ford or any of its affiliates, in each case subject to certain exceptions.

The Commitment Letter is subject to certain customary conditions including satisfactory completion of documentation.

Tender Offers

On October 17, 2005, we launched cash tender offers for all of the following series of our outstanding senior promissory notes issued under the applicable indentures listed below and for the Euro Notes, all in connection with our pending sale to CCMG:

Issue	Aggregate Principal Amount Outstanding
1986 Indenture
9% Senior Notes due November 1, 2009	$	99,998,000
1994 Indenture
6.50% Senior Notes due May 15, 2006	$	250,000,000
6.30% Senior Notes due November 15, 2006	$	6,859,000
7 5/8% Senior Notes due August 15, 2007	$	500,000,000
6 5/8% Senior Notes due May 15, 2008	$	200,000,000
6 1/4% Senior Notes due March 15, 2009	$	300,000,000
7.40% Senior Notes due March 1, 2011	$	500,000,000
7% Senior Notes due January 15, 2028	$	250,000,000
2001 Indenture
4.7% Senior Notes due October 2, 2006	$	500,000,000
Floating Rate Notes due August 5, 2008	$	250,000,000
6.350% Senior Notes due June 15, 2010	$	600,000,000
7 5/8% Senior Notes due June 1, 2012	$	800,000,000
6.9% Notes due August 15, 2014	$	250,000,000

In conjunction with the tender offers for the notes listed on the table above, we are soliciting consents to the adoption of proposed amendments to (i) the indenture dated as of April 1, 1986, as supplemented (the “1986 Indenture’’), between us and JPMorgan Chase Bank, N.A., as trustee; (ii) the indenture, dated as of December 1, 1994 (the ''1994 Indenture’’), between us and Wachovia Bank, N.A., as trustee; and (iii) the indenture, dated as of March 16, 2001 (the ''2001 Indenture’’), between us and The Bank of New York, as trustee. The 1986 Indenture, the 1994 Indenture and the 2001 Indenture are referred to collectively as the ''Indentures.’’ The purpose of the solicitation of consents is to amend each of the Indentures to eliminate restrictive covenants, certain reporting obligations of us and the cross-acceleration event of default and to amend certain other provisions contained therein. All of the tender offers are subject to the closing of the sale of us (and the closing of the sale is itself subject to various conditions).

18

THE HERTZ CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Unaudited

As of October 28, 2005, we had received more than a majority of the tenders and consents which were required in order to amend the Indentures, and we have entered into supplemental indentures related to the consents. The amendments contained in the supplemental indentures will become operative upon our acceptance of the tenders of the notes, which is anticipated to coincide with the closing of the sale of us to CCMG.

19

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Certain statements contained or incorporated by reference in this Form 10-Q for the quarter ended September 30, 2005, or this “Report,” are “forward-looking statements.” These statements give our current expectations or forecasts of future events and our future performance and do not relate directly to historical or current events or our historical or current performance. Most of these statements contain words that identify them as forward-looking, such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” or other words that relate to future events, as opposed to past or current events. Forward-looking statements are based on the then-current expectations, forecasts and assumptions of our management and involve risks and uncertainties, some of which are outside our control, that could cause actual outcomes and results to differ materially from current expectations. For some of the factors that could cause such differences, see the information under the caption “Risk factors” that was filed as Exhibit 99.1 to our Current Report on Form 8-K that was filed with the Securities and Exchange Commission, or “SEC” on June 15, 2005 and under Item 8.01 that was filed on our Current Report on Form 8-K that was filed with the SEC on October 17, 2005. We cannot assure you that the assumptions made in preparing any of the forward-looking statements will prove accurate or that any projections will be realized. It is expected that there will be differences between projected and actual results. These forward-looking statements speak only as of the date of this Report, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. We caution that undue reliance should not be placed on the forward-looking statements.

Unless the context otherwise requires, (i) references in this Report to “we,” “our” and “us” mean The Hertz Corporation and its consolidated subsidiaries and its predecessors, (ii) “HERC” means Hertz Equipment Rental Corporation, our wholly owned subsidiary, and our various other wholly owned international subsidiaries that conduct our industrial, construction and equipment rental business, (iii) “Ford” means Ford Motor Company and its consolidated subsidiaries (other than us), including Ford Holdings LLC, (iv) “cars” means cars and light trucks (including sport utility vehicles and, in Europe, light commercial vehicles) and (v) “equipment” means industrial, construction and material handling equipment.

Restatement of Consolidated Statement of Operations

We have restated our previously issued consolidated statements of operations for the years ended December 31, 2003 and 2002 and the condensed consolidated statements of operations for the quarters ended March 31, 2004, June 30, 2004 and September 30, 2004, or the “Restatement.” The Restatement corrected certain of our historical accounting policies to conform with generally accepted accounting principles, or “GAAP.”

As a result of the Restatement, total revenues and expenses in our previously issued condensed consolidated statement of operations for the quarter and nine months ended September 30, 2004 have each been increased by $218.1 million and $604.8 million, respectively. Because previously reported revenues and expenses for the quarter and nine months ended September 30, 2004 were increased by equal amounts, the Restatement did not result in a change in our previously reported income before income taxes and minority interest or net income, nor has it changed our liquidity or financial condition. Additionally, the Restatement had no effect on our condensed consolidated balance sheet or statement of cash flows. See Note 1A to the Notes to our condensed consolidated financial statements included in this Report. A more complete description of the Restatement is set forth in Note 1A to our consolidated financial statements contained in the Form 10-K for the fiscal year ended December 31, 2004, or the “10-K,” filed by us with the SEC on March 21, 2005.

All prior period amounts included in this Report affected by the Restatement are presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations on a restated basis.

20

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Overview
We are engaged principally in the business of renting cars and renting industrial and construction equipment.

Our revenues principally are derived from rental and related charges and consist of:

• Car rental revenues (revenues from all company-operated car rental operations, including charges to customers for the reimbursement of costs incurred relating to airport concession fees and vehicle license fees, the fueling of vehicles and the sale of loss or collision damage waivers, liability insurance coverage and other products);

• Industrial and construction equipment rental revenues (revenues from all company-operated equipment rental operations, including amounts charged to customers for the fueling and delivery of equipment and sale of loss damage waivers); and

• Other revenues (fees and certain cost reimbursements from our licensees and revenues from our claim management services).

Our industrial and construction equipment rental business also derives revenues from the sale of new equipment and consumables.

Our expenses consist of:

• Direct operating expenses (primarily wages and related benefits; commissions and concession fees paid to airport authorities, travel agents and others; facility, self-insurance and reservations costs; the cost of new equipment and consumables purchased for resale; and other costs relating to the operation and rental of the revenue earning equipment, such as damage, maintenance and fuel costs);

• Depreciation expense relating to revenue earning equipment (including net gains or losses on the disposal of such equipment). Revenue earning equipment includes cars and industrial and construction equipment;

• Selling, general and administrative expenses (including advertising); and

• Interest expense relating primarily to the funding of the acquisition of revenue earning equipment.

The car and industrial and construction equipment rental industries are significantly influenced by general economic conditions. The car rental industry is also significantly influenced by developments in the travel industry, and, particularly, in airline passenger traffic. Our profitability is primarily a function of the volume and pricing of rental transactions and the utilization of cars and industrial and construction equipment. Significant changes in the purchase price of cars and industrial and construction equipment or interest rates can also have a significant effect on our profitability depending on our ability to adjust pricing for these changes. We expect increases in car costs and modest increases in industrial and construction equipment costs in the near term. We expect a significant increase in car costs for the 2006 model year, which will adversely affect our results of operations beginning in the fourth quarter of 2005 because we do not expect sufficient rental price increases in the near term to offset these car cost increases. Our business requires significant expenditures for cars and industrial and construction equipment, and consequently we require substantial liquidity to finance such expenditures.

Car rental and industrial and construction equipment rental operations are seasonal businesses, with decreased levels of business in the winter months and heightened activity during the spring and summer. To accommodate increased demand, we increase our available fleet and staff during the second and third quarters. As business demand declines, fleet and staff are decreased accordingly. However, certain operating expenses, including minimum concession fees, rent, insurance, and administrative overhead, remain fixed and cannot be adjusted for seasonal demand.

21

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

In the United States, industry revenues from airport rentals have only recently returned to levels seen before the 2001 recession and the September 11, 2001 terrorist attacks. During the first nine months of 2005, we believe the major U.S. car rental brands have seen pricing for rental cars, as measured by rental rates charged, decline slightly. Industry pricing performance is consistent with the downward pressure on pricing for the major U.S. car rental brands in the year ended December 31, 2004. Also, we believe most European car rental companies’ pricing moved downward in 2004. During the first nine months of 2005, we experienced strong transaction day growth in our European operations, but our rental car pricing was below the pricing during the same period last year.

In each of the years ended December 31, 2003 and 2004, we increased the number of our staffed off-airport rental locations in the United States by approximately 200, to approximately 1,200 off-airport locations as of December 31, 2004. As of September 30, 2005, we had approximately 1,300 off-airport locations and we intend to add more off-airport locations in the United States in the remainder of 2005 and in subsequent years. Accordingly, we expect the percentage of our overall U.S. rental revenues and transactions represented by our off-airport operations to grow. When we open a new off-airport location, we incur a number of costs, including those relating to site selection, lease negotiation, recruitment of employees, selection and development of managers, initial sales activities and integration of our systems with those of the companies who will reimburse the location’s replacement renters for their rentals. A new off-airport location, once opened, takes time to generate its full potential revenues, and as a result revenues at new locations do not initially cover their start-up costs and often do not, for some time, cover the costs of their ongoing operation.

From 2001 to 2003, the industrial and construction equipment rental industry experienced downward pricing, measured by the per-period rates charged by rental companies. For the year ended December 31, 2004 and the first nine months of 2005, we believe industry pricing, measured in the same way, has improved in North America but has continued to decline in France and Spain, albeit at a reduced rate. HERC has also experienced higher equipment rental volumes worldwide for the year ended December 31, 2004 and the first nine months of 2005. HERC slightly contracted its North American network of industrial and construction equipment rental locations during the 2001 to 2003 downturn in construction activities. In 2005, we currently expect HERC will add approximately seven new locations in major markets across the United States. In this expansion, we expect HERC will incur non-fleet start-up costs of approximately $900,000 per location and additional fleet acquisition costs over an initial twelve-month period of approximately $4.9 million per location.

We expect moderate demand in the car rental business and continued strong demand in the industrial and construction equipment rental business during the remainder of 2005. Full year 2005 income before income taxes and minority interest is anticipated to be similar to 2004 levels exclusive of any charges relating to our pending sale to CCMG Holdings, Inc., or “CCMG.” (See Note 1 to the Notes to our condensed consolidated financial statements included in this Report.) Recent hurricanes in Florida and other Gulf Coast states will not have a material effect on our full year 2005 results.

On September 12, 2005, Ford entered into a definitive agreement, or “the Stock Purchase Agreement,” with CCMG under which Ford will sell to CCMG all its shares of our common stock. CCMG is owned by private equity funds managed by Clayton, Dubilier & Rice, Inc., The Carlyle Group and Merrill Lynch Global Private Equity. In the sale of us to CCMG:

• CCMG will pay, or cause to be paid, to Ford Holdings LLC or an affiliate designated by Ford Holdings LLC, an aggregate amount in cash equal to $5.6 billion less the principal amount of and all accrued and unpaid interest on the $1.185 billion Intercompany Note issued by us to Ford Holdings LLC on June 10, 2005;

• CCMG will cause us to repay all loans made by Ford Holdings LLC and its affiliates to us, including the Intercompany Note; and

• CCMG will provide or cause to be provided funds necessary to enable us to purchase the tendered senior unsecured promissory notes which we are offering to purchase pursuant to the

22

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

tender offers described under “Recent Developments” below and will purchase or repay or cause us to purchase or repay certain other indebtedness.

The Stock Purchase Agreement contains various covenants regarding the conduct of our business prior to the closing of the sale of us. In addition, the sale of us is subject to a number of conditions, which include, among other things, that:

• no injunction, restraining order or decree of any nature of any governmental authority shall be in effect that restrains or prohibits the consummation of the sale;

• the applicable waiting periods specified under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall have lapsed or terminated and certain other regulatory consents and approvals required to consummate the sale shall have been received;

• the representations and warranties of Ford Holdings LLC and CCMG contained in the Stock Purchase Agreement are true and accurate as of the closing date and the parties have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants contained in the Stock Purchase Agreement to be performed or complied with by them prior to or at the closing date; and

• consents of holders of a majority in principal amount of all the notes issued and outstanding under the indenture, dated as of March 16, 2001, or the “2001 Indenture,” between us and The Bank of New York, as trustee to certain proposed amendments shall have been received, and the supplemental indenture implementing the amendments to the 2001 Indenture shall be effective.

In connection with the sale of us, CCMG is expected to receive equity contributions of approximately $2.3 billion. In addition, we expect CCMG to borrow or to cause us to borrow a significant amount of debt in connection with the sale. Aggregate maximum commitments under all of the expected facilities total approximately $15.0 billion, a significant portion of which is expected to be secured by liens on substantially all of our assets (including those of certain of our subsidiaries), and a significant portion of which is expected to be guaranteed by certain of our existing and future consolidated subsidiaries. The actual amounts of such indebtedness may vary in aggregate amount, structure and specific terms.

The sale is anticipated to be completed by year-end 2005. The Stock Purchase Agreement contemplates a number of transactions including, among other things, the termination of the existing tax sharing agreement between Ford and us. The cancellation or settlement of related intercompany balances and other consequences of the sale, which are subject to the completion of our sale by Ford to CCMG, have not been reflected in the accompanying condensed consolidated financial statements.

The following discussion and analysis provides information that management believes to be relevant to understanding our consolidated financial condition and results of operations. This discussion should be read in conjunction with the financial statements and the related notes thereto contained in our condensed consolidated financial statements included in this Report.

23

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Quarter ended September 30, 2005 Compared with Quarter ended September 30, 2004

Summary

The following table sets forth for the quarters ended September 30, 2005 and 2004 the percentage of operating revenues represented by certain items in our condensed consolidated statement of operations:

	Percentage of Revenues
	Quarter Ended
	September 30,
				2004
	2005			Restated
Revenues:
Car rental		80.1	%		81.9	%
Industrial and construction equipment rental		18.4			16.8
Other		1.5			1.3
		100.0			100.0
Expenses:
Direct operating		52.8			52.9
Depreciation of revenue earning equipment		20.4			19.7
Selling, general and administrative		7.8			8.6
Interest, net of interest income		6.6			5.4
		87.6			86.6
Income before income taxes and minority interest		12.4			13.4
Provision for taxes on income		(2.5	)		(3.5	)
Minority interest		(0.2	)		(0.1	)
Net income		9.7	%		9.8	%

The following table sets forth certain of our selected operating data for the quarters ended September 30, 2005 and 2004:

	Selected Operating Data
	Quarter Ended
	September 30,
	2005		2004
Car Rental Operations:
Average number of owned cars operated during the period		473,900		456,700
Number of transaction days of owned car rental operations during period (in thousands)		34,674		32,856
Rental rate revenue per day	$	44.21	$	43.80
Equipment Rental Operations:
Average cost of rental equipment operated during the period (in millions)	$	2,723.3	$	2,388.3

Revenues

Total revenues in the quarter ended September 30, 2005 of $2,123.6 million increased by 13.0% from $1,879.2 million in the quarter ended September 30, 2004. Revenues from car rental operations of $1,701.5 million in the quarter ended September 30, 2005 increased by $163.1 million, or 10.6%, from $1,538.4 million in the quarter ended September 30, 2004. The increase was primarily the result of a 5.5% increase in car rental volume worldwide, a 0.9% increase in pricing worldwide (including 1.7%

24

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

increase in the U.S.), an increase in refueling and airport concession fees and the effects of foreign currency translation of approximately $10.1 million.

Revenues from industrial and construction equipment rental operations of $390.9 million in the quarter ended September 30, 2005 increased by $74.6 million, or 23.6%, from $316.3 million in the quarter ended September 30, 2004. The increase was due to higher rental volume in North America, improved pricing in the United States, and the effects of foreign currency translation of approximately $4.5 million.

Revenues from all other sources of $31.3 million in the quarter ended September 30, 2005 increased by $6.8 million, or 27.5%, from $24.5 million in the quarter ended September 30, 2004, primarily due to the increase in car rental licensee revenue.

Expenses

Total expenses of $1,859.3 million in the quarter ended September 30, 2005 increased by 14.2% from $1,628.3 million in the quarter ended September 30, 2004, and total expenses as a percentage of revenues increased to 87.6% in the quarter ended September 30, 2005 compared with 86.6% in the quarter ended September 30, 2004.

Direct operating expenses of $1,120.3 million in the quarter ended September 30, 2005 increased by 12.7% from $994.2 million in the quarter ended September 30, 2004. The increase was primarily the result of increases in wages and benefits, commission fees, self insurance expense, facility expenses, gasoline costs and concession fees in car rental operations and the effects of foreign currency translation.

Depreciation of revenue earning equipment for car rental operations of $377.0 million in the quarter ended September 30, 2005 increased by 20.9% from $311.8 million in the quarter ended September 30, 2004. The increase was primarily due to the increase in the average number of vehicles worldwide, lower net proceeds received in excess of book value on the disposal of used vehicles, higher cost of vehicles in the United States, and the effects of foreign currency translation. This increase was partly offset by a $5.5 million net reduction in depreciation for domestic car rental operations resulting from a decrease in depreciation rates to reflect changes in the estimated residual values of vehicles. Depreciation of revenue earning equipment for industrial and construction equipment rental operations of $55.5 million in the quarter ended September 30, 2005 decreased by 5.8% from $58.9 million in the quarter ended September 30, 2004 due to higher net proceeds received in excess of book value on the disposal of used equipment in the United States and a $4.3 million net reduction in depreciation expense to reflect the changes in depreciation rates of equipment in the United States and Canada, partly offset by an increase in the quantity of equipment operated.

Selling, general and administrative expenses of $165.4 million in the quarter ended September 30, 2005 increased by 2.7% from $161.1 million in the quarter ended September 30, 2004. The increase was primarily due to increases in administrative and sales promotion expenses and the effects of foreign currency translation.

Interest expense, net of interest income, of $141.2 million in the quarter ended September 30, 2005 increased by 37.9% from $102.4 million in the quarter ended September 30, 2004, primarily due to increases in the weighted average debt outstanding, the weighted average interest rate and $16.3 million of interest expense on the $1,185.0 million Intercompany Note payable to Ford Holdings LLC relating to the dividend declared and paid on June 10, 2005. The increase was partly offset by an increase in interest income.

The provision for taxes on income of $54.6 million in the quarter ended September 30, 2005 decreased by 15.9% from $65.0 million in the quarter ended September 30, 2004, primarily due to the reversal in 2005 of a valuation allowance on foreign tax credit carryforwards of $35.0 million, partly offset by an increase in pretax income. The valuation allowance was no longer necessary due to the completion of a tax audit of Ford by the U.S. Internal Revenue Service for the years 1996 through 2000. The quarter ended September 30, 2004 included favorable foreign tax adjustments of $23.3 million. The effective tax rate in

25

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

the quarter ended September 30, 2005 was 20.7% as compared to 25.9% in the quarter ended September 30, 2004. See Note 5 to the Notes to our condensed consolidated financial statements included in this Report.

Minority interest of $4.5 million in the quarter ended September 30, 2005 increased by $3.0 million from $1.5 million in the quarter ended September 30, 2004. The increase was primarily due to an increase in Navigation Solutions LLC’s net income in the quarter ended September 30, 2005 as compared to the quarter ended September 30, 2004. See Note 1 to the Notes to our condensed consolidated financial statements included in this Report.

Net Income

We had net income of $205.2 million in the quarter ended September 30, 2005, representing an increase of $20.8 million, or 11.3%, from $184.4 million in the quarter ended September 30, 2004. The increase in net income was primarily due to higher rental volume in our worldwide car rental business and improved results in our North American industrial and construction equipment rental operations, as well as the net effect of other contributing factors noted above.

Nine Months ended September 30, 2005 Compared with Nine Months ended September 30, 2004

Summary

The following table sets forth for the nine months ended September 30, 2005 and 2004 the percentage of operating revenues represented by certain items in our condensed consolidated statement of operations:

	Percentage of Revenues
	Nine Months Ended
	September 30,
				2004
	2005			Restated
Revenues:
Car rental		80.4	%		81.9	%
Industrial and construction equipment rental		18.2			16.8
Other		1.4			1.3
		100.0			100.0
Expenses:
Direct operating		55.9			55.6
Depreciation of revenue earning equipment		21.1			21.7
Selling, general and administrative		8.6			9.1
Interest, net of interest income		6.3			5.7
		91.9			92.1
Income before income taxes and minority interest		8.1			7.9
Provision for taxes on income		(2.1	)		(2.3	)
Minority interest		(0.2	)		(0.1	)
Net income		5.8	%		5.5	%

26

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The following table sets forth certain of our selected operating data for the nine months ended September 30, 2005 and 2004:

	Selected Operating Data
	Nine Months Ended
	September 30,
	2005		2004
Car Rental Operations:
Average number of owned cars operated during the period		442,300		414,600
Number of transaction days of owned car rental operations during period (in thousands)		93,077		87,208
Rental rate revenue per day	$	43.41	$	43.53
Equipment Rental Operations:
Average cost of rental equipment operated during the period (in millions)	$	2,544.0	$	2,270.9

Revenues

Total revenues in the nine months ended September 30, 2005 of $5,626.5 million increased by 12.7% from $4,991.6 million in the nine months ended September 30, 2004. Revenues from car rental operations of $4,526.1 million in the nine months ended September 30, 2005 increased by $435.8 million, or 10.7%, from $4,090.3 million in the nine months ended September 30, 2004. The increase was primarily the result of a 6.7% increase in car rental volume worldwide, an increase in airport concession and refueling fees and the effects of foreign currency translation of approximately $47.4 million, partly offset by a 0.3% decrease in pricing worldwide.

Revenues from industrial and construction equipment rental operations of $1,020.9 million in the nine months ended September 30, 2005 increased by $182.3 million, or 21.7%, from $838.6 million in the nine months ended September 30, 2004. The increase was due to higher rental volume in North America, improved pricing in the United States and the effects of foreign currency translation of approximately $13.8 million.

Revenues from all other sources of $79.5 million in the nine months ended September 30, 2005 increased by $16.8 million, or 26.8%, from $62.7 million in the nine months ended September 30, 2004, primarily due to the increase in car rental licensee revenue and the effects of foreign currency translation.

Expenses

Total expenses of $5,172.2 million in the nine months ended September 30, 2005 increased by 12.5% from $4,599.0 million in the nine months ended September 30, 2004, and total expenses as a percentage of revenues decreased to 91.9% in the nine months ended September 30, 2005 compared with 92.1% in the nine months ended September 30, 2004.

Direct operating expenses of $3,145.8 million in the nine months ended September 30, 2005 increased by 13.3% from $2,776.0 million in the nine months ended September 30, 2004. The increase was primarily the result of increases in wages and benefits, commission fees, facility expenses, gasoline costs, and concession fees in car rental operations, the effects of foreign currency translation and $7.0 million received in 2004 regarding insurance claims made by us relating to the terrorist attacks of September 11, 2001.

Depreciation of revenue earning equipment for car rental operations of $1,026.9 million in the nine months ended September 30, 2005 increased by 12.2% from $915.6 million in the nine months ended September 30, 2004. The increase was primarily due to the increase in the average number of vehicles worldwide, higher cost of vehicles in the U.S. and the effects of foreign currency translation. This increase was partly

27

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

offset by a $15.6 million net reduction in depreciation for domestic car rental operations resulting from a decrease in depreciation rates to reflect changes in the estimated residual values of vehicles. Depreciation of revenue earning equipment for industrial and construction equipment rental operations of $162.0 million in the nine months ended September 30, 2005 decreased by 4.1% from $168.9 million in the nine months ended September 30, 2004 due to higher net proceeds received in excess of book value on the disposal of used equipment in the United States, and a $9.1 million net reduction in depreciation resulting from the effects of changes in depreciation rates of equipment in the U.S. and Canada, partly offset by an increase in the quantity of equipment operated.

Selling, general and administrative expenses of $484.3 million in the nine months ended September 30, 2005 increased by 6.8% from $453.4 million in the nine months ended September 30, 2004. The increase was primarily due to increases in administrative and sales promotion expenses and the effects of foreign currency translation.

Interest expense, net of interest income, of $353.2 million in the nine months ended September 30, 2005 increased by 23.9% from $285.1 million in the nine months ended September 30, 2004, primarily due to increases in the weighted average debt outstanding, the weighted average interest rate and $20.0 million of interest expense on the $1,185.0 million Intercompany Note payable to Ford Holdings LLC relating to the dividend declared and paid on June 10, 2005. The increase was partly offset by an increase in interest income.

The provision for taxes on income of $119.6 million in the nine months ended September 30, 2005 increased by 4.4% from $114.5 million in the nine months ended September 30, 2004, primarily due to an increase in pre-tax income in the nine months ended September 30, 2005, partly offset by the reversal of a valuation allowance on foreign tax credit carryforwards of $35.0 million. The nine months ended September 30, 2004 included favorable foreign tax adjustments of $23.3 million. The effective tax rate in the nine months ended September 30, 2005 was 26.3% as compared to 29.2% in nine months ended September 30, 2004. See Note 5 to the Notes to our condensed consolidated financial statements included in this Report.

Minority interest of $9.5 million in the nine months ended September 30, 2005 increased $8.0 million from $1.5 million in the nine months ended September 30, 2004. The increase was due to only one quarter of earnings included in 2004 as we increased our ownership interest in Navigation Solutions LLC beginning in July 2004. See Note 1 to the Notes to our condensed consolidated financial statements included in this Report.

Net Income

We had net income of $325.3 million in the nine months ended September 30, 2005, representing an increase of $48.7 million, or 17.6% from $276.6 million in the nine months ended September 30, 2004. The increase in net income was primarily due to higher rental volume in our worldwide car rental business and improved results in our North American industrial and construction equipment rental operations, as well as the net effect of other contributing factors noted above.

Outlook

We expect moderate demand in the car rental business and continued strong demand in the industrial and construction equipment rental business during the remainder of 2005. Full year 2005 income before income taxes and minority interest is anticipated to be similar to 2004 levels exclusive of any charges relating to our pending sale to CCMG. (See Note 1 to the Notes to our condensed consolidated financial statements included in this Report.) Recent hurricanes in Florida and other Gulf Coast States will not have a material effect on our full year 2005 results.

28

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Liquidity and Capital Resources

As of September 30, 2005, we had cash and equivalents of $776.6 million, an increase of $95.7 million from December 31, 2004. As of September 30, 2005, cash and equivalents included $4.9 million of restricted cash to be used for the purchase of revenue earning vehicles or for the repayment of outstanding indebtedness under the Asset Backed Securitization, or “ABS,” program. In addition, we have made short-term investments with a related party investment fund that pools and invests excess cash balances of certain Ford subsidiaries to maximize returns. These short-term investments totaled $269.1 million as of September 30, 2005. The cash equivalents and short-term investments are being held until the funds are required for operating purposes or to reduce indebtedness.

Our domestic and foreign operations are funded by cash provided by operating activities, and by extensive financing arrangements maintained by us in the United States, Europe, Australia, New Zealand, Canada and Brazil. Net cash provided by operating activities during the nine months ended September 30, 2005 was $1,744.2 million, a decrease of $65.7 million from the nine months ended September 30, 2004. This decrease was primarily due to timing differences in the receipts and payments of receivables, amounts due from affiliates, accounts payable and accrued liabilities and the increase in depreciation of revenue earning equipment. Revenue earning equipment expenditures and proceeds from the disposal of such equipment have been reclassified from operating activities to investing activities for the nine months ended September 30, 2004. See Note 1 to the Notes to our condensed consolidated financial statements included in this Report.

Our primary use of cash in investing activities is for the acquisition of revenue earning equipment, which consists of cars and industrial and construction equipment. Net cash used in investing activities during the nine months ended September 30, 2005 was $2,769.1 million, a decrease of $345.7 million from the nine months ended September 30, 2004. The decrease is primarily due to the net increase in the proceeds from sales of short-term investments. Our expenditures for the nine months ended September 30, 2005 for revenue earning equipment were $10,018.1 million (partially offset by proceeds from the disposal of such equipment of $7,191.2 million). These assets are purchased by us in accordance with the terms of programs negotiated with car and equipment manufacturers.

For the nine months ended September 30, 2005, our capital expenditures for property and non-revenue earning equipment were $279.7 million. For the year 2005, we anticipate a slightly increased level of net expenditures for revenue earning equipment and property and equipment compared to the year 2004. See “Capital Expenditures” below.

Car rental and equipment rental operations are seasonal businesses with decreased levels of business in the winter months and heightened activity during the spring and summer. This is particularly true of our on-airport car rental operations and equipment rental operations. To accommodate this increased demand, we maintain a larger fleet by holding vehicles and equipment and purchasing additional fleet which increases our financing requirements in the second and third quarters. These seasonal financing needs are funded by increasing the utilization of our commercial paper programs and our bank credit facilities. As business demand moderates during the winter, we reduce our fleet accordingly and dispose of vehicles and equipment. The disposal proceeds are used to reduce short-term debt.

Financing
To finance our domestic operations, we maintain active unsecured and asset backed commercial paper programs. We are also active in the domestic unsecured medium-term and long-term debt markets and the domestic asset backed medium-term debt market, and maintain credit facilities described under “Credit Facilities” below.

During 2002, we established the ABS program for our domestic car rental fleet to reduce our borrowing costs and enhance our financing resources. All debt issued under the ABS program is collateralized by the assets of the special purpose financing entities, consisting of revenue earning vehicles used by us in our car rental business, restricted cash and certain receivables related to the revenue earning vehicles. The ABS program provided for the initial issuance of asset backed commercial paper (up to $1.0 billion)

29

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

and the subsequent issuance of asset backed medium-term notes. These notes are issued by wholly owned and consolidated special purpose financing entities and are included in “Debt” in our condensed consolidated balance sheet. As of September 30, 2005, $849.5 million of asset backed commercial paper and $600.0 million of asset backed medium-term notes were outstanding.

The asset backed commercial paper notes have ratings of A-1 by Standard & Poors Rating Services, a division of McGraw-Hill Companies, Inc., or “S&P,” Prime-1 by Moody’s Investors Service, Inc., or “Moody’s” and F1 by Fitch Ratings, or “Fitch.” Under certain conditions, the commercial paper notes may be repaid by draws under a related bank liquidity facility ($814.0 million), which expires in June 2006, or a related letter of credit issued under a letter of credit facility ($215.0 million), which expires in June 2007.

On September 30, 2003, we issued $500.0 million of 4.7% Senior Promissory Notes, or the “4.7% Notes,” due on October 2, 2006. On June 3, 2004, we issued $600.0 million of 6.35% Senior Promissory Notes, or the “6.35% Notes,” due on June 15, 2010. Effective September 30, 2003 and June 3, 2004, we entered into interest rate swap agreements relating to the 4.7% Notes and 6.35% Notes, respectively. Under these agreements, we pay interest at a variable rate in exchange for fixed rate receipts, effectively transforming the 4.7% Notes and the 6.35% Notes to floating rate obligations with effective interest rates as of September 30, 2005 of 5.66% and 5.70%, respectively. See Note 7 to the Notes to our condensed consolidated financial statements included in this Report.

On March 31, 2004, we issued $600.0 million of asset backed medium-term notes, or the “Medium-Term Notes,” under the ABS program. Of the $600.0 million of the Medium-Term Notes, $500.0 million has fixed interest rates ranging from 2.4% to 3.2% and maturities ranging from 2007 to 2009 and the remaining $100.0 million has a variable interest rate based on the one-month LIBOR rate plus nine basis points (3.9% as of September 30, 2005) and matures in 2007. Payments of principal and interest relating to the Medium-Term Notes are insured to the extent provided in a note guaranty insurance policy issued by MBIA Insurance Corporation. The Medium-Term Notes have ratings of AAA by S&P, Aaa by Moody’s and AAA by Fitch.

On July 2, 2004, we established a Euro Medium-Term Note Program under which we and/or Hertz Finance Centre plc, or “HFC,” a wholly owned subsidiary of ours, can issue up to Euro 650.0 million in Medium-Term Notes, or the “Euro Notes.” On July 16, 2004, HFC issued Euro 200 million of Euro Notes under this program. The Euro Notes are fully guaranteed by us, mature in July 2007, and have a variable interest rate based on the three-month EURIBOR rate plus 110 basis points. As of September 30, 2005, the interest rate on the Euro Notes was 3.22%.

On August 5, 2004, we issued $500.0 million of Promissory Notes consisting of $250.0 million of floating rate notes at the three-month LIBOR rate plus 120 basis points due on August 5, 2008, and $250.0 million of 6.90% fixed rate notes due on August 15, 2014. As of September 30, 2005, the interest rate on the $250.0 million floating rate notes was 4.93%.

The total amount of unsecured medium-term and long-term debt outstanding as of September 30, 2005 was $4.8 billion, excluding the Intercompany note payable to Ford Holdings LLC of $1,185.0 million discussed below, having fixed and floating rates ranging from 4.93% to 9.00% as of September 30, 2005 and having maturities ranging from 2005 to 2028. From time to time, we file with the SEC shelf registration statements to allow for the issuance of such unsecured senior, senior subordinated and junior subordinated debt securities on terms to be determined at the time such securities are offered for sale. As of September 30, 2005, we had $1.9 billion available for issuance under effective registration statements, so long as the SEC’s conditions for issuance are satisfied. Among those conditions is one that, at the time of issuance, the securities being issued are placed in a generic rating category signifying investment grade by at least one nationally recognized statistical rating organization (such as S&P, Moody’s, Fitch and Dominion Bond Rating Services, or “DBRS”). See “Debt Ratings” below.

Borrowing for our international operations also consists of loans obtained from local and international banks and commercial paper programs established in Ireland, Canada, the Netherlands and Belgium. We guarantee only the commercial paper borrowings of our subsidiaries in Ireland, Canada, the Netherlands

30

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

and Belgium, and we guarantee short-term bank loans of our subsidiary in Australia. All borrowings by international operations are either in the international operation’s local currency or, if in non-local currency, hedged to minimize foreign exchange exposure. As of September 30, 2005, the total debt for our foreign operations was $1,778.9 million, of which $1,531.9 million was short-term (original maturity of less than one year) and $247.0 million was long-term. As of September 30, 2005, the total amounts outstanding under the commercial paper programs in Ireland, the Netherlands and Belgium were $208.2 million, $12.1 million and $9.0 million, respectively.

On June 10, 2005, we declared and paid a dividend of $1,185.0 million on our outstanding common stock to Ford Holdings LLC in the form of the Intercompany Note. So long as the Interim Credit Facility, described in “Credit Facilities” below, remains in effect, the Intercompany Note is subordinated in right of payment to all of our existing and future senior indebtedness. The Intercompany Note matures on June 10, 2010, but may be prepaid in whole at any time or in part from time to time. Interest on the Intercompany Note will be payable in cash quarterly or on or before the maturity date of the Intercompany Note, subject to certain limitations contained in the Interim Credit Facility. The Intercompany Note has a per annum interest rate equal to three-month LIBOR plus a spread of 200 basis points. As of September 30, 2005, the interest rate on the Intercompany Note was 5.8%.

On April 20, 2005, Ford first announced that it was evaluating its long-term strategic options for its investment in us. Since the announcement by Ford, our ability to sell unsecured commercial paper has been adversely affected, and has been further impacted by the announcement of our sale and related recent developments described under “Overview,” “Debt Ratings” and “Recent Developments.”

Credit Facilities
As of September 30, 2005, we had committed credit facilities totaling $2.8 billion.

A portion of our committed credit facilities are represented by a combination of multi-year, 364-day global and other committed credit facilities provided by 20 participating banks which as of September 30, 2005 totaled $1.2 billion in commitments. In addition to direct borrowings by us, the multi-year and 364-day global facilities allow certain of our subsidiaries to borrow on the basis of a guarantee by us.

• The multi-year facilities were renegotiated effective July 1, 2005 and currently total $952.5 million in commitments with expirations as follows: $35.0 million on June 30, 2006, $108.0 million on June 30, 2007, $102.0 million on June 30, 2008, $81.0 million on June 30, 2009 and $626.5 million on June 30, 2010. The multi-year facilities that expire in 2010 have an evergreen feature, which provides for the automatic extension of the expiration date one year forward unless the bank provides timely notice.

• During 2005, the 364-day global committed credit facilities, which totaled $94.0 million as of June 16, 2005, were renegotiated and currently expire on June 15, 2006. Under the terms of the 364-day facilities, we are permitted to convert any amount outstanding prior to expiration into a two-year loan.

• The committed facilities totaled $155.9 million as of September 30, 2005 and expire at various times during 2005 and 2006.

Some of our other committed credit facilities are represented by facilities that support our ABS program, which as of September 30, 2005 totaled $1.0 billion:

• Effective September 18, 2002, as part of the ABS program, we transferred a portion of the 364-day global committed credit facilities to the ABS program. As part of the agreement to transfer these commitments, we have waived the right to transfer them back to the 364-day global committed credit facilities without the consent of the participating banks. As of September 30, 2005, $814.0 million was committed under this facility which expires in June 2006.

• In addition to the transfer of the 364-day commitments, we raised committed credit support through an ABS letter of credit from banks that participate in our multi-year global committed

31

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

credit facilities, which totaled $215.0 million as of September 30, 2005 and expires in June 2007. In exchange for this credit support, we agreed to reduce the banks’ multi-year facility commitment by one half of the amount of their ABS letter of credit participation.

In addition to these committed credit facilities, in February 1997, Ford extended to us a line of credit of $500.0 million, which currently expires on June 30, 2007. This line of credit has an evergreen feature that provides on an annual basis for automatic one-year extensions of the expiration date, unless notice is provided by Ford at least one year prior to the then scheduled expiration date. The line of credit automatically terminates, however, at any time Ford ceases to own, directly or indirectly, our capital stock having more than 50% of the total voting power of all our capital stock outstanding and all loans and accrued interest under this facility would become immediately due and payable. Our obligations under this agreement would rank pari passu with our senior debt securities. A quarterly commitment fee of 0.2% is payable to Ford on the average daily unused available credit. As of September 30, 2005, the line of credit was not being utilized.

On May 26, 2005, we entered into a Credit Agreement, or the “Interim Credit Facility,” with an aggregate availability of up to $3.0 billion from external financial institutions. The Interim Credit Facility, as amended on July 5, 2005, provides a term facility of up to $1,650.0 million and a revolving credit facility of up to $700.0 million available to The Hertz Corporation and a term facility of up to $350.0 million and a revolving credit facility of up to $300.0 million available to our Canadian subsidiary, Hertz Canada Limited, guaranteed by The Hertz Corporation, with unutilized capacity under the Canadian tranches available to be borrowed by The Hertz Corporation. Amounts under the term facilities were fully drawn. Amounts under the revolving facilities are available to be borrowed throughout the term of the Interim Credit Facility. The Interim Credit Facility matures on November 23, 2005. We may elect a combination of per annum interest rates on the Interim Credit Facility including the federal funds rate plus 0.50%, JPMorgan Chase Bank, N.A.’s prime rate, LIBOR and, for loans made to Hertz Canada Limited, a Canadian base rate or Canadian prime rate, plus, in each case, a margin based on our then-current S&P and Moody’s debt ratings. We are also required to pay to the lenders a quarterly facility fee equal to a rate per annum of 0.175% of the total amount of the Interim Credit Facility (such rate based upon our current S&P and Moody’s debt ratings). As of September 30, 2005, we had net outstanding borrowings of approximately $1.2 billion and C$550.0 million under the Interim Credit Facility, which as of September 30, 2005, consisted of $1,850.0 million available to The Hertz Corporation and $650.0 million available to Hertz Canada Limited.

We are required to prepay loans and permanently reduce commitments under the Interim Credit Facility under certain limited circumstances, including certain issuances of securities, certain sales of assets, when Ford controls less than 25% of us or any other person or group has equal or greater control of us than Ford, and in the event that on July 26, 2005, previously July 20, 2005, the credit exposure of any of the initial lenders has not been reduced through syndication to $600.0 million or less (which could effectively reduce the total committed availability of the Interim Credit Facility to $1.8 billion as of such date). Effective July 26, 2005, $1,825.0 million of the Interim Credit Facility commitments provided by the three initial external financial institutions were syndicated and allocated to eight additional external financial institutions. The Interim Credit Facility has terms, including restrictive covenants, substantially similar to the terms of our other current committed credit facilities. In addition, the Interim Credit Facility contains restrictions on the payment of any indebtedness to, or investments in, other than in the ordinary course of business, Ford, other than as noted above, and our ability to pay future dividends, other than the dividend to Ford of the Intercompany Note or additional stock, payments pursuant to certain stock option plans or other benefit plans, or any other dividend. We have used and intend to continue to use the amounts borrowed under the Interim Credit Facility to refinance existing, short-term indebtedness and for general corporate purposes. The Interim Credit Facility is to be replaced and refinanced pursuant to a commitment letter dated October 11, 2005. See Note 12 to the Notes to our condensed consolidated financial statements included in this Report.

We maintain agreements with Ford Financial Services, Inc., or “FFS,” a NASD registered broker/dealer and an indirect wholly owned subsidiary of Ford, whereby FFS acts as a sales agent for our secured and unsecured domestic commercial paper programs. We pay fees to FFS, which range from 0.03% to 0.05%

32

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

per annum of commercial paper placed depending upon the monthly average dollar value of the notes outstanding in the portfolios. For the nine months ended September 30, 2005, we paid fees to FFS of $93,377. FFS is under no obligation to purchase any of the notes for its own account. On July 13, 2005, we entered into a letter agreement with FFS which amended the agreements to provide that they will automatically terminate at any time Ford ceases to own shares having more than 50% of the total voting power of all of our outstanding capital stock. Through our subsidiary Hertz Australia Pty. Limited, we also have a similar agreement with Ford Credit Australia Limited, also an indirect wholly owned subsidiary of Ford. Hertz Australia Pty. Limited no longer maintains an active commercial paper program.

We anticipate that the Interim Credit Facility, as replaced and refinanced, will be terminated and all amounts outstanding under it repaid at the time CCMG acquires all our capital stock. At that time, our commercial paper arrangements with FFS and Ford Credit Australia Pty. will also terminate.

Debt Ratings
Debt ratings are not recommendations to buy, sell or hold securities and are subject to revision or withdrawal at any time by the assigning rating agency. Each rating agency may have different criteria in evaluating the risk associated to a company, and therefore ratings should be evaluated independently for each rating agency.

During 2005, our debt ratings or outlook were downgraded by all four rating agencies, generally in conjunction with downgrades of Ford and Ford Motor Credit Company. Our long and short term debt ratings are currently at the lowest ratings that are considered investment grade. In response to Ford’s announcement of the sale of us on September 12, 2005, each of the four rating agencies announced that they had revised their outlook on us to negative and may downgrade our debt ratings, which would be to below investment grade. Our ratings are likely to be downgraded upon the consummation of our sale due to the increase in our total and secured indebtedness in connection with the financing of the sale and other factors. Our current ratings are as follows:

	Debt Ratings
	Long-Term	Short-Term	Outlook/Trend
Moody’s	Baa3	Prime-3	Review — possible downgrade
S&P	BBB-	A-3	CreditWatch — negative
Fitch	BBB-	F2	Rating watch — negative
DBRS	BBB	R-2 (middle)(1)	Under review — negative

⁽¹⁾ Relates to commercial paper of Hertz Canada Limited, one of our wholly owned subsidiaries.

Other Factors
Foreign currency. Our decision to withdraw earnings or investments from foreign countries is, in some cases, influenced by exchange controls and the utilization of foreign tax credits, and may also be affected by fluctuations in exchange rates for foreign currencies and by revaluation of such currencies in relation to the U.S. dollar by the governments involved. Foreign operations have been financed to a substantial extent through loans from local lending sources in the currency of the countries in which such operations are conducted. Car rental operations in foreign countries are, from time to time, subject to governmental regulations imposing varying degrees of currency restrictions. Currency restrictions and other regulations historically have not had a material impact on our operations as a whole.

Ford ownership. By virtue of Ford’s 100% ownership interest in us, Ford has the right to make any changes that it deems appropriate in our assets, corporate structure, capitalization, operations, properties and policies (including dividend policies). See Note 11 to the Notes to our condensed consolidated financial statements included in this Report.

33

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Capital Expenditures

The table below shows revenue earning equipment and property and equipment capital expenditures and related disposal proceeds received by quarter for 2005 and 2004.

	Revenue Earning Equipment								Property and Equipment
						Net Capital								Total Net Capital
						Expenditures								Expenditures
	Capital Expenditures		Disposal Proceeds			(Disposal Proceeds)			Capital Expenditures		Disposal Proceeds			(Disposal Proceeds)
	(Dollars in millions)
2005
First Quarter	$	3,600.2	$	(2,307.4	)	$	1,292.8		$	81.3	$	(9.0	)	$	1,365.1
Second Quarter		4,040.4		(2,304.3	)		1,736.1			105.5		(21.3	)		1,820.3
Third Quarter		2,377.5		(2,579.5	)		(202.0	)		92.9		(19.0	)		(128.1	)
Total	$	10,018.1	$	(7,191.2	)	$	2,826.9		$	279.7	$	(49.3	)	$	3,057.3
2004
First Quarter	$	2,916.1	$	(1,860.7	)	$	1,055.4		$	61.2	$	(11.7	)	$	1,104.9
Second Quarter		3,804.1		(1,921.2	)		1,882.9			82.8		(20.9	)		1,944.8
Third Quarter		2,179.0		(2,321.8	)		(142.8	)		74.6		(19.4	)		(87.6	)
Fourth Quarter		2,410.9		(2,637.2	)		(226.3	)		67.8		(7.3	)		(165.8	)
Total Year	$	11,310.1	$	(8,740.9	)	$	2,569.2		$	286.4	$	(59.3	)	$	2,796.3

For the year ending December 31, 2005, we anticipate a level of net expenditures for revenue earning equipment and property and equipment slightly higher than our net expenditures in 2004. These anticipated capital expenditures reflect expected increases in the prices of 2006 model year vehicles to be acquired beginning in the fourth quarter of 2005, together with capital expenditures relating to the planned expansion of off-airport and HERC locations.

Off-Balance Sheet Commitments

As of September 30, 2005 and December 31, 2004, the following guarantees were issued and outstanding:

Indemnifications
In the ordinary course of business, we execute contracts involving indemnifications standard in the relevant industry and indemnifications specific to a transaction such as the sale of a business. These indemnifications might include claims against any of the following: environmental and tax matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier and other commercial contractual relationships; and financial matters. Performance under these indemnities would generally be triggered by a breach of terms of the contract or by a third party claim. We regularly evaluate the probability of having to incur costs associated with these indemnifications and have accrued for expected losses that are probable and estimable. The types of indemnifications for which payments are possible include the following:

Environmental. We have indemnified various parties for the costs associated with remediating numerous hazardous substance storage, recycling or disposal sites in many states and, in some instances, for natural resource damages. The amount of any such expenses or related natural resource damages for which we may be held responsible could be substantial. The probable losses that we expect to incur for such matters have been accrued, and those losses are reflected in our consolidated financial statements. As of September 30, 2005 and December 31, 2004, the aggregate amounts accrued for environmental liabilities reflected in our consolidated balance sheet in “Accrued liabilities” were $4.8 million and $5.4

34

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

million, respectively. The accrual represents the estimated cost to study potential environmental issues at sites deemed to require investigation or clean-up activities, and the estimated cost to implement remediation actions, including on-going maintenance, as required. Cost estimates are developed by site. Initial cost estimates are based on historical experience at similar sites and are refined over time on the basis of in-depth studies of the site. For many sites, the remediation costs and other damages for which we ultimately may be responsible cannot be reasonably estimated because of uncertainties with respect to factors such as our connection to the site, the materials there, the involvement of other potentially responsible parties, the application of laws and other standards or regulations, site conditions, and the nature and scope of investigations, studies, and remediation to be undertaken (including the technologies to be required and the extent, duration, and success of remediation).

Tax. We provide various tax-related indemnifications as part of the transactions giving rise to the indemnification obligations. The indemnified party typically is protected from certain events that result in a tax treatment different from that originally anticipated. In some cases, a payment under a tax indemnification may be offset in whole or in part by refunds from the applicable governmental taxing authority. We are party to a number of tax indemnifications, and many of these indemnities do not limit potential payment; therefore, we are unable to estimate a maximum amount of potential future payments that could result from claims made under these indemnities.

Risk Management
For a discussion of additional risks arising from our operations, including vehicle liability, general liability and property damage insurable risks, see Part I, Item 1 “Business-Risk Management” in our 10-K.

Market Risks
We are exposed to a variety of market risks, including the effects of changes in interest rates and foreign currency exchange rates. We manage our exposure to these market risks through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Derivative financial instruments are viewed as risk management tools and are not used for speculative or trading purposes. In addition, derivative financial instruments are entered into with a diversified group of major financial institutions in order to manage our exposure to counterparty nonperformance on such instruments. For more information on these exposures see Note 14 to the Notes to our audited consolidated financial statements included in our 10-K.

Interest Rate Risk
From time to time, we enter into interest rate swap agreements to manage interest rate risk. Effective September 30, 2003, we entered into interest rate swap agreements relating to the issuance of our 4.7% Notes due October 2, 2006. Effective June 3, 2004, we entered into interest rate swap agreements relating to the issuance of our 6.35% Notes due June 15, 2010. Under these agreements, we pay interest at a variable rate in exchange for fixed rate receipts, effectively transforming these notes to floating rate obligations. See Note 7 to the Notes to our condensed consolidated financial statements included in this Report and Note 3 to the Notes to our audited consolidated financial statements included in our 10-K. We have assessed our exposure to changes in interest rates by analyzing the sensitivity to our earnings assuming various changes in market interest rates. Assuming a hypothetical increase of one percentage point in interest rates on the existing debt portfolio as of September 30, 2005, net of interest income on investments, our net income would decline by approximately $33.0 million over a twelve-month period.

Foreign Currency Risk
We manage our foreign currency risk primarily by incurring operating and financing expenses in the local currency in the countries in which we operate, including making fleet and equipment purchases and borrowing for working capital needs. Also, we have purchased foreign exchange options to manage exposure to fluctuations in foreign exchange rates for selected marketing programs. The effect of exchange rate changes on these financial instruments would not materially affect our consolidated financial position, results of operations or cash flows. Our risks with respect to currency option contracts are limited to the premium paid for the right to exercise the option and the future performance of the option’s counterparty. Premiums paid for options outstanding as of September 30, 2005, were

35

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

approximately $0.8 million, and we limit counterparties to financial institutions that have strong credit ratings.

We also manage exposure to fluctuations in currency risk on intercompany loans we make to certain of our foreign subsidiaries by entering into foreign currency forward contracts at the time of the loans. The forward rate is reflected in the intercompany loan rate to the foreign subsidiaries, and as a result, the forward contracts have no material impact on earnings.

Inflation
The increased acquisition cost of vehicles is the primary inflationary factor affecting us. Many of our other operating expenses are also expected to increase with inflation, including health care costs. Management does not expect that the effect of inflation on our overall operating costs will be greater for us than for our competitors.

Employee Retirement Benefits

Pension
We sponsor defined benefit pension plans worldwide. Pension obligations give rise to significant expenses that are dependent on assumptions discussed in Note 6 of the Notes to our audited consolidated financial statements included in our 10-K. Based on present assumptions, 2005 worldwide pre-tax pension expense is expected to be approximately $37.5 million, which is an increase of $6.8 million from 2004 primarily attributable to the decrease in the discount rate in the United States from 6.25% to 5.75% and in the United Kingdom from 5.50% to 5.25%, a pension settlement loss of $1.1 million relating to the Supplemental Executive Retirement Plan, as well as the effects of foreign currency translation.

The funded status (i.e., the amount by which the present value of projected benefit obligations exceeded the market value of pension plan assets) of our U.S. qualified plan, in which most domestic employees participate, improved as of December 31, 2004, compared with December 31, 2003. The primary factors that contributed to the improvement in the funded status was a discretionary contribution by us of $48.0 million and an increase in the actual return on plan assets, partly offset by a decrease in the discount rate.

Included in our “Stockholder’s equity” as of December 31, 2004 was a $15.1 million adjustment, net of tax, for worldwide minimum pension liability. The increase of $4.0 million in the pension adjustment from the prior year is primarily attributable to unfunded plans in the United States and Germany and decreases in the discount rates as of December 31, 2004 used to calculate the present value of benefit obligations, in each case compared with the prior year.

We review our pension assumptions regularly and from time to time make contributions beyond those legally required. For example, discretionary contributions of $28.0 million, $48.0 million and $54.0 million were made to the U.S. qualified plan for the nine months ended September 30, 2005 and the years ended December 31, 2004 and 2003, respectively. After giving effect to these contributions, based on current interest rates and on our return assumptions and assuming no additional contributions, we do not expect to be required to pay any variable-rate premiums to the Pension Benefit Guaranty Corporation before 2010.

We participate in various “multiemployer” pension plans administrated by labor unions representing some of our employees. We make periodic contributions to these plans to allow them to meet their pension benefit obligations to their participants. In the event that we withdrew from participation in one of these plans, then applicable law could require us to make an additional lump-sum contribution to the plan, and we would have to reflect that on our balance sheet. Our withdrawal liability for any multiemployer plan would depend on the extent of the plan’s funding of vested benefits. We currently do not expect to incur any withdrawal liability in the near future. However, in the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we could decide to discontinue participation in a plan, and in that event we could face a withdrawal liability. Some multiemployer plans,

36

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

including one in which we participate, are reported to have significant underfunded liabilities. Such underfunding could increase the size of our potential withdrawal liability.

Other Postretirement Benefits
We provide limited postretirement health care and life insurance for employees of our domestic operations with hire dates prior to January 1, 1990. There are no plan assets associated with this plan. We provide for these postretirement costs through monthly accruals. The net periodic postretirement benefit cost for the year ended December 31, 2004 was $1.6 million and the accumulated benefit obligation as of December 31, 2004 was $17.3 million compared to postretirement benefit cost of $1.3 million and an accumulated benefit obligation of $14.1 million as of December 31, 2003. The increase in cost and the accumulated benefit obligation was primarily attributable to the decrease in the discount rate from 6.25% as of December 31, 2003 to 5.75% as of December 31, 2004 and higher than expected medical cost increases.

Recent Developments

Commitment Letter
On October 11, 2005, we entered into a commitment letter, or “Commitment Letter,” with JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc., Citigroup Global Markets Inc., Goldman Sachs Credit Partners L.P. and Deutsche Bank AG New York Branch under which these initial lenders have severally committed, subject to the terms and conditions set forth in the Commitment Letter, to provide us with up to $2.575 billion to replace and refinance in full the indebtedness under the Interim Credit Facility dated as of May 26, 2005, and to use for general corporate purposes. Effective November 23, 2005, up to an aggregate amount of $1.150 billion is expected to be available in the form of a single draw term credit facility and up to an aggregate amount of $775.0 million is expected to be available in the form of a revolving credit facility, up to an aggregate amount of $350.0 million is expected to be available to either Hertz Canada Limited or us in the form of a single draw term facility and up to an aggregate amount of $300.0 million is expected to be available to either Hertz Canada Limited or us in the form of a revolving Credit Facility. The portions of these credit facilities available to Hertz Canada Limited will be guaranteed by us. The credit facilities are expected to mature on February 28, 2006, but would be expected to be repaid with the proceeds raised in the financing of the sale of us. See Note 1 to the Notes to our condensed consolidated financial statements included in this Report.

We will be expected to prepay loans and permanently reduce commitments under the credit facilities under certain limited circumstances, including upon certain issuances of securities or incurrence of indebtedness, certain sales of assets and a change of control. The credit facilities are expected to have terms, including restrictive covenants, substantially similar to the terms of the Interim Credit Agreement. In addition, the credit facilities will contain restrictions on our ability to pay dividends and other like payments to, repay indebtedness to, or make investments in Ford or any of its affiliates, in each case subject to certain exceptions.

The Commitment Letter is subject to certain customary conditions including satisfactory completion of documentation.

37

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Pending Sale and Tender Offers
For a discussion of the pending sale of us pursuant to the Stock Purchase Agreement and the transactions related thereto, see “Overview.”

In addition, pursuant to the Stock Purchase Agreement, on October 17, 2005, we launched cash tender offers for all of the following series of our outstanding senior promissory notes issued under the applicable indentures listed below and for the Euro Notes, all in connection with our pending sale to CCMG:

Issue	Aggregate Principal Amount Outstanding
1986 Indenture
9% Senior Notes due November 1, 2009	$	99,998,000
1994 Indenture
6.50% Senior Notes due May 15, 2006	$	250,000,000
6.30% Senior Notes due November 15, 2006	$	6,859,000
7 5/8% Senior Notes due August 15, 2007	$	500,000,000
6 5/8% Senior Notes due May 15, 2008	$	200,000,000
6 1/4% Senior Notes due March 15, 2009	$	300,000,000
7.40% Senior Notes due March 1, 2011	$	500,000,000
7% Senior Notes due January 15, 2028	$	250,000,000
2001 Indenture
4.7% Senior Notes due October 2, 2006	$	500,000,000
Floating Rate Notes due August 5, 2008	$	250,000,000
6.350% Senior Notes due June 15, 2010	$	600,000,000
7 5/8% Senior Notes due June 1, 2012	$	800,000,000
6.9% Notes due August 15, 2014	$	250,000,000

In conjunction with the tender offers for the notes listed on the table above, we are soliciting consents to the adoption of proposed amendments to (i) the indenture dated as of April 1, 1986, as supplemented (the “1986 Indenture’’), between us and JPMorgan Chase Bank, N.A., as trustee; (ii) the indenture, dated as of December 1, 1994 (the ''1994 Indenture’’), between us and Wachovia Bank, N.A., as trustee; and (iii) the 2001 Indenture. The 1986 Indenture, the 1994 Indenture and the 2001 Indenture are referred to collectively as the ''Indentures.’’ The purpose of the solicitation of consents is to amend each of the Indentures to eliminate restrictive covenants, certain reporting obligations of us and the cross-acceleration event of default and to amend certain other provisions contained therein. All of the tender offers are subject to the closing of the sale of us (and the closing of the sale is itself subject to various conditions as described above).

As of October 28, 2005, we had received more than a majority of the tenders and consents which were required in order to amend the Indentures, and we have entered into supplemental indentures related thereto. The amendments contained in the supplemental indentures will become operative upon our acceptance of the tenders of the notes anticipated to coincide with the closing of the sale of us.

Other Financial Information

The interim financial information included in this quarterly report on Form 10-Q has not been audited by PricewaterhouseCoopers LLP, or “PwC.” In reviewing such information, PwC has applied limited procedures in accordance with professional standards for reviews of interim financial information. Accordingly, reliance on their reports on such information should be restricted. PwC is not subject to the liability provisions of Section 11 of the Securities Act of 1933 for its reports on the interim financial information because such reports do not constitute “reports” or “parts” of registration statements prepared or certified by PwC within the meaning of Sections 7 and 11 of the Securities Act of 1933.

38

ITEM 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed under the Exchange Act is accumulated and communicated to management, including our Chairman of the Board and Chief Executive Officer and Executive Vice President and Chief Financial Officer, or our “Certifying Officers,” as appropriate to allow timely decisions regarding required disclosure.

Our internal control over financial reporting is a process designed by, or under the supervision of, our Certifying Officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP; and that our receipts and expenditures are being made only in accordance with the authorization of our Board of Directors and management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. We regard our internal control over financial reporting as an element of our disclosure controls and procedures.

We restated our financial statements in the manner, and for the reasons, described generally in Note 1A to the Notes to our condensed consolidated financial statements included in this Report and in more detail in Note 1A to the Notes to our consolidated financial statements contained in the Form 10-K for the fiscal year ended December 31, 2004, filed by us with the SEC on March 21, 2005. As explained in our previous filing, the Restatement had been necessitated by our prior presentation of certain items of revenue and expense on a net basis in circumstances under which GAAP, and particularly those set forth in EITF No. 99-19 and No. 01-14, required presentation on a gross basis. In view of this error in the application of GAAP, we had determined that, as of December 31, 2004, a material weakness existed in our internal control over financial reporting with respect to the selection and application of GAAP to our financial statements. The magnitude of any actual or potential misstatement in our financial statements was limited to an increase by identical amounts in revenue and expense in the relevant financial statements, with no changes to income before income taxes or net income and no effect on consolidated balance sheets or consolidated statements of cash flows.

Since December 31, 2004, we have taken a series of steps designed to improve the control processes regarding the selection and application of GAAP and preparation and review of the consolidated financial statements. Specifically, key personnel involved in our financial reporting processes have enhanced the process through which authoritative guidance will be monitored on a regular basis. On-going reviews of authoritative guidance are being conducted in order to ensure that new guidance is being complied with in the preparation of the financial statements, related disclosures and periodic filings with the SEC. Additionally, when we became aware of the misapplication of EITF No. 99-19 and No. 01-14, our management reviewed all applicable authoritative guidance issued since 1999 in relation to all consolidated financial statements which had been filed with the SEC.

Management believes that the corrective actions which have been implemented address the identified deficiencies in our disclosure controls and procedures. Management will continue to apply these process improvements to our disclosure controls and procedures.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Certifying Officers carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2005. Their evaluation was carried out with the participation of other members of our management. Based upon their evaluation, our Certifying Officers concluded that our disclosure controls and procedures were effective.

Except as described above, there has been no change in our internal control over financial reporting that occurred in the quarter ended September 30, 2005, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

39

PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

We are not required to disclose any pending legal proceedings in response to Item 103 of Regulation S-K. The following recent developments pertaining to legal proceedings described in our Form 10-K for the fiscal year ended December 31, 2004, and describing certain legal proceedings commenced subsequent to December 31, 2004, is furnished on a supplemental basis:

In October 2005, Keith Kochner, individually and on behalf of all similarly situated persons v. The Hertz Corporation (previously discussed in Item 1. Legal Proceedings in our Form 10-Q for the quarter ended March 31, 2005, filed with the SEC), the court granted our motion to dismiss, but allowed the plaintiff to file a second amended complaint by the end of October, which the plaintiff did.

In October 2005, Rene Potkay and Sylvia W. Thompson on behalf of themselves and all others similarly situated, v. The Hertz Corporation (previously discussed in Item 1. Legal Proceedings in our Form 10-Q for the quarter ended June 30, 3005 filed with the SEC on August 5, 2005) has been settled for a nominal amount.

ITEM 5. Other Information

On October 27, 2005, Craig R. Koch, our Chairman and Chief Executive Officer, announced his current intention to retire effective January 1, 2007.

ITEM 6. Exhibits

(a) Exhibits:

4	Instruments defining the rights of security holders, including indentures.
	At September 30, 2005, we had various obligations, which could be considered as long-term debt, none of which exceeded 10% of our total assets on a consolidated basis. As disclosed in the accompanying report, subsequent to September 30, 2005 and prior to the filing of this report, we entered into certain supplemental indentures amending the terms of the instruments governing some of this outstanding long-term debt. We agree to furnish to the SEC upon request a copy of any such instrument defining the rights of the holders of such long-term debt.
12	Consolidated Computation of Ratio of Earnings to Fixed Charges for the nine months ended September 30, 2005 and 2004.
15	Letter from PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, dated November 7, 2005, relating to Financial Information.
31.1	Certification of Chief Executive Officer Pursuant to Rule 15d — 14(a).
31.2	Certification of Chief Financial Officer Pursuant to Rule 15d — 14(a).
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
99.1	Stock Purchase Agreement, dated as of September 12, 2005, between CCMG Holdings, Inc., Ford Holdings LLC and Ford Motor Company with respect to the sale of The Hertz Corporation.

40

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE HERTZ CORPORATION
	(Registrant)
Date: November 7, 2005	By:	/s/ Paul J. Siracusa
		Paul J. Siracusa
		Executive Vice President and Chief Financial Officer
		(principal financial officer and duly authorized officer)

41

EXHIBIT INDEX

4	Instruments defining the rights of security holders, including indentures. At September 30, 2005, we had various obligations, which could be considered as long-term debt, none of which exceeded 10% of our total assets on a consolidated basis. As disclosed in the accompanying report, subsequent to September 30, 2005 and prior to the filing of this report, we entered into certain supplemental indentures amending the terms of the instruments governing some of this outstanding long-term debt. We agree to furnish to the SEC upon request a copy of any such instrument defining the rights of the holders of such long-term debt.
12	Consolidated Computation of Ratio of Earnings to Fixed Charges for the nine months ended September 30, 2005 and 2004.
15	Letter from PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, dated November 7, 2005, relating to Financial Information.
31.1	Certification of Chief Executive Officer Pursuant to Rule 15d — 14(a).
31.2	Certification of Chief Financial Officer Pursuant to Rule 15d — 14(a).
32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350.
99.1	Stock Purchase Agreement, dated as of September 12, 2005, between CCMG Holdings, Inc., Ford Holdings LLC and Ford Motor Company with respect to the sale of The Hertz Corporation.

42

EX-12

EXHIBIT 12

THE HERTZ CORPORATION AND SUBSIDIARIES
CONSOLIDATED COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands of Dollars Except Ratios)
Unaudited

	Nine Months Ended
	September 30,
	2005		2004
Income before income taxes and minority interest	$	454,329	$	392,584
Interest expense		379,383		300,829
Portion of rent estimated to represent the interest factor		99,678		97,896
Earnings before income taxes, minority interest and fixed charges	$	933,390	$	791,309
Interest expense (including capitalized interest)	$	381,301	$	301,404
Portion of rent estimated to represent the interest factor		99,678		97,896
Fixed charges	$	480,979	$	399,300
Ratio of earnings to fixed charges		1.9		2.0

EX-15

EXHIBIT 15

November 7, 2005

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: The Hertz Corporation Registration Statements on Form S-1 (File No. 333-125764), Form S-3 (Files No. 333-109955 and 333-57138) and on Form S-8 (File Nos. 333-32543, 333-60311, 333-80457 and 333-32868).

Commissioners:

We are aware that our report dated November 7, 2005, on our review of interim financial information of The Hertz Corporation and its subsidiaries (the “Company”) for the three- and nine- month periods ended September 30, 2005 and September 30, 2004 and included in the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2005 is incorporated by reference in the above referenced Registration Statements.

Very truly yours,

PricewaterhouseCoopers LLP
Florham Park, New Jersey

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 15d — 14(a)

I, Craig R. Koch, certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2005 of The Hertz Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2005
	By:	/s/ Craig R. Koch
		Craig R. Koch
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 15d — 14(a)

I, Paul J. Siracusa, certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the quarter ended September 30, 2005 of The Hertz Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
c)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2005
	By:	/s/ Paul J. Siracusa
		Paul J. Siracusa
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the quarterly report of The Hertz Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Craig R. Koch, Chairman of the Board and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	the Report, to which this statement is furnished as an Exhibit, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 7, 2005	By:	/s/ Craig R. Koch
		Craig R. Koch
		Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the quarterly report of The Hertz Corporation (the “Company”) on Form 10-Q for the period ending September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul J. Siracusa, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	the Report, to which this statement is furnished as an Exhibit, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 7, 2005	By:	/s/ Paul J. Siracusa
		Paul J. Siracusa
		Chief Financial Officer

EX-99.1

EXHIBIT 99.1

STOCK PURCHASE AGREEMENT

Dated as of September 12, 2005

between

CCMG HOLDINGS, INC.,

FORD HOLDINGS LLC

and

FORD MOTOR COMPANY
(for purposes of Article VI and Sections 3.2(xxiv), 3.2(xxv), 4.2(d), 5.11, 7.15 and 7.16 only)

TABLE OF CONTENTS

		Page
ARTICLE I SHARE PURCHASE			1
1.1	Share Purchase; Funding		1
1.2	Closing		2
ARTICLE II REPRESENTATIONS AND WARRANTIES			3
2.1	Representations and Warranties of Holdings		3
2.2	Representations and Warranties of Buyer		17
2.3	Representations and Warranties of the Parties		20
2.4	Survival of Representations and Warranties		20
2.5	Schedules		20
ARTICLE III COVENANTS			21
3.1	Access; Information and Records; Confidentiality		21
3.2	Conduct of the Business of the Company Prior to the Closing Date		22
3.3	Filings		27
3.4	Public Announcements		28
3.5	Further Actions		28
3.6	Termination of Affiliate Relations		29
3.7	Indemnification of Directors and Officers		29
3.8	Director Resignations		30
3.9	Financing		30
3.10	Debt Tender Offer; Repayment of Third-Party Indebtedness		34
3.11	Insurance		36
ARTICLE IV CONDITIONS PRECEDENT			37
4.1	Conditions Precedent to Obligations of Parties		37
4.2	Conditions Precedent to Obligation of Buyer		37
4.3	Conditions Precedent to the Obligation of Holdings		39
ARTICLE V EMPLOYEE AND LABOR MATTERS			39
5.1	Comparability of Benefits		39
5.2	Continuity of Employment		39
5.3	Welfare Plans		40
5.4	Retirement Plans		40
5.5	Vacation and Severance		40
5.6	WARN Act		41
5.7	Cash Bonus Plans		41
5.8	Collective Bargaining Agreements		41
5.9	Options on Ford Shares		41

i

		Page
5.10	Cooperation Regarding Pension Plans		42
5.11	Employee Discount Program		42
ARTICLE VI TAX MATTERS			42
6.1	Liability for Taxes		42
6.2	Tax Sharing Agreements		43
6.3	Tax Returns, Elections, etc		44
6.4	Tax Audits, Assistance and Cooperation		44
6.5	Refunds and Tax Credits		46
6.6	Carrybacks		46
6.7	Transfer Taxes		47
ARTICLE VII MISCELLANEOUS			47
7.1	Termination and Abandonment		47
7.2	Expenses		49
7.3	Notices		49
7.4	Entire Agreement		51
7.5	Exclusive Remedy		51
7.6	No Third Party Beneficiaries		51
7.7	Assignability		52
7.8	Amendment and Modification; Waiver		52
7.9	Severability		52
7.10	Section Headings		52
7.11	Interpretation		52
7.12	Definitions		52
7.13	Company Actions		55
7.14	Counterparts		55
7.15	Enforcement		55
7.16	Governing Law		55

ii

INDEX TO DISCLOSURE SCHEDULES

Schedule

2.1(a)(iii)	Subsidiary Due Organization and Qualification
2.1(c)(ii)	Company Capitalization
2.1(c)(iii)	Subsidiary Capitalization
2.1(d)	Company Equity Interests
2.1(f)	No Conflict
2.1(g)	SEC Filings; Financial Statements
2.1(h)(i)	Absence of Certain Changes — Material Adverse Effect
2.1(h)(ii)	Absence of Certain Changes — Ordinary Course
2.1(i)	Absence of Undisclosed Liabilities
2.1(j)(i)-1	Real and Personal Properties
2.1(j)(i)-2	Real and Personal Properties Encumbrances
2.1(k)(ii)	Returns Filed and Taxes Paid
2.1(k)(iii)	Tax Deficiencies; Audits; Statutes of Limitations
2.1(k)(iv)	Affiliated Group — Consolidated Tax Return
2.1(k)(v)	Tax Sharing
2.1(l)	Compliance with Laws; Permits
2.1(m)	Legal Proceedings
2.1(n)	Environmental Matters
2.1(o)(i)	Employee Benefit Plans
2.1(o)(vii)	Events Under Benefits Plans
2.1(p)(i)	Labor and Employment Matters
2.1(p)(ii)	Multiemployer Pension Plans
2.1(q)	Intellectual Property
2.1(r)	Specified Contracts
2.1(s)	Relationship with Affiliates of Holdings
3.2	Conduct of the Business of the Company Prior to the Closing Date
3.6(b)	Surviving Contracts
3.9(b)	Restricted Subsidiaries
3.10(a)	Short-Dated Notes
3.10(b)	Long-Dated Notes
3.10(c)	Certain Other Indebtedness
3.10(d)	Unsecured Credit Facilities
4.2(d)	Letter of Credit Obligations
5.4	Retirement Plans
5.5	Vacation and Severance

iii

5.7	Bonus Plans
7.1(d)	SEC Investigation
7.12(a)	Buyer’s Knowledge
7.12(b)	Holdings’ Knowledge

The Registrant agrees to furnish to the Securities and Exchange Commission upon request a copy of any omitted schedule.

iv

INDEX OF DEFINED TERMS

Term	Page
1986 Indenture		52
1994 Indenture		53
2001 Indenture		53
ABL Financing		19
ABS Financing		19
Accounting Arbitrator		45
Acquisitions		24
Affiliate		53
Affiliate Agreements		17
Affiliate Indebtedness		29
Affiliate Indebtedness Repayment Amount		1
Affiliated Group		11
Agreement		1
Alternative Tender Offers		35
Antitrust Division		27
Applicable Insurance Laws		6
Assistance Costs		37
Australian Authority		6
Benefit Plans		13
Bermuda Insurance Laws		6
Board of Directors		53
Bonus Plans		41
Bridge Financing		19
Business Day		53
Buyer		1
Buyer Indemnitees		53
CBC		6
CE		24
Closing		2
Closing Date		2
Closing Debt Amount		36
Code		14
Common Stock		1
Company		1
Company Option Plan		41
Confidentiality Agreement		21
Connecticut DEP		7
Consent		6
Consent Solicitation		34
Consolidated or Combined Return		53
Contracts		16
Coverage Period		36
D&O Tail Coverage		30
Debt Commitment Letter		18
Debt Financing		19
Debt Payment Amount		36
Debt Receipt Failure		48
Debt Tender Offer		34

v

Term	Page
ECMR		6
Encumbrances		9
Environmental Laws		13
Equity Commitment Letters		18
Equity Financing		18
ERISA		13
Exchange Act		7
Exchange Offeror		34
Exchange Offers		35
Exchange Value		35
Exchanged Notes		35
FASB		25
Federal and Consolidated Income Tax Liabilities		53
Financial Statements		7
Financing		19
Fleet Expenditures		24
Ford		1
Ford Group		53
Ford Insurance		36
Ford Letter of Credit		38
Ford Option Plan		41
Ford Options		41
Foreign Antitrust Laws		6
FTC		27
GAAP		7
Governmental Authority		6
Group		3
Group Employees		13
Group Member		3
Group Relief		53
Guarantees		19
Hazardous Substances		13
High Yield Financing		19
HIRE		7
HIRE (Bermuda)		6
Holdings		1
Holdings Note		54
HSR Act		6
Income Tax		54
Indebtedness		54
Intellectual Property		15
Interim Credit Agreement		54
International ABS Bridge Financing		19
Irish Finance Requirements		7
Irish Insurance Laws		6
IRS		14
Knowledge		54
Law		54
Long Dated Notes		34
Marketing Period		31
Material Adverse Effect		3
Material Proceeding		26
Material Real Property		9
Material Subsidiary		4

vi

Term	Page
Multiemployer Plan		13
Non-Fleet Expenditures		24
Offering Documents		32
Options		42
Orders		6
Partnership		29
Partnership Agreement		29
Permits		12
Permitted Encumbrances		9
Permitted Extension		25
Person		54
Pre-Closing Claim		36
Pre-Closing Period		54
Prior SEC Filings		5
Probus		6
Purchase Price		1
Requested Bond Consents		34
Requested Indenture Consents		34
Required Financial Information		32
Returns		10
Sarbanes-Oxley Act		8
SEC		7
SEC Filings		7
Securities Act		7
Senior Secured Term Loan Financing		19
Shares		1
Short Dated Notes		34
Specified Contract		16
State and Foreign Insurance Laws		6
Subsidiary		3
Surviving Agreements		29
Tax Sharing Agreements		54
Taxes		10
Taxing Authority		10
Tender Amount		34
Tendered Notes		34
Termination Fee		48
Transfer Taxes		54
Undisclosed Material Affiliate Agreement		29
WARN		41
Wholly Owned Subsidiary		5

vii

STOCK PURCHASE AGREEMENT

     STOCK PURCHASE AGREEMENT, dated as of September 12, 2005 (this “Agreement”), between CCMG Holdings, Inc., a Delaware corporation (“Buyer”), and Ford Holdings LLC, a Delaware limited liability company (“Holdings”) and, for purposes of only the provisions noted on the signature page hereto, Ford Motor Company, a Delaware corporation (“Ford”).

     WHEREAS, Holdings, an indirect wholly-owned subsidiary of Ford, owns 100 shares (the “Shares”) of common stock, par value $0.01 per share (the “Common Stock”), of The Hertz Corporation (the “Company”), representing 100% of the outstanding shares of capital stock of the Company;

     WHEREAS, Buyer desires to purchase from Holdings, and Holdings desires to sell to Buyer, the Shares pursuant to this Agreement; and

     WHEREAS, in connection with the purchase and sale of the Shares, the parties desire to effect certain other transactions as more fully described herein, including causing the Company to complete a tender offer with respect to certain series of its outstanding senior notes and cooperating with an exchange offer by an Affiliate of Ford with respect to certain other series of the Company’s outstanding senior notes;

     NOW, THEREFORE, in consideration of the mutual terms, conditions and other agreements set forth herein and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

SHARE PURCHASE

     1.1   Share Purchase; Funding.

               (a)   Purchase and Sale. Upon the terms and subject to the conditions of this Agreement, at the Closing, Holdings shall sell to Buyer (or to a wholly-owned subsidiary of Buyer), and Buyer (or a wholly-owned subsidiary of Buyer) shall purchase from Holdings, the Shares.

               (b)   Purchase Price. In consideration for the sale and transfer of the Shares, and upon the terms and subject to the conditions of this Agreement, at the Closing, Buyer shall pay, or cause to be paid, to Holdings (or an Affiliate of Holdings designated by Holdings) an aggregate amount in cash equal to (x) $5,600,000,000 minus (y) the principal amount of and all accrued and unpaid interest on the Holdings Note (the “Purchase Price”).

               (c)   Repayment of Affiliate Indebtedness. Upon the terms and subject to the conditions of this Agreement, at the Closing, Buyer shall cause the Company to repay all Affiliate Indebtedness referred to in Section 3.6 (the “Affiliate Indebtedness Repayment Amount”).

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               (d)   Repayment of Certain Third Party Indebtedness. At the Closing, and as a condition thereof, Buyer shall cause the Company to purchase the Tendered Notes and shall purchase or repay or cause a Group Member to purchase or repay, as applicable, all of the Indebtedness referred to in Section 3.10(c).

               (e)   Payment for Exchange Notes. At the Closing, and as a condition thereof, Buyer shall pay or cause to be paid by the Company to the applicable Exchange Offeror (or to an Affiliate of the Exchange Offeror designated by the Exchange Offeror in writing), cash in an amount equal to the aggregate Exchange Value of any Exchange Notes accepted for exchange in any Exchange Offer in accordance with the terms and conditions hereof on or prior to the Closing, and tendered by the Exchange Offeror for purchase in accordance with Section 3.10(b).

               (f)   Source of Funds. At or prior to the Closing, subject to the terms and conditions of this Agreement, (i) Buyer (or a wholly-owned subsidiary of Buyer) shall incur the portion of the Financing to be incurred by it, and (ii) a portion of the proceeds of the Financing, together with (at the option of Buyer) the Company’s cash on hand, together with indebtedness to be incurred by the Company and other Group Members at the Closing, shall be applied to make the payments set forth in this Section 1.1.

               (g)   Payment Terms. At the Closing, upon the terms and subject to the conditions of this Agreement, (i) Holdings shall deliver to Buyer (or to a wholly-owned subsidiary of Buyer designated by Buyer at least two Business Days prior to the Closing Date) certificates representing the Shares owned by Holdings duly endorsed, or accompanied by stock powers duly executed and (ii), all payments provided for in this Section 1.1 shall be made by wire transfer of immediately available funds to account(s) designated by the applicable recipients at least two Business Days prior to the Closing Date.

     1.2   Closing. Unless this Agreement shall have been terminated and the transactions herein contemplated shall have been abandoned pursuant to Section 7.1, and subject to the satisfaction or waiver of the conditions set forth in Article IV, the closing of the transactions contemplated by this Agreement (the “Closing”) will take place at 10:00 a.m. New York City time on the first Business Day following the satisfaction or waiver of each of the conditions set forth in Article IV hereof on the date (the “Closing Date”) that is the earliest of (a) any Business Day during the Marketing Period as may be specified by Buyer on no less than three Business Days’ prior notice to Holdings, (b) the final day of the Marketing Period or (c) the date following commencement of the Marketing Period that is three business days following the date the Debt Financing is obtained, at the offices of Simpson Thacher & Bartlett LLP, 425 Lexington Avenue, New York, New York, unless another date, time or place is agreed to in writing by the parties hereto.

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ARTICLE II

REPRESENTATIONS AND WARRANTIES

     2.1   Representations and Warranties of Holdings. Holdings hereby represents and warrants to Buyer as follows:

               (a)   Due Organization and Qualification. (i) Holdings is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware. Holdings (A) has all requisite corporate power and authority to own and lease its properties and assets and to carry on its business as it is now being conducted and (B) is in good standing and is duly qualified to transact business in each jurisdiction in which it is required to be so qualified, except, in the case of clause (A) or (B), where the failure to have such power and authority or to be in good standing would not, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impede the ability of Holdings to consummate the transactions contemplated by this Agreement.

          (ii)    The Company is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware. The Company (A) has all requisite corporate power and authority to own and lease its properties and assets and to carry on its business as it is now being conducted and (B) is in good standing and is duly qualified to transact business in each jurisdiction in which it is required to be so qualified, except in the case of clause (A) or (B), where the failure to have such power and authority or to be in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          (iii)    Each entity listed on Schedule 2.1(a)(iii) (each, a “Subsidiary”; each of the Subsidiaries and the Company individually, a “Group Member”, and collectively, the “Group”) (A) is duly incorporated or organized, as the case may be, validly existing and in good standing under the laws of the jurisdiction of organization appearing opposite its name on Schedule 2.1(a)(iii) and (B) has all requisite corporate power and authority to own and lease its properties and assets and to carry on its business as it is now being conducted and (C) is in good standing and is duly qualified to transact business in each jurisdiction in which it is required to be so qualified, except in the case of clauses (A), (B) or (C), where the failure to have such power and authority or to be in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

          For purposes of this Agreement, “Material Adverse Effect” shall mean any fact, event, change, circumstance or effect that is materially adverse to the business, condition (financial or otherwise) or results of operations of the Group, taken as a whole, or would materially impair the ability of Holdings or any member of the Group to consummate the transactions contemplated by this Agreement, other than any fact, event, change, circumstance or effect resulting from (A) general changes or developments (other than those resulting from acts of terrorism, war or armed hostilities) in the industries in which the Group operates or in the general economy, financial, banking, currency or capital markets, (B) normal seasonal changes in the results of operations of the Group, (C) the solicitation of offers to enter into this Agreement, the negotiation of the terms of and entering into of this Agreement, the announcement of this Agreement and the consummation of the transactions contemplated hereby

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or any action taken at the request of Buyer, (D) changes in accounting requirements or principles or any changes in applicable Laws or interpretations thereof or (E) any failure in and of itself by any Group Member to meet any estimates of revenues or earnings or other financial performance for any period (it being agreed that the facts and circumstances giving rise to such failure may be taken into account in determining whether there has been a Material Adverse Effect), except, in the case of the foregoing clause (A), to the extent such changes referred to therein have a disproportionate adverse effect on the Group, taken as a whole, relative to other participants in the industries in which the Group operates; provided, that (i) solely with respect to the representations and warranties set forth in Section 2.1(f), the exception set forth in clause (C) above shall not apply and (ii) for purposes of the definition of “Material Adverse Effect”, the industries in which the Group operates shall be deemed to be the vehicle rental industry and the construction, industrial and materials handling equipment rental industry.

          (iv)    Certificate of Incorporation and By-Laws. Holdings has made available to Buyer a complete and correct copy of the Certificate of Incorporation and the By-Laws (or similar organizational documents), each as amended to date, of the Company and each of the Subsidiaries listed on Schedule 2.1(a)(iii) as a “Material Subsidiary” (each such Subsidiary, a “Material Subsidiary”). Neither the Company nor any Subsidiary is, nor has been, in violation of any of the provisions of its Certificate of Incorporation or By-Laws (or similar organizational documents), except in the case of any Subsidiary (other than any Material Subsidiary) for violations that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Holdings has made available to Buyer complete and correct copies of the minutes of all meetings of the Board of Directors of the Company, other than the portion of any minutes regarding the deliberations of the Board of Directors of the Company in connection with entering into this Agreement or pursuing other strategic alternatives, and of the stockholders of the Company, in each case since January 1, 2002.

               (b)   Authorization and Validity of Agreement. The execution, delivery and performance by Holdings of this Agreement and the consummation by Holdings of the transactions contemplated hereby have been duly authorized by the Board of Directors of Holdings, and no other corporate action on the part of Holdings is necessary for the execution, delivery and performance by Holdings of this Agreement and the consummation by Holdings of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Holdings and is a legal, valid and binding obligation of Holdings, enforceable against it in accordance with its terms, except to the extent that its enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors’ rights generally and by general equity principles.

               (c)   Capitalization.

          (i)    100 shares of Common Stock are issued and outstanding as of the date hereof and constitute the Shares. The authorized capital stock of the Company consists of 3,000 shares of Common Stock. No shares of Common Stock are held in treasury. All of the issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable.

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          (ii)    Except as disclosed in the SEC Filings filed prior to the date hereof, (such filings, excluding the “Risk Factors” sections therein, the “Prior SEC Filings”) or on Schedule 2.1(c)(ii), (A) there are no (x) outstanding options, warrants, or other rights, of any kind relating to the sale, purchase, redemption, issuance or voting of any shares of capital stock of any class (whether issued or unissued) or other equity or voting securities of the Company, or (y) securities convertible into, exchangeable for or evidencing the right to purchase from the Company any shares of capital stock of any class or other equity or voting securities of the Company, or (z) equity equivalents, stock appreciation rights, phantom stock or other rights similar to or derived from the economic benefits and rights accruing to holders of any equity interest in the Company, (B) there are no preemptive or similar rights with respect to the issuance, sale or other transfer (whether present, past or future) of the issued or unissued capital stock or other equity interests of the Company and (C) there are no agreements or other obligations (contingent or otherwise) which may require the Company to vote, dispose of, repurchase, redeem or otherwise acquire shares of, or other equity interests in, the Company’s capital stock or to make any investment (in the form of a loan, capital contribution or otherwise) in any Subsidiary or other Person. Except as disclosed on Schedule 2.1(c)(ii), from June 30, 2005 to the date hereof, (a) (i) no dividends on or distributions in respect of the Company’s Common Stock have been declared or paid and (ii) there has been no repurchase of any shares of or options in respect of the Company’s capital stock and (b) (i) no dividends on or distributions in respect of any of the non-Wholly Owned Subsidiaries’ capital stock have been declared or paid and (ii) there has been no repurchase of any shares of or options in respect of the capital stock of any Subsidiary.

          (iii)    Except as disclosed on Schedule 2.1(c)(iii), with respect to each Subsidiary, (A) there are no (x) outstanding options, warrants, or other rights of any kind relating to the sale, purchase, redemption, issuance or voting of any shares of capital stock (whether issued or unissued) or other equity or voting security, in or of such Subsidiary which are binding on any Group Member, (y) securities convertible into, exchangeable for or evidencing the right to purchase from any Group Member any shares of capital stock of any class or other equity or voting securities of any such Subsidiary, (z) equity equivalents, stock appreciation rights, phantom stock, or other right similar to or derived from the economic benefits and rights accruing to holders of any equity interest in, any such Subsidiary, (B) there are no preemptive or similar rights with respect to the issuance, sale or other transfer (whether present, past or future) of the issued or unissued capital stock, or other equity interests, of such Subsidiary and (C) there are no agreements or other obligations (contingent or otherwise) which may require any Group Member to vote, dispose of, repurchase, redeem or otherwise acquire shares of, or other equity interest in, such Subsidiary’s capital stock or to make any investment (in the form of a loan, capital contribution or otherwise) in such Subsidiary or other Person, in each case other than options, warrants and other rights running in favor of the Company and Subsidiaries in which the Company directly or indirectly owns at least a 99.0% equity interest (each such Subsidiary, a “Wholly Owned Subsidiary”).

               (d)   Subsidiaries. Except as disclosed on Schedule 2.1(d), (i) there are no entities in which the Company directly or indirectly owns or controls more than 50% of the voting power, other than the Subsidiaries, (ii) there are no entities in which the Company directly or indirectly owns an equity interest, other than the Subsidiaries and (iii) all capital stock and equity interests in each Subsidiary are owned beneficially and of record by the Company and/or

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Wholly Owned Subsidiaries, free and clear of any Encumbrance other than restrictions imposed on U.S. Subsidiaries by applicable securities Laws and restrictions on transfer imposed on non-U.S. Subsidiaries by applicable Laws.

               (e)   Ownership of the Shares. Holdings is the record and beneficial owner and holder of the Shares. The Shares are held free and clear of all Encumbrances other than restrictions imposed by applicable securities Laws. Upon the transfer of the Shares to Buyer on the Closing Date in accordance with this Agreement, Buyer will receive good and valid title to the Shares, free and clear of all Encumbrances other than restrictions imposed by applicable securities Laws.

               (f)   No Conflict. Except as set forth on Schedule 2.1(f), as specifically contemplated in this Agreement or, in the case of clauses (i), (ii) and (iv) of this Section 2.1(f) only, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect or be expected to prevent, materially delay or materially impede the ability of Holdings to consummate the transactions contemplated by this Agreement, the execution, delivery and performance of this Agreement by Holdings and consummation by Holdings of the transactions contemplated hereby:

          (i)    will not violate any provision of any Law or order, writ, injunction, judgment or decree (“Orders”) of the European Union, any federal, state, municipal, foreign or other governmental department, commission, board, bureau, agency, court or instrumentality, whether domestic or foreign (“Governmental Authority”) applicable to Holdings or any Group Member;

          (ii)    will not require any license, consent, clearance, authorization, permit, qualification, waiver, order or approval of, or filing with or notice to, any Governmental Authority (each, a “Consent”) under any provision of Law applicable to Holdings or any Group Member, except for (A) the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), (B) any filing with the European Commission of a merger notification in accordance with Council Regulation (EC) 139/2004, the E.C. Merger Regulation (the “ECMR”), (C) the applicable requirements of any competent antitrust or competition Governmental Authority of any member state of the European Union, (D) the applicable requirements of the Canadian Bureau of Competition (the “CBC”), (E) the applicable requirements of any competent Australian antitrust or competition Governmental Authority (the “Australian Authority”), (F) the applicable requirements of antitrust, competition or other similar Laws, rules, regulations and judicial doctrines of jurisdictions, other than the United States and the European Union, or of investment Laws relating to foreign ownership (the Laws and requirements described in clauses (B) through (F), collectively, the “Foreign Antitrust Laws”), (G) the applicable requirements of insurance law and regulatory authorities in (x) Bermuda (the “Bermuda Insurance Laws”) in connection with an indirect transfer of control of HIRE (Bermuda) Limited, an insurance company domiciled in Bermuda (“HIRE (Bermuda)”), (y) Ireland (the “Irish Insurance Laws”) in connection with an indirect transfer of control of Probus Insurance Company Europe Limited, an insurance company domiciled in Ireland (“Probus”) and (z) any U.S. state or other foreign jurisdiction (the “State and Foreign Insurance Laws”, and together with Bermuda Insurance Laws, and Irish Insurance Laws, the “Applicable Insurance Laws”) in connection with an indirect transfer of control of any Group Member that is

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licensed as an insurance company or as an insurance agent, insurance broker, third-party administrator or claims adjustor, (H) the applicable requirements of the Department of Finance of Ireland in respect of the tax operating certificates of each of Probus and Hertz International Re Limited (“HIRE”), a reinsurance company domiciled in Ireland (the “Irish Finance Requirements”), (I) the filing with the Connecticut Department of Environmental Protection (“Connecticut DEP”), and (J) any other Consent which is applicable solely as a result of the specific regulatory status of Buyer or its Affiliates or which Buyer or its Affiliates are otherwise required to obtain;

          (iii)    will not violate any provision of the limited liability company operating agreement of Holdings or the Certificate of Incorporation or By-Laws of the Company; and

          (iv)    will not require any consent, approval or notice under, and will not conflict with, or result in the breach or termination of, or constitute a default (or an event which, with notice or lapse of time or both, would become a breach or default or give to others a right of termination) under, result in the acceleration of the performance or the loss of any benefit by any Group Member under, or result in the creation of an Encumbrance on any property or asset of any Group Member pursuant to, any indenture, mortgage, deed of trust, lease, license, franchise, contract (written or oral), agreement, permit or other binding commitment, instrument or obligation to which any Group Member is a party or by which any of the assets of the Group are bound or affected.

               (g)   SEC Filings; Financial Statements. Except as set forth on Schedule 2.1(g):

          (i)    the Company has timely filed all forms, reports, schedules, declarations, statements, applications and other documents required to be filed with the United States Securities and Exchange Commission (“SEC”) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) since December 31, 2003. For purposes of this Agreement, all forms, reports, schedules, declarations, statements, applications and other documents filed with the SEC since December 31, 2004 under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), are collectively referred to as the “SEC Filings”. Each SEC Filing, when filed, complied in all material respects with the applicable requirements of the Exchange Act, as the case may be, and other applicable federal securities Laws as in effect on the date so filed, and none of the SEC Filings (including any financial statements or schedules included or incorporated by reference therein), when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

          (ii)    each of the audited and unaudited financial statements (including any related notes) included in the SEC Filings (the “Financial Statements”), when filed, complied in all material respects with all applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, has been prepared in accordance with generally accepted accounting principles (“GAAP”) (except, in the case of unaudited quarterly statements, as permitted by Form 10-Q and Regulation S-X) applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and, when filed, fairly

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presented in all material respects the consolidated financial position of the Group at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments, which were not and are not expected to be material in amount);

          (iii)    Other than the Holdings Note, as of the date hereof, no Group Member owes any Indebtedness to Ford or any of its Affiliates (other than the Group);

          (iv)    Since the enactment of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Company has been and is in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder;

          (v)    The Company has designed disclosure controls and procedures to ensure that material information relating to the Company, including its subsidiaries, is made known to the chief executive officer and the chief financial officer of the Company by others within those entities;

          (vi)    The Company has disclosed, based on its most recent evaluation prior to the date hereof, to the Company’s auditors and the audit committee of the Company’s board of directors (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect in any material respect the Company’s ability to record, process, summarize and report financial information and (ii) any fraud or allegation of fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting. As of the date hereof, to the Knowledge of Holdings, the Company has not received any complaints since December 31, 2004 regarding accounting, internal accounting controls or auditing matters, including any such complaint regarding questionable accounting or auditing matters; and

          (vii)    As of the date hereof, to the Knowledge of Holdings, the Company has not identified any material weaknesses in the design or operation of internal controls over financial reporting. To the Knowledge of Holdings, there is no reason to believe that its auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, when first due.

               (h)   Absence of Certain Changes. Except as disclosed on Schedule 2.1(h)(i) hereto, since June 30, 2005 there has not been any Material Adverse Effect and there has not been any fact, event, change or circumstance that would be reasonably likely to have a Material Adverse Effect. Except as a result of the execution and delivery of this Agreement, as expressly contemplated hereby or as disclosed in Prior SEC Filings or on Schedule 2.1(h)(ii), from June 30, 2005 to the date of this Agreement, (i) the business of the Group has been conducted in all material respects in the ordinary course consistent with past practice and (ii) except for transactions that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, no Group Member has taken any action or omitted to take any action

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that would, after the date hereof, be prohibited by clause (iv), (v), (vi), (x), (xii), (xiii) and (xv) through (xix) of Section 3.2.

               (i)   Absence of Undisclosed Liabilities. Except as disclosed in the Prior SEC Filings or on Schedule 2.1(i), no Group Member has any obligations or liabilities (whether accrued, absolute, contingent or otherwise) that are required to be set forth on a balance sheet prepared in accordance with GAAP, except (A) liabilities reflected on the unaudited condensed consolidated balance sheet of the Group as of June 30, 2005 or the notes thereto included in the Financial Statements, (B) liabilities incurred in the ordinary course of business consistent with past practice since June 30, 2005 that would not be prohibited by this Agreement, (C) liabilities which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, (D) obligations and liabilities otherwise expressly disclosed in this Agreement or the Schedules hereto and (E) obligations and liabilities incurred at the prior written request or with the prior written consent of Buyer.

               (j)   Real and Personal Properties. Real and Personal Properties. (i) Schedule 2.1(j)(i)-1 lists, and Buyer has been furnished true, correct and complete copies of, all instruments and agreements (A) granting to the Group ownership, leasehold and associated concession or operating rights with respect to the real property constituting each rental location of the Group from which net revenues in the year 2004 exceeded $50,000,000 and (B) granting to the Group ownership of the real property constituting the Hertz World Headquarters, Park Ridge, New Jersey, and the Hertz Financial, Administrative, Reservation and Data Centers in and about Oklahoma City, Oklahoma, and the leasehold rights in the real property constituting the Hertz Europe Service Center, Swords, Ireland, the Saraland, Alabama reservations center and the Hertz Europe Ltd. headquarters, Uxbridge, U.K. (all such interests in real property and associated concession and operating rights referred to in clauses (A) and (B), the “Material Real Property”). The Company or one of its Subsidiaries has good, valid and marketable title to each parcel of Material Real Property owned in fee, and a good and valid leasehold interest, or interest as a tenant at sufferance or concession and operating rights, in each parcel of Material Real Property leased or operated under such concession or operating right by the Group, except as would not, individually or in the aggregate, have a Material Adverse Effect. The interests of the Group in the Material Real Property are free and clear of all liens, claims, encumbrances, security interests or other charges or rights of other Persons (“Encumbrances”), except (A) as set forth on Schedule 2.1(j)(i)-2, (B) as disclosed in the Financial Statements, (C) for liens for taxes, assessments and other governmental charges not yet due and payable or, if due, not delinquent or being contested in good faith by appropriate proceedings, during which collection or enforcement against the Material Real Property is stayed, (D) mechanics’, workmen’s, repairmen’s, warehousemen’s, carriers’ or other like liens arising or incurred in the ordinary course of business consistent with past practices, (E) with respect to real property, (1) any conditions, including easements, licenses, covenants, rights-of-way and other similar restrictions that may be shown by survey or title report, (2) incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and, do not materially detract from the value of the property subject thereto or materially interfere with the ordinary course of business of the Company and (3) zoning, building and other similar restrictions, and (F) other Encumbrances which would not reasonably be expected to have a Material Adverse Effect (those Encumbrances described in clauses (A) through (E), “Permitted Encumbrances”). With respect to any portion of the Material Real Property that constitutes a leasehold interest or concession or operating

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right, Holdings has no Knowledge of the termination of, and no Group Member has received any written notice from the landlord or grantor of such rights terminating (by reason of a default or otherwise) any such leasehold interest, concession or operating right. With respect to all real property utilized by the Group in the conduct of its business, other than the Material Real Property, Group Members have good, valid and marketable title to, or a good and valid leasehold interest, license or concession rights in, such property, except as would not reasonably be expected to have a Material Adverse Effect.

          (ii)    Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and except for personal property disposed of since June 30, 2005 in the ordinary course of business consistent with past practice, Group Members have good and valid title to, or a valid and enforceable leasehold interest in, all of the Group’s personal property (subject to the effects of bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors’ rights generally) (A) that is used or held for use in connection with the business of the Group and is reflected on or included in the unaudited condensed consolidated balance sheet of the Group as of June 30, 2005 included in the Financial Statements or (B) acquired by Group Members after June 30, 2005 and which would be reflected on or included in such a balance sheet prepared as of the date this representation is made, in each case free and clear of all Encumbrances other than Permitted Encumbrances.

               (k)   Tax Matters.

     (i)   Certain Defined Terms. For purposes of this Agreement, the following definitions shall apply:

     (A)   The term “Taxes” shall mean all taxes, however denominated, including any interest, penalties or other additions to tax that may become payable in respect thereof, imposed by any federal, territorial, state, local or foreign government or any agency or political subdivision of any such government (collectively, “Taxing Authority”), which taxes shall include, without limiting the generality of the foregoing, all income or profits taxes (including, but not limited to, federal income taxes and state income taxes), payroll and employee withholding taxes, unemployment insurance taxes, social security taxes, sales and use taxes, ad valorem taxes, value added taxes, excise taxes, franchise taxes, gross receipts taxes, business license taxes, occupation taxes, real and personal property taxes, stamp taxes, environmental taxes, transfer taxes, and other obligations of the same or of a similar nature to any of the foregoing, which any Group Member is required to pay, withhold, collect or for which it is otherwise liable.

     (B)   The term “Returns” shall mean all reports, estimates, declarations of estimated Tax, information statements, forms and returns relating to, or required to be filed in connection with, any Taxes.

     (ii)   Returns Filed and Taxes Paid. Except as set forth on Schedule 2.1(k)(ii) or as would not reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise) or results of operations of the Group, taken as a whole, (A) all Returns required to be filed by or on behalf of Group Members insofar as they relate to any Group

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Members have been duly filed on a timely basis and any such filed Returns are true, complete and correct, (B) all Taxes shown to be payable on the Returns or on subsequent assessments with respect thereto have been paid in full on a timely basis, (C) each Group Member has withheld and paid over all Taxes required to have been withheld and paid over, and complied with all information reporting requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party for all periods for which the statute of limitations has not expired, and (D) there are no liens on any of the assets of the Group with respect to Taxes, other than liens for Taxes not yet due and payable or for Taxes that Group Members are contesting in good faith through appropriate proceedings and for which appropriate reserves in accordance with GAAP have been established by the appropriate Group Member.

     (iii)   Tax Deficiencies; Audits, Statutes of Limitations. Except as set forth on Schedule 2.1(k)(iii) or as would not reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise) or results of operations of the Group, taken as a whole, (A) there is no audit, examination, investigation or other proceeding by a governmental or Taxing Authority in process or pending or, to the Knowledge of Holdings, threatened in writing with respect to any Returns of any Group Member, (B) no deficiencies exist or have been asserted, in writing, with respect to any Taxes of the Group Members and no Group Member has received written notice that it has not filed a Return or paid Taxes required to be filed or paid by it, (C) no Group Member is a party to any action or proceeding for assessment or collection of any Taxes, nor has such event been asserted, in writing, against any Group Member or any of its assets and (D) no Group Member has waived any statute of limitations in respect of a material amount of Taxes or agreed to any extension of time with respect to an assessment or deficiency for a material amount of Taxes (other than pursuant to extensions of time to file Returns obtained in the ordinary course and other than Tax Returns filed on a consolidated, combined or unitary basis with Ford or any of its affiliates).

     (iv)   Affiliated Group. The domestic corporate Group Members are members of an “affiliated group” (the “Affiliated Group”) within the meaning of Section 1504(a) of the Code and Ford is the “common parent” of the Affiliated Group. Ford and all domestic corporate Group Members join in filing a consolidated U. S. federal Income Tax Return. For purposes of this Section 2.1(k) and Article VI, “domestic” has the meaning set forth in Section 7701(a)(4) of the Code. Except with respect to the Affiliated Group or as set forth on Schedule 2.1(k)(iv) or as would not reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise) or results of operations of the Group, taken as a whole, none of the Group Members has been included in any “consolidated,” “unitary” or “combined” Return provided for under any Law with respect to Taxes for which any Member may be liable for any taxable period for which the statute of limitations has not expired.

     (v)   Tax Sharing. Except as set forth on Schedule 2.1(k)(v) or as would not reasonably be expected to have a material adverse effect on the business, condition (financial or otherwise) or results of operations of the Group, taken as a whole, there are no tax sharing, allocation, indemnification or similar agreements in effect between any of the Group Members and any other Person (other than solely with other Group Members), except for (i) customary agreements to indemnify lenders or security holders in respect of Taxes, and (ii) customary tax sharing obligations under commercial lease agreements.

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     (vi)   Classifications. Each of Hertz Fleet Funding LLC, Hertz General Interest LLC, Hertz Vehicle Financing LLC and Hertz Vehicles LLC is classified as a disregarded entity for U.S. federal income tax purposes.

               (l)   Compliance with Laws; Permits and Filings. Except as disclosed in the Prior SEC Filings or on Schedule 2.1(l), (A) no Group Member has received any written notice from any Governmental Authority, and Holdings does not have Knowledge, (x) that any Group Member is not in compliance with any of the Laws applicable to the Group Members, their respective businesses or by which any property or asset of any Group Member is bound, or (y) that revokes or threatens to revoke any permits, licenses, certificates, easements, approvals, concessions, leases or other authorizations or consents of a Governmental Authority necessary to own, lease and operate its properties, and to conduct their respective businesses as presently conducted (“Permits”), (B) each Group Member (x) is, and has been since December 31, 2003, in compliance with any Law applicable to such Group Member, its business or by which any property or asset of such Group Member is bound, and (y) is in possession of any and all Permits, except in the case of (A) or (B) above, where such failure to be in compliance or such failure to be in possession of such Permit would not reasonably be expected to have a Material Adverse Effect. The consummation of the transactions contemplated by this Agreement will not result in any revocation, cancellation or suspension of any such Permit, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. Notwithstanding anything herein to the contrary, Holdings makes no representation or warranty in this Section 2.1(l) with respect to Tax matters, environmental matters, employee benefit matters or labor and employment matters.

               (m)   Legal Proceedings. There are no actions, suits or proceedings pending or, to the Knowledge of Holdings, threatened against the Group, except for proceedings (i) disclosed in the Prior SEC Filings, (ii) disclosed on Schedule 2.1(m), (iii) seeking damages (including punitive damages) or other remedies for death, bodily injury or property damage allegedly arising from the operation of vehicles and construction and industrial equipment in which Group Members have interests and (iv) as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

               (n)   Environmental Matters.

          (i)    Except as disclosed in the Prior SEC Filings or on Schedule 2.1(n) or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect:

          (A)   Each Group Member is and has been in compliance with all applicable Environmental Laws;

          (B)   Each Group Member possesses the Permits required under applicable Environmental Laws for it to operate as it currently operates;

          (C)   no Group Member has received any written notice or claim against it alleging a violation of any Environmental Laws, other than such notices or claims that have been resolved;

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          (D)   no Group Member has received any written notice or claim alleging that it is or may be liable to any Person under any applicable Environmental Law as a result of a release or threatened release of any Hazardous Substance at any location, other than such notices or claims that have been resolved; and

          (E)   no Group Member is a party to any pending judicial or administrative proceedings or, to the Knowledge of Holdings, the subject of any investigations by any Governmental Authority, pursuant to any Environmental Laws.

          (ii)    For purposes of this Agreement, the following terms shall have the meanings assigned below:

          (A)   “Environmental Laws” shall mean any and all laws (including common law), statutes, codes, regulations, ordinances, decrees or orders of the United States, any other nation, and any state, local, or municipal authority thereof, regulating or imposing liability or standards of conduct concerning pollution or protection of human health as it relates to exposure to Hazardous Substances or the environment, including surface water, groundwater, ambient air, surface or subsurface soil, or wildlife habitat.

          (B)   “Hazardous Substances” shall mean any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, polychlorinated biphenyls, urea-formaldehyde insulation, hazardous wastes, toxic or hazardous substances, asbestos, pollutants, or contaminants defined as such in or regulated under any applicable Environmental Law.

          (iii)    Notwithstanding the generality of any other representations and warranties in this Agreement, the representations and warranties in this Section 2.1(n) and Section 2.1(i) shall be deemed the only representations and warranties in this Agreement with respect to matters relating to Environmental Laws or to Hazardous Substances.

               (o)   Employee Benefit Plans.

          (i)    All material “employee benefit plans” (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), but excluding any plan that is a “multiemployer plan” as defined in Section 3(37) of ERISA (“Multiemployer Plan”), deferred compensation, change in control or employment, vacation, fringe benefit, incentive, bonus, stock option, stock purchase, or restricted stock plans, programs, agreements or policies contributed to or maintained by any Group Member or with respect to which any Group Member has or is reasonably expected to have any liability for the benefit of any current or former employee, officer, consultant, independent contractor or director of any Group Member (such persons, collectively, “Group Employees”, and such plans, programs, agreements and policies, collectively, the “Benefit Plans”), other than those Benefit Plans disclosed in the SEC Filings filed prior to the date hereof or required by the Laws of the applicable jurisdictions to be so maintained, are set forth on Schedule 2.1(o)(i).

          (ii)    With respect to each Benefit Plan, Holdings has made available to Buyer a true and complete copy thereof (or, if a plan is not written, a written summary of the material terms thereof) and, to the extent applicable, (v) any related trust or custodial agreement or other

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funding instrument, (w) the most recent determination letter, if any, received from the Internal Revenue Service (the “IRS”), (x) any current summary plan description or employee handbook, (y) for the most recently completed year (A) the Form 5500 and attached schedules or comparable foreign filing or report, (B) audited financial statements and (C) actuarial valuation reports and (z) copies of any material correspondence from the IRS, SEC, Pension Benefit Guaranty Corporation, Department of Labor or any comparable foreign Governmental Authority relating to the operation of such Benefit Plan.

          (iii)    Each Benefit Plan has been established and administered and is in compliance with the terms of such Benefit Plan and all applicable Laws, except where the failure thereof would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

          (iv)    Each Benefit Plan that is intended to be qualified under section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”), has received a favorable determination letter regarding such qualification from the IRS and, to the Knowledge of Holdings, nothing has occurred that could reasonably be expected to adversely affect such qualification. The Hertz (UK) 1972 Pension Plan UK Plan has been registered and has been maintained in good standing with all applicable United Kingdom Governmental Authorities, and, to the Knowledge of Holdings, nothing has occurred that could reasonably be expected to adversely affect such status.

          (v)    There are no pending or, to the Knowledge of Holdings, threatened claims or litigation with respect to any Benefit Plans, other than ordinary and usual claims for benefits by participants and beneficiaries or that would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

          (vi)    Except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, (x) no Group Member has incurred any liability under Title IV of ERISA that has not been satisfied in full and (y) to the knowledge of the Holdings, no condition exists that is likely to cause any Group Member to incur any such liability (other than liability for premiums due the Pension Benefit Guaranty Corporation).

          (vii)    Except as set forth on Schedule 2.1(o)(vii), no Benefit Plan exists that provides that the execution of this Agreement or the consummation of the transactions contemplated hereby will (either alone or upon occurrence of any additional or subsequent events) result in any payment, acceleration, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Group Employee under any Benefit Plan, or will result in the triggering or imposition of any restrictions or limitations on the right of any Group Member to amend or terminate any Benefit Plan.

               (p)   Labor and Employment Matters. (i) Except as disclosed in the Prior SEC Filings or on Schedule 2.1(p)(i), or as would not reasonably be expected to have a Material Adverse Effect, there is no strike, slowdown or work stoppage by, or lockout of, or other labor dispute involving any Group Employees pending or, to the Knowledge of Holdings, threatened as of the date hereof.

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          (ii)    Schedule 2.1(p)(ii) sets forth a true and complete list of each Multiemployer Plan in which any Group Member participates other than any entered after the date hereof in compliance with this Agreement.

               (q)   Intellectual Property. (i) Except as disclosed in the SEC Filings filed prior to the date hereof or on Schedule 2.1(q) or as would not reasonably be expected to have a Material Adverse Effect, (A) Group Members own (free and clear of all Encumbrances other than Permitted Encumbrances), or have obtained a license or other right to use, the Intellectual Property necessary to the conduct of the Group’s businesses as conducted on the date hereof, and (B) to the Knowledge of Holdings, (x) no actions or claims have been asserted in writing by any third party (1) challenging the validity or ownership of any such Intellectual Property or the Group’s right to use such Intellectual Property, or (2) claiming that any Group Member is infringing any Intellectual Property owned by third parties, in each case other than actions, proceedings and claims that have been finally adjudicated with no further right of appeal, (y) the Intellectual Property that is registered with Governmental Authorities in the name of any Group Member is valid and enforceable, and (z) no third party is infringing any Intellectual Property owned by any Group Member (it being understood that third parties may be making authorized uses of certain Intellectual Property). For purposes of this Agreement, “Intellectual Property” shall mean all U.S. and foreign patents, inventions, trademarks, service marks, trade names, corporate names, domain names, logos, trade dress, trade secrets, copyrights and copyrightable works, and all registrations or applications related thereto, and databases and computer software.

          (ii)    Holdings has furnished to the Buyer copies of all material Intellectual Property license agreements pursuant to which (A) any third party grants any Group Member any rights in any Intellectual Property, or (B) any Group Member grants to any third party any rights in any Intellectual Property other than such license agreements the absence of possession of which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

          (iii)    Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, to the Knowledge of Holdings, each Group Member is in compliance with all applicable contractual and legal requirements pertaining to information privacy and security, including without limitation any privacy policies concerning the collection and use of personally identifiable information.

               (r)   Specified Contracts. (i) Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, each Specified Contract is a legal, valid and binding obligation of a Group Member (and, to Holdings’ Knowledge, of the counterparty thereto) and is in full force and effect and enforceable against such Group Member (and, to Holdings’ Knowledge, against the counterparty thereto) in accordance with its terms (subject to the effects of bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors’ rights generally). No Group Member is and, to Holdings’ Knowledge, no counterparty is in breach or violation of, or default under, any Specified Contract, except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. To the Knowledge of Holdings, no event has occurred which would result in a breach or violation of, or a default under, any Specified Contract (in each case, with or without notice or lapse of time or both).

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          (ii)    For purposes of this Agreement, the term “Specified Contract” means any of the following contracts, agreements, commitments or understandings, written or oral, together with all exhibits and schedules thereto (“Contracts”), if applicable, to which any Group Member is a party, or by which any Group Member or any of their respective properties or assets are bound or affected, all of which, as of the date hereof, are listed on Schedule 2.1(r) to the extent not filed as an exhibit to a Prior SEC Filing:

     (A)   any Contract filed (or that will be required to be filed) as an exhibit to the Company’s Annual Report on Form 10-K pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act or disclosed or required to be disclosed by the Company in a Current Report on Form 8-K;

     (B)   any limited liability company agreement, joint venture or other similar agreement or arrangement relating to the formation, creation, operation, management or control of any material partnership or joint venture (other than a Subsidiary) other than any such agreement or arrangement entered into by the Company at the request of any entity operating an airport at which the Company has rental facilities;

     (C)   any credit agreement, indenture, note or other instrument (other than among consolidated Subsidiaries) evidencing Indebtedness having an outstanding principal amount in excess of $10,000,000;

     (D)   any Contract that constitutes a leasehold interest or concession or operating right for any Material Real Property which is required to be listed on Schedule 2.1(j)(i)-1; and

     (E)   any Contract relating to the acquisition of a business or the acquisition of any interest in real property for consideration in excess of $25,000,000 if such acquisition is still pending or was completed in 2005.

          (iii)    (A) Each Group Member that is a party to any Contract for the repurchase of motor vehicles is, and to the Knowledge of Holdings, the counterparty to such Contract is, in compliance with the terms of such Contract, and (B) each such Contract is in full force and effect and enforceable against such Group Member (and, to Holdings’ Knowledge, against the counterparty thereto), in accordance with its terms (subject to the effects of bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors’ rights generally) except for any failures to be in compliance or to be enforceable as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

               (s)   Sufficiency of Assets; Relationship with Affiliates of Holdings. (i) Except as specifically disclosed in the “Certain Relationships and Related Transactions” sections of the Prior SEC Filings or Schedule 2.1(s), neither Holdings nor any Affiliate of Holdings, other than the Group, owns or makes available any of the assets, properties or rights that are necessary to conduct the business of the Group substantially as it is currently conducted. As of the date hereof, there are no material contracts, agreements or arrangements between Group Members, on the one hand, and Holdings or any Affiliate of Holdings (other than Group Members), on the other hand (all such contracts, agreements and arrangements, whether or not

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material, “Affiliate Agreements”) that are not disclosed on Schedule 2.1(s). As of the date hereof, all contracts, agreements or arrangements between Group Members, on the one hand, and Holdings or any Affiliate of Holdings (other than Group Members), on the other hand, not listed on Schedule 2.1(s), if any, were, in the judgment of the parties thereto, entered into on an arms-length basis.

               (t)   Brokers, Finders, etc. Neither Holdings nor any Group Member has engaged, or is subject to any valid claim of, or is bound by any arrangement or agreement with, any broker, finder, consultant or other intermediary in connection with the transactions contemplated by this Agreement who might be or is entitled to a fee or commission from any Group Member in connection with such transactions. Holdings will be responsible for any fees and commissions payable in connection with the transactions contemplated by this Agreement to its advisors.

               (u)   Notification of Certain Matters. As of the Closing, Holdings shall not have failed to provide notice of the occurrence, or failure to occur, of any event which occurrence or failure to occur would cause (a) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect, or (b) any material failure of Holdings to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement.

               (v)   Investigation. Except to the extent Holdings has otherwise advised Buyer in writing, Holdings has no Knowledge (to the actual Knowledge of those persons identified on part 2.1(v) of Schedule 7.12(b)) of any of the representations or warranties contained in Section 2.2 being untrue or incorrect as of the date hereof.

     2.2   Representations and Warranties of Buyer. Buyer hereby represents and warrants to Holdings as follows:

               (a)   Due Organization and Power. Buyer is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Buyer (A) has all requisite corporate power and authority to own and lease its properties and assets and to carry on its business as it is now being conducted and (B) is in good standing and is duly qualified to transact business in each jurisdiction in which it is required to be so qualified, except, in the case of clause (A) or (B), where the failure to have such power and authority or to be in good standing would not reasonably be expected to prevent, materially delay or materially impede the ability of Buyer to consummate the transactions contemplated by this Agreement.

               (b)   Authorization and Validity of Agreement. The execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby have been duly authorized in accordance with the laws and organizational documents of Buyer, and no other corporate action on the part of Buyer (or any member, partner, joint venturer, shareholder, board, director or officer of Buyer) is or will be necessary for the execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby. This Agreement has been duly executed and

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delivered by Buyer and is a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except to the extent that enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting creditors’ rights generally and by general equity principles.

               (c)   No Conflict. Except in the case of clauses (i), (ii) and (iv) of this Section 2.2(c) only, for any consent, approval, filing or notice that would not reasonably be expected to prevent, materially delay or materially impede the ability of Buyer to consummate the transactions contemplated by this Agreement, the execution, delivery and performance by Buyer of this Agreement and the consummation by Buyer of the transactions contemplated hereby:

          (i)    will not violate any provision of Law or Order applicable to Buyer or any of its Affiliates;

          (ii)    will not require any Consent or approval of, or filing or notice to, any Governmental Authority under any provision of Law applicable to Buyer, except for (A) the requirements of the HSR Act, (B) the applicable requirements of any other Foreign Antitrust Laws, (C) the applicable requirements of Applicable Insurance Laws, (D) applicable Irish Finance Requirements, (E) any requirements of the Connecticut DEP and (F) any Consent, which is applicable solely as a result of the specific regulatory status of Holdings or any Group Member or which Holdings or any Group Member is otherwise required to obtain;

          (iii)    will not violate any provision of the certificate of incorporation or by-laws or other governing documents of Buyer; and

          (iv)    will not require any consent or approval under, and will not conflict with, or result in the breach or termination of, or constitute a default under, or result in the acceleration of the performance by Buyer under, any indenture, mortgage, deed of trust, lease, license, franchise, contract, agreement or other instrument to which Buyer is a party or by which it or any of its assets is bound.

               (d)   Brokers, Finders, etc. Buyer has not employed, and is not subject to, the valid claim of, any broker, finder, consultant or other intermediary in connection with the transactions contemplated by this Agreement who might be entitled to a fee or commission from Holdings or any Group Member in connection with such transactions.

               (e)   Financing. Concurrently with the execution of this Agreement, Buyer has delivered correct and complete copies of (i) executed commitment letters, dated the date hereof (the “Equity Commitment Letters”), from Clayton, Dubilier & Rice Fund VII, L.P., Carlyle Partners IV, L.P., ML Global Private Equity Fund, L.P. (collectively, the “Equity Funds”) and Merrill Lynch Ventures L.P. 2001 to provide equity financing in an aggregate amount of $2.295 billion to fund a portion of the Purchase Price (the “Equity Financing”), and (ii) an executed commitment letter, dated the date hereof (the “Debt Commitment Letter”), from Lehman Brothers Inc., Lehman Commercial Paper Inc., Deutsche Bank Securities Inc., Deutsche Bank AG Cayman Islands Branch, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Merrill Lynch Capital Corporation, Goldman Sachs Credit Partners L.P., Goldman, Sachs & Co.,

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JPMorgan Chase Bank, N.A., and J.P. Morgan Securities Inc. to provide Buyer or the applicable Group Member with (A) up to $2.1 billion in senior secured term loan financing (the “Senior Secured Term Loan Financing”), (B) up to $1.5 billion in asset-based senior secured financing (the “ABL Financing”), (C) up to $3.05 billion in interim financing (the “Bridge Financing”), (D) up to $5.937 billion in asset-backed securities financing (the “ABS Financing”) and (E) up to $2.4 billion in international bridge financing (the “International ABS Bridge Financing”, and together with the Senior Secured Term Loan Financing, the ABL Financing, the Bridge Financing, the ABS Financing and any high yield debt financing used to fund the acquisition in lieu of the Bridge Financing (the “High Yield Financing”), being collectively referred to as the “Debt Financing”, and the Debt Financing together with the Equity Financing being collectively referred to as the “Financing”). Subject to its terms and conditions, the Financing, when funded in accordance with the Equity Commitment Letters and the Debt Commitment Letter, will, together with cash on hand held by the Company or another Group Member, provide financing sufficient to pay the Purchase Price, all other amounts called for to be paid or repaid under Sections 1.1, 3.6, 3.9 and 3.10 (whether payable on or after the Closing) and all of Buyer’s fees and expenses associated with the transactions contemplated in this Agreement. As of the date hereof, each of the Equity Commitment Letters in the form so delivered is, and to the Knowledge of Buyer, the Debt Commitment Letter in the form so delivered is, valid and in full force and effect and no event has occurred which, with or without notice, lapse of time or both, would constitute a default or breach on the part of Buyer under any term or condition of the Equity Commitment Letters or the Debt Commitment Letter. Except as set forth, described or provided for in the Equity Commitment Letters and the Debt Commitment Letter, (x) there are (I) no conditions precedent to the respective obligations of the Equity Funds and Merrill Lynch Ventures L.P. 2001 to fund the Equity Financing, or (II) material conditions precedent to the respective obligations of the Committing Lenders (as defined in the Debt Commitment Letter) to fund the Debt Financing, and (y) there are no express contractual contingencies under any agreement relating to the transactions contemplated by this Agreement to which the Buyer or any of its Affiliates is a party that would permit any of the Equity Funds, Merrill Lynch Ventures L.P. 2001 and the Committing Lenders to reduce the total amount of the Financing (other than, in the case of the Debt Financing, to provide for “OID” that the applicable borrower is permitted to finance with revolving borrowings) or impose any additional condition precedent to the availability of the Equity Financing or any additional material condition precedent to the availability of the Debt Financing. As of the date hereof, Buyer has no reason to believe that any of the conditions to the Financing will not be satisfied on a timely basis. Buyer has fully paid any and all commitment fees or other fees required by the Debt Commitment Letter to be paid as of the date hereof. If the Debt Financing (or alternative debt financing as contemplated by Section 3.9) is obtained, or if the conditions to the funding thereunder are satisfied (other than the availability of funding under the Equity Commitment Letters and provided that the lenders do not default in their obligations to provide such financing), Buyer shall have at the Closing proceeds in connection with the Financing in an amount sufficient to pay the Purchase Price, all amounts called for to be repaid under Sections 1.1, 3.6, 3.9 and 3.10 and all of Buyer’s fees and expenses associated with the transactions contemplated in this Agreement.

               (f)   Guarantee. Concurrently with the execution of this Agreement, Buyer has delivered to Holdings guarantees, dated the date hereof, of each of the Equity Funds with respect to certain matters on the terms specified therein (the “Guarantees”).

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               (g)   Unregistered Equity. Buyer acknowledges that it has been advised by Holdings that the Shares have not been and will not be registered under the Securities Act. Buyer is an “accredited investor” as that term is defined in Regulation D under the Securities Act. The Shares will be acquired by Buyer for its own account for investment and without a view to resale.

               (h)   Investigation. Except to the extent Buyer has otherwise advised Holdings in writing, Buyer has no Knowledge of any of the representations or warranties contained in Section 2.1 being untrue or incorrect as of the date hereof.

               (i)   Notification of Certain Matters. As of the Closing, Buyer shall not have failed to provide notice of the occurrence, or failure to occur, of any event which occurrence or failure to occur would cause (a) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect, or (b) any material failure of Buyer to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement.

     2.3   Representations and Warranties of the Parties. Each party hereto represents and warrants to the other that it is the explicit intent of each party hereto that, except for the express representations and warranties contained in this Article II, Holdings is making no representation or warranty whatsoever, whether express or implied, including, but not limited to, any implied warranty or representation as to condition, merchantability or suitability as to any of the properties or assets of any Group Member and that Buyer takes the Group “as is” and “where is.” It is understood that any cost estimates, projections or other predictions, any data, any financial information or any memoranda or offering materials or presentations provided or addressed to Buyer, are not and shall not be deemed to be or to include representations or warranties of Holdings or any of its Affiliates.

     2.4   Survival of Representations and Warranties. Except for the first sentence of each of Sections 2.1(b), 2.1(c)(i), 2.1(e) and of 2.2(b) and the second sentence of Section 2.1(c)(i), the respective representations and warranties made by Holdings and Buyer contained in this Article II shall expire and be terminated and extinguished at the Closing and shall not survive the Closing, and no party shall have any liability or obligation in connection with any such representation or warranty following the Closing.

     2.5   Schedules. Disclosure of any fact or item in any Schedule hereto referenced by a particular paragraph or section in this Agreement shall, should the existence of the fact or item or its contents be relevant to any other paragraph or section that is qualified by reference to a Schedule, be deemed to be disclosed with respect to that other paragraph or section only to the extent that such relevance is reasonably apparent from the face of the Schedule; provided, however, that no fact or item in any Schedule hereto shall be deemed to be disclosed for purposes of Schedule 2.1(h)(i) unless such fact or item is set forth on Schedule 2.1(h)(i). Disclosure of any fact or item in any Schedule hereto shall not necessarily mean that such item or fact individually is material to the business or financial condition of any of the Company or the Subsidiaries individually or of the Company and the Subsidiaries taken as a whole.

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ARTICLE III

COVENANTS

     3.1   Access; Information and Records; Confidentiality. (a) During the period commencing on the date hereof through the Closing Date, Holdings shall, and shall cause the Group to, upon request and reasonable notice (i) afford to Buyer, its counsel, accountants and other authorized representatives reasonable access (which access shall be exercised to the extent practicable during normal business hours) to the offices, properties, senior management, books and records of the Group Members and to the books and records of Holdings relating to the Group in order that Buyer may have the opportunity to make such reasonable investigations as it shall desire to make of the affairs of the Group and (ii) instruct the employees, counsel, accountants and financial advisors of the Group Members to cooperate with Buyer in its investigation of the Group. Holdings shall, and shall cause the Group Members, to cause their officers, employees, accountants and other agents to furnish to Buyer such additional financial and operating data and information in their possession with respect to the Group as Buyer may from time to time reasonably request. The Group Member shall not be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of the Group Member or contravene any Law or binding agreement entered into prior to the date of this Agreement (it being agreed that the parties shall use their reasonable best efforts to cause such information to be provided in a manner that does not cause such violation or jeopardization).

               (b)   Prior to the Closing Date and (if the Closing does not occur) after any termination of this Agreement, Buyer shall hold, and shall cause their respective directors, officers, employees, accountants, counsel, financial advisors and other representatives and Affiliates to hold, any information in confidence to the extent required by, and in accordance with, the provisions of the letters, dated July 1, 2005, July 5, 2005 and July 6, 2005, between Clayton, Dubilier & Rice, Inc., Carlyle Investment Management, L.L.C. and Merrill Lynch Global Partners, Inc., respectively, and the Company and Ford (collectively, the “Confidentiality Agreement”); provided, that unless this Agreement is terminated (i) any requirement under the Confidentiality Agreement to obtain consent for the disclosure of Information (as defined in the Confidentiality Agreement) to prospective debt financing sources and prospective equity co-investors and (ii) Sections 2 and 7(a) of the Confidentiality Agreement, shall cease to have further force and effect from and after the date hereof. Sections 6 and 7(b) (with respect to employees of the Company) of the Confidentiality Agreement shall cease to have further force and effect upon Closing.

               (c)   Prior to the Closing Date and (if the Closing does not occur) after any termination of this Agreement, with respect to any information obtained pursuant to this Section or the Confidentiality Agreement, Buyer shall not, and shall cause its respective directors, officers, employees, accountants, counsel, financial advisors and other representatives and Affiliates not to, take any action that would cause any Group Member to violate its Privacy Policy for Rental Customers or Privacy Policy for Car Sales Customers, as such policies are in effect on the date hereof.

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               (d)   From the date hereof and until the second anniversary of the Closing Date, Holdings will hold, and will cause Ford and its Affiliates to hold, and will use their reasonable best efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by judicial or administrative process or by other requirements of Law, all confidential documents and information concerning the Group Members, except to the extent that such information can be shown to have been (i) in the public domain through no fault of Holdings or its Affiliates (other than the Group Members) or (ii) later lawfully acquired by such Person from sources other than those related to Holdings’ ownership of Shares or the operation of the business of the Group. The obligation of Holdings to hold or cause to be held any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information.

               (e)   From and after the Closing Date, (i) Holdings will afford promptly to Buyer and its agents reasonable access to its books of account, financial and other records (including accountant’s work papers), information, employees and auditors to the extent necessary or reasonably useful for Buyer in connection with any audit, investigation, dispute or litigation or any other reasonable business purpose relating to the Group and (ii) Buyer will cause the Company to afford promptly to Holdings and its agents reasonable access to the Company’s books of account, financial and other records (including accountant’s work papers), information, employees and auditors to the extent necessary or reasonably useful for Holdings in connection with any audit, investigation, dispute or litigation or any other reasonable business purpose relating to the Group; provided, that any such access by Buyer or Holdings shall not unreasonably interfere with the conduct of the business of Holdings or the Company, as the case may be and; provided, further, that this provision shall not be available to and shall not expand the scope of discovery in the case of a legal proceeding between the parties (but only to the extent of the matters that are the subject of such proceeding). The party afforded access shall bear all of the out-of-pocket costs and expenses (including attorneys’ fees, but excluding reimbursement for general overhead, salaries and employee benefits) reasonably incurred in connection with the foregoing. No party shall be required to provide access to or to disclose information where such access or disclosure would jeopardize the attorney-client privilege of such party or contravene any Law or binding agreement entered into prior to the date of this Agreement (it being agreed that the parties shall use their reasonable best efforts to cause such information to be provided in a manner that does not cause such violation or jeopardization).

     3.2   Conduct of the Business of the Company Prior to the Closing Date. Holdings and, solely for purposes of clauses (xxiv) and (xxv) below, Ford agree that, except (x) as expressly contemplated by this Agreement, including, without limitation, Section 6.2 and those actions contemplated on Schedule 2.1(h)(ii) or Schedule 3.2, or (y) otherwise requested or consented to in writing by Buyer, which consent shall not be unreasonably withheld or delayed, during the period commencing on the date hereof and through the time of the Closing:

          (i)    Holdings shall not transfer the Shares to any Person or create or suffer to exist any Encumbrance upon the Shares other than, in each case, restrictions on their transfer under applicable securities Laws;

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          (ii)    the businesses of the Group shall be conducted only in the ordinary course of business and in a manner consistent with past practice;

          (iii)    the Company shall not amend its Certificate of Incorporation or By-Laws or take, agree to take or authorize, any action to wind up its affairs or dissolve or change the corporate or other organizational form of any Group Member;

          (iv)    except to the extent required under any Benefit Plan, collective bargaining agreement, labor agreement or works council agreement, or as required by applicable Law or any Governmental Authority, no Group Member shall (A) adopt any Benefit Plan (other than with respect to any cash incentive plan adopted in the ordinary course of business for 2006), (B) amend any Benefit Plan in any material respect or exercise any discretion to accelerate the vesting or payment of any compensation or benefit under any Benefit Plan, (C) increase or decrease the compensation or fringe benefits of any Group Employee, except for routine increases in accordance with past practice or any such increases made in connection with the promotion of any Group Employee in a manner consistent with past practice, (D) grant any severance or termination pay not provided for under any Benefit Plan except for payments made in connection with any settlement with terminating Group Employees below the level of senior vice presidents in a manner consistent with past practice in exchange for a release of all claims against the Group Members, (E) enter into any employment or consulting agreement or arrangement that provides for annual cash compensation in excess of $400,000, or any amendment thereof, (F) enter into any change in control or severance agreement or arrangement with any Group Employee at the level of senior vice president or above or (G) hire or terminate any executive officer other than a termination for cause;

          (v)    except to the extent required under any Benefit Plan, collective bargaining agreement, labor agreement or works council agreement, or as required by Law, applicable accounting standards, or any Governmental Authority, no Group Member shall (A) materially change any actuarial or other assumption used to calculate funding obligations with respect to any Benefit Plan or materially change the manner in which contributions to any Benefit Plan are made or the basis on which such contributions are determined, (B) commit to or agree with any Governmental Authority to abide by any funding arrangement or contribution schedule that would purport to be binding on Buyer or its Affiliates following the Closing with respect to any Benefit Plan that is a pension plan or (C) make any contribution to any Benefit Plan other than in the ordinary course of business and in a manner consistent with past practice or as required by Law or any Governmental Authority;

          (vi)    the Group Members shall use their commercially reasonable efforts to preserve intact their business organization, to keep available the services of their present officers and key employees (as determined by the Company, but subject to clause (iv) above), and to preserve the good will of those having business relationships with them;

          (vii)    the Group shall not (A) make or commit to make any Acquisitions (other than (x) Acquisitions of the Group’s licensees or franchisees for consideration, in the aggregate, of less than $20,000,000 (including assumed Indebtedness) and (y) other Acquisitions for consideration in the aggregate of less than $5,000,000), (B) incur Fleet Expenditures that, in the aggregate (including assumed Indebtedness) and on a consolidated basis, (x) for the period from

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the date hereof until December 31, 2005, are in excess of 110% of the amount allocated to Fleet Expenditures in the CE for the period commencing on September 1, 2005, and ending on December 31, 2005, and (y) for the period from January 1, 2006 until Closing, are in excess of 132% of the amount of aggregate, consolidated Fleet Expenditures actually incurred by the Group for the period commencing on January 1, 2005, and ending on February 28, 2005, (C) incur Non-Fleet Expenditures (other than in connection with Acquisitions) that, in the aggregate and on a consolidated basis, (x) for the period from the date hereof until December 31, 2005, are in excess of the sum of the amount allocated to Non-Fleet Expenditures in the CE for the period commencing on September 1, 2005 and ending on December 31, 2005, and (y) for the period from January 1, 2006 until the Closing, are in excess of $55 million (provided that in addition to the amounts of Non-Fleet Expenditures permitted above, Holdings may incur an additional $20 million of Non-Fleet Expenditures during the period from the date hereof until the Closing), or (D) incur or commit to incur any Fleet Expenditures or Non-Fleet Expenditures (other than in connection with Acquisitions) other than in the ordinary course of business consistent with past practice; as used herein, “Acquisitions” shall mean acquisitions (by merger, consolidation, or acquisition of stock or assets or any other business combination) of any corporation, partnership, other business organization or any business or any division thereof, “CE” shall mean the consolidated August 2005 Current Estimate for the Group, as previously furnished to Buyer, “Fleet Expenditures” shall mean capital expenditures for the purchase of revenue-earning equipment (as such term is used in the Group’s consolidated financial statements), and “Non-Fleet Expenditures” shall mean capital expenditures other than Fleet Expenditures;

          (viii)    except between Wholly Owned Subsidiaries or between a Wholly Owned Subsidiary and the Company in connection with cash management, financing of operations and movement of vehicles and equipment, in each case in the ordinary course of business consistent with past practice, no Group Member shall redeem or repurchase, directly or indirectly, any shares of the capital stock of any Group Member or declare or pay any dividends or distributions, with respect to any shares of its capital stock;

          (ix)    no Group Member shall issue, sell, transfer or encumber any equity securities of any Group Member, securities convertible into equity securities of any Group Member or warrants, options or other rights to acquire any such securities;

          (x)    no Group Member shall sell, assign, transfer, pledge or encumber, or grant any security interest (other than Permitted Encumbrances described in clauses (C) and (D) of the definition thereof) in, any of their tangible or intangible assets, in excess of $10,000,000 in the aggregate, except (A) in the ordinary course of business consistent with past practice, (B) as contemplated by the CE or (C) except in connection with the incurrence of Indebtedness or financings permitted by the terms of this Agreement;

          (xi)    except between Wholly Owned Subsidiaries or between a Wholly Owned Subsidiary and the Company in connection with cash management, financing of operations and movement of vehicles and equipment, in each case in the ordinary course of business consistent with past practice, no Group Member shall (A) repurchase, repay or prepay any Indebtedness other than at maturity, other than Indebtedness owed to Affiliates of Holdings and Indebtedness outstanding under the Interim Credit Agreement that is repurchased, repaid or prepaid in connection with a Permitted Extension, (B) incur any Indebtedness other than under (i) the

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Interim Credit Agreement (or any Permitted Extension), (ii) other lines of credit existing on the date hereof, and existing commercial paper programs and (iii) loans from Affiliates of Holdings; provided that the consolidated Indebtedness of the Group outstanding following any such incurrence of Indebtedness would not exceed (1) during the period from the date hereof until September 30, 2005, the sum of (x) amount of Indebtedness reflected in the balance sheet of the Group as of June 30, 2005 included in the Financial Statements and (y) $100 million, and (2) during the period from October 1, 2005 through the Closing Date, the amount of Indebtedness reflected in the balance sheet of the Group as of June 30, 2005 included in the Financial Statements, (C) no Group Member shall assume, endorse, or otherwise become responsible for the indebtedness for borrowed money of any Person other than another Group Member, or make any loan or advance to any Person, except for loans or advances to non-executive employees of the Group made in the ordinary course of business and consistent with past practice and (D) no Group Member shall assume, endorse or otherwise become responsible for the obligations (other than obligations constituting indebtedness for borrowed money) of any Person other than in the ordinary course of business and consistent with past practice; for purposes hereof, “Permitted Extension” shall mean an extension, an amendment or a replacement (whether effected through entry into new agreements and instruments or amendment of existing agreements and instruments, and whether with the same or different lenders) of the Interim Credit Agreement through a date not later than November 1, 2006, so long as (i) the aggregate availability thereunder does not exceed $3.0 billion, (ii) the terms thereof (other than the interest rates and other fees applicable thereunder) shall be substantially similar to those of the Interim Credit Agreement, (iii) the loans outstanding thereunder may be prepaid without premium or penalty, other than customary “breakage” fees associated with the prepayment of short-term loans on which interest accrues at rates based on the rates quoted in inter-bank markets and (iv) the facility is unsecured;

          (xii)    the Company shall not make any change to its methods of accounting, as applied to its consolidated and consolidating financial statements, in effect at June 30, 2005, except (A) as required by changes in GAAP (or any interpretation thereof) or Regulation S-X of the Exchange Act, (B) as may be required by a change in applicable Law or required by a Governmental Authority or quasi-Governmental Authority (including the Financial Accounting Standards Board (“FASB”) or any similar organization), or (C) as disclosed in the Prior SEC Filings; or

          (xiii)    there shall be no Tax election, change in any Tax election or change or adoption of any method of Tax accounting that could be reasonably expected to have a material adverse effect on the Group or Buyer;

          (xiv)    Holdings shall use all reasonable efforts subject to the proviso below to maintain in full force and effect substantially the same level of insurance coverage for the Group’s respective businesses, operations, personnel and other risks as the insurance provided under the policies in force on the date hereof, including any coverage under policies of Ford and its Affiliates; provided, however, that nothing herein shall prohibit Ford or its Affiliates (other than members of the Group) from replacing, amending, cancelling or otherwise changing any insurance policies made available to members of the Group so long as the Company is not disproportionately and adversely affected relative to Ford’s other Affiliates;

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          (xv)    except as required by Law, continue to manage and conduct the business of Probus, HIRE and HIRE (Bermuda), in the ordinary course consistent with past practices;

          (xvi)    no Group Member shall write up, write down or write off the book value of any material assets of the Group, other than (i) in the ordinary course of business and consistent with past practice or (ii) as may be required by GAAP or FASB;

          (xvii)    no Group Member shall cancel without reasonable consideration any material debts owing to or held by Group Members, except for debts cancelled in the ordinary course of the Group’s business consistent with past practice in connection with routine customer service activities, collection of accounts receivable and settlement of claims against Group Members;

          (xviii)    enter into any agreement that restricts the ability of any Group Member to engage or compete in any line of business in any respect material to the business of the Group, taken as a whole, other than in the ordinary course of business or that restricts the ability of any stockholder or Affiliate of such stockholder to engage in such competing line of business;

          (xix)    no Group Member shall, other than in the ordinary course of business consistent with past practice, (x) enter into, amend, modify, grant a waiver in respect of, cancel or consent to the termination of any Specified Contract (or any Contract that would be a Specified Contract if in effect on the date of this Agreement) or (y) settle or compromise any material action, suit, claim, litigation, proceeding, arbitration, investigation, audit or controversy (each, a “Material Proceeding”) or enter into any consent, decree, injunction or similar restraint or form of equitable relief in settlement of any Material Proceeding;

          (xx)    no Group Member shall enter into or adversely amend, modify or waive any rights under, in each case, in any material respect, any Contract (or series of related Contracts) with (A) Holdings or any Affiliate of Holdings (other than any Group Member), or (B) with any executive officer or director, or (other than on arm’s length terms in the ordinary course of business) any Person in which such executive officer or director, or any immediate family member of such executive officer or director, has over a 10% interest, other than the entry into or amendment, modification, or waiver of any such Contracts on an arms’ length basis which are not in the aggregate materially adverse to the business of the Group;

          (xxi)    notwithstanding clause 3.2(y) above, the Company shall not (A) enter into or amend any collective bargaining agreement covering more than 100 full-time employees in North America or (B) settle or otherwise voluntarily resolve any material condemnation proceeding, in either case without first consulting with, and in good faith considering the recommendations of, Buyer;

          (xxii)    no Group Member registered as an insurance company shall effect a merger, consolidation, redomestication, or any other transaction or series of transactions that has the effect of changing its jurisdiction of incorporation or organization;

          (xxiii)    except as otherwise required by Law, no Group Member that is not primarily regulated as an insurance company shall transfer reserves held against its self-insured liabilities and the assets supporting such reserves to any entity that is so primarily regulated;

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          (xxiv)    Ford shall not cause any Group Member to engage in any transactions outside the ordinary course of business between the date hereof and through the Closing that would materially increase the Taxes for which Buyer is responsible under this Agreement or that could reasonably be expected to have a material adverse effect on the Taxes of any Group Member after the date hereof, other than transactions expressly contemplated or permitted by this Agreement or the Schedules hereto;

          (xxv)    Ford shall not cause any Group Member to engage in any transaction between the date hereof and through the Closing that would result in any change to the entity classification of any Group Member for U.S federal Income Tax or foreign Tax purposes without the consent of Buyer;

          (xxvi)    no Group Member shall engage in any transaction that would result in any change in the ownership or form of organization of any Group Member; and

          (xxvii)    no Group Member shall announce an intention, enter into any formal or informal agreement or otherwise make a commitment, to do any of the foregoing.

     3.3   Filings. (a) Each party hereto shall (i) make the filings required of it or any of its Affiliates with the CBC and under the HSR Act, any Foreign Antitrust Laws and the Applicable Insurance Laws in connection with this Agreement and the transactions contemplated hereby as promptly as practicable following the date hereof, (ii) comply at the earliest practicable date and after consultation with the other party hereto with any request for additional information or documentary material received by it or any of its Affiliates from the Federal Trade Commission (the “FTC”), the Antitrust Division of the Department of Justice (the “Antitrust Division”), the European Commission, the CBC or any other Governmental Authority, (iii) cooperate with one another (which, for the avoidance of doubt will include in the case of Holdings, making reasonably available appropriate employees and representatives of the Group Members), in connection with any filing or submission with the CBC and under the HSR Act, any Foreign Antitrust Laws and the Applicable Insurance Laws and in connection with resolving any investigation or other inquiry concerning the transactions contemplated by this Agreement initiated by the FTC, the Antitrust Division, the European Commission, the CBC, any other Governmental Authority or any private party, (iv) take any other action reasonably necessary to obtain the approvals and consents required for the consummation of the transactions contemplated by this Agreement at the earliest possible date and (v) take all necessary actions within its control to cause the waiting periods under the HSR Act to terminate or expire at the earliest possible date.

               (b)   For purposes of this Section 3.3, without limiting the foregoing, required actions by Buyer shall include acceptance by Buyer of any and all divestitures of any subsidiary or assets of Buyer or its Affiliates or the Group or acceptance of an agreement to hold any assets of Buyer or its Affiliates or the Group separate in any lawsuit or other legal proceeding, whether judicial or administrative and whether required by the FTC, the Antitrust Division, the European Commission, the CBC or any other applicable Governmental Authority in connection with the transactions contemplated by this Agreement or any other agreement contemplated hereby.

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               (c)   Each party hereto shall promptly inform the other parties of any material communication made to, or received by such party from, the FTC, the Antitrust Division, the European Commission, the CBC or any other Governmental Authority regarding any of the transactions contemplated hereby.

               (d)   The filing fee under the HSR Act, the ECMR and, subject to Section 3.3(e) below, any fee or payment to a Governmental Authority under any other Foreign Antitrust Laws or the Applicable Insurance Laws and any fees paid in connection with obtaining an advance ruling certificate from the CBC shall be borne by Buyer.

               (e)   Holdings agrees that, if any Governmental Authority, in connection with its review of the transactions contemplated by this Agreement, requests (and such request is not withdrawn within five days following such request) or requires that any amounts owing from Ford, Transcon Insurance Limited, or any other direct or indirect subsidiaries of Ford (other than Group Members) to Probus, HIRE or HIRE (Bermuda), as the case may be, be collateralized, Holdings will cause such amounts to be collateralized (in an amount not greater than the amount owing from any of the above entities) at Holdings’ option either by providing a letter of credit or surety bond (in a form acceptable to the Governmental Authority) or by providing any other form of collateral, in each case acceptable to such Governmental Authority. In any event, unless the regulator requires to the contrary, the amount of collateral will be reviewed as of December 31 of each year (beginning in 2006) and adjusted to reflect the actual amounts then owing.

     3.4   Public Announcements. Holdings and Buyer shall agree on the form of a joint press release with respect to the announcement of the transactions contemplated by this Agreement. Except as set forth above, unless otherwise required by Law, including the rules and regulations promulgated by the SEC, prior to the Closing Date, no news release or other public announcement pertaining to the transactions contemplated by this Agreement shall be made by or on behalf of any party or their respective Affiliates without the consent of the other party, which shall not be unreasonably withheld or delayed. Prior to any party or their Affiliates issuing a press release or other public announcement required by Law, Buyer and Holdings shall consult with each other and each of them shall have reasonable opportunity to comment on such press release.

     3.5   Further Actions. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement, including using its reasonable best efforts: (i) to obtain, in addition to the Consents discussed in Section 3.3 hereof, any Consents of any Governmental Authority and/or similar actions of or with respect to any third party as are necessary or advisable in connection with the consummation of the transactions contemplated hereby, (ii) to effect, in addition to the filings discussed in Section 3.3 hereof, all necessary or advisable registrations and filings, (iii) to defend any lawsuits or other legal proceedings, whether judicial or administrative, whether brought derivatively or on behalf of third parties (including Governmental Authorities or officials), challenging this Agreement or the consummation of the transactions contemplated hereby and (iv) to furnish to each other such information and assistance and to consult with respect to the terms of any registration, filing, application or undertaking as reasonably may be requested in connection with the foregoing.

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     3.6   Termination of Affiliate Relations. (a) Except as contemplated by this Agreement (including, for the avoidance of doubt, the matters addressed in Section 6.2, which are addressed exclusively in such section, and Schedule 3.10(b)), on or prior to the Closing Date, (i) the Group Members shall repay Indebtedness under the Holdings Note and under any loan made by Holdings or its Affiliates to any Group Member after the date hereof in compliance with this Agreement (collectively, “Affiliate Indebtedness”) and (ii) all other liabilities (other than payables for goods sold and services rendered in the ordinary course under the Contracts set forth in Schedule 2.1(s) which shall be paid in the ordinary course of business) owed to Ford or any of its Affiliates (other than a Group Member) by any Group Member or owed to any Group Member by Ford or any of its Affiliates (other than a Group Member) shall in each case be settled and terminated without any payment in respect of such liability. On the Closing Date, Buyer shall provide the Company with amounts of cash equal to the amounts of cash needed for the Group to repay all of its outstanding Affiliate Indebtedness owed to Ford or Ford’s Affiliates (other than a Group Member).

               (b)   All agreements between Group Members, on the one hand, and Ford and its Affiliates (other than the Group), on the other hand (the “Affiliate Agreements”) shall be terminated as of the Closing, and all obligations and liabilities thereunder (other than payables for goods sold and services rendered in the ordinary course under the Contracts set forth in Schedule 2.1(s) which shall be paid in the ordinary course of business) shall thereupon be discharged and released, except that the agreements listed on Schedule 3.6(b) (the “Surviving Agreements”) shall remain in full force and effect. This covenant is intended to be for the benefit of, and shall be enforceable by, Ford and its Affiliates as if such Persons were parties hereto.

               (c)   The Company shall have the right, exercisable by notice to Holdings within 180 days following the Closing, to require Holdings to cause any Undisclosed Material Affiliate Agreement to be reinstated as of the date of such notice and to continue in effect until the earlier to occur of the fifth anniversary of the Closing or the expiration of the term of such Undisclosed Material Affiliate Agreement. Any such Undisclosed Material Affiliate Agreement that the Company properly elects to be reinstated shall be reinstated within 10 Business Days of such election by the Company. “Undisclosed Material Affiliate Agreement” shall mean any material Affiliate Agreement entered into prior to the Closing and not set forth on Schedule 2.1(s).

               (d)   Notwithstanding anything to the contrary in this Agreement, on or prior to the Closing Date, Holdings shall cause the partnership (the “Partnership”) formed pursuant to the Investment Partnership Agreement of the Ford Investment Partnership, dated May 31, 1992, among the parties listed on Exhibit A thereto, as amended (the “Partnership Agreement”), to cause all amounts or securities or other assets payable, owing or distributable to all Group Members by the Partnership under the Partnership Agreement to be paid or distributed to such Group Member at or prior to the Closing Date, and upon such payment or distribution in full such Partnership Agreement shall be terminated without further liability or obligation of the parties thereto.

     3.7   Indemnification of Directors and Officers. (a) The certificate of incorporation and by-laws (or equivalent governing instruments) of each Group Member shall contain

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provisions no less favorable with respect to indemnification than are set forth in the certificate of incorporation and by-laws of such Group Member as of the date hereof, which provisions shall not be amended, repealed or otherwise modified for a period of six years after the Closing Date in any manner that would adversely affect the rights thereunder of individuals who at or prior to the Closing Date were directors, officers, agents or employees of such Group Member or who were otherwise entitled to indemnification pursuant to the certificate of incorporation and by-laws (or equivalent governing instruments) of such Group Member. After the Closing Date, Buyer shall cause the Company to indemnify each individual who served as a director or officer of any Group Member (or any other direct or indirect subsidiary of the Company from time to time) at any time prior to the Closing Date from and against all actions, suits, proceedings, hearings, investigations and claims, including all court costs and reasonable attorney fees and expenses resulting from or arising out of, or caused by, this Agreement or any of the transactions contemplated hereby. This covenant is intended to be for the benefit of, and shall be enforceable by, each person who served as a director or officer of any Group Member prior to the Closing Date and their respective heirs and legal representatives and shall survive the consummation of the transactions contemplated by this Agreement.

               (b)   For a period of six years following the Closing Date, to the extent Ford retains directors’ and officers’ liability insurance, Holdings shall cause Ford to arrange to provide coverage to the Group directors and officers as of the date hereof for alleged wrongful acts that occurred prior to the Closing Date on the same terms and conditions as applicable to other covered directors and officers (the “D&O Tail Coverage”); provided, that nothing herein shall require Ford or any of its Affiliates to maintain or preserve in effect any items of directors’ and officers’ liability insurance which it does not otherwise maintain or preserve in effect for directors and officers other than the directors and officers of the Group; and provided, further, that Holdings shall use its reasonable best efforts to give the Company no less than 60 days prior written notice before any lapse in or cancellation or termination of the D&O Tail Coverage and shall consult with the Company and keep the Company reasonably informed with respect to any of the foregoing. Buyer shall pay the Company’s allocable cost for such insurance (based on the amount paid by the Company with respect to coverage for the period from December 15, 2004 to December 15, 2005) and shall promptly reimburse Holdings or its designee for all other reasonable costs and expenses whatsoever incurred in providing the coverage described in this Section 3.7(b).

     3.8   Director Resignations. At the Closing, Holdings shall cause to be delivered to Buyer duly signed resignations of those directors of the Group Members who are also officers of Ford and, in addition, any other directors of the Group Members designated by Buyer to Holdings in writing at least 10 Business Days prior to the Closing.

     3.9   Financing. (a) Buyer shall use its reasonable best efforts to arrange the Debt Financing on the terms and conditions described in the Debt Commitment Letter, including using reasonable best efforts to (i) negotiate definitive agreements with respect thereto on the terms and conditions contained therein or on other terms not materially less beneficial to Buyer and the Company, (ii) satisfy on a timely basis all conditions applicable to Buyer in such definitive agreements that are within its control and (iii) consummate the Financing contemplated by the Debt Commitment Letter at Closing. Buyer shall obtain the Financing contemplated by the Equity Commitment Letters upon satisfaction or waiver of (A) the conditions to the Closing set

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forth in Section 4.1 and 4.2 (other than those conditions that by their nature will not be satisfied until the Closing) and (B) the conditions to the funding of the Debt Financing or any alternative debt financing that is on terms not materially less beneficial to Buyer and the Company (other than those conditions that by their nature will not be satisfied until the Closing and conditions related to the funding of the Equity Financing and provided that the lenders do not default in their obligations to provide such financing). In the event any portion of the Debt Financing becomes unavailable on the terms and conditions contemplated in the Debt Commitment Letters, Buyer shall use its reasonable best efforts to arrange to obtain alternative financing, including from alternative sources, on terms that are not materially less beneficial to Buyer and the Company as promptly as practicable following the occurrence of such event. In the event that (x) any portion of the Debt Financing structured as High Yield Financing has not been consummated, (y) all closing conditions contained in Article IV shall have been satisfied or waived (other than those conditions contained in Sections 4.2(c) and 4.3(c) and any other conditions that by their nature will not be satisfied until the Closing) and (z) the Bridge Financing (or alternative bridge financing obtained in accordance with this Section 3.9(a)) is available on the terms and conditions described in the Debt Commitment Letter (or any replacement commitment letter), then Buyer shall borrow under and use the proceeds of the Bridge Financing (or such alternative bridge financing) to replace such affected portion of the High Yield Financing no later than the last day of the Marketing Period. For purposes of this Agreement, the “Marketing Period” shall mean (x) if the conditions set forth in Section 4.1 (other than the approval under the Irish Insurance Laws and the Bermuda Insurance Laws so long as Buyer reasonably believes such approvals will be obtained prior to December 22, 2005) and 4.2(e)(i) are satisfied or waived on or prior to November 27, 2005, the period from the date such conditions are satisfied or waived until and including December 22, 2005 or (y) if the conditions set forth in Section 4.1 (other than the approval under the Irish Insurance Laws and the Bermuda Insurance Laws) and 4.2(e)(i) are satisfied or waived on or after November 28, 2005, the 20 consecutive Business Day period commencing on the later of January 2, 2006 and the date such conditions are satisfied or waived (it being agreed that Buyer shall have the right in its sole discretion to delay the commencement date described in this clause (y) until the later of the date on which (i) approval under Irish Insurance Laws is received and (ii) approval under the Bermuda Insurance Laws is received, but such right to delay shall expire on January 18, 2006); provided that, in the case of clauses (x) and (y), the Company shall have timely filed, without extension, a Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 that complies with Section 2.1(g)(i); and provided further that, the conditions set forth in (x) and (y) shall not be deemed satisfied and the “Marketing Period” shall not be deemed to have commenced if, prior to the completion of the Marketing Period, PricewaterhouseCoopers shall have withdrawn its audit opinion on the Company’s audited financial statements as of and for the period ended December 31, 2004 or withdrawn as the Company’s independent auditors in either case as a result of PricewaterhouseCooper’s failure to be independent with respect to the Company or Ford (if and to the extent relevant to the financial statements of the Company) under Rule 2-01 of Regulation S-X. Buyer shall give the Company prompt notice upon becoming aware of any material breach by any party of the Debt Commitment Letter or any termination of the Debt Commitment Letter. Buyer shall keep the Company informed on a reasonably current basis in reasonable detail of the status of its efforts to arrange the Financing and shall not permit any material amendment or modification to be made to, or any waiver of any material provision or remedy under, the Debt Commitment Letter without the prior written consent of Holdings

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(such consent not to be unreasonably withheld or delayed). Buyer shall provide notice to Holdings promptly upon receiving the Debt Financing. Buyer shall not permit any amendment or modification to be made to, or any waiver of any material provision or remedy under, the Equity Commitment Letters without the prior written consent of Holdings.

               (b)   Holdings shall provide, and shall cause the Group to provide, and shall use reasonable best efforts to cause the Group’s independent auditors, counsel and other representatives to provide, all reasonable and timely cooperation in connection with the arrangement of the Debt Financing as may be reasonably requested by Buyer (provided, that Holdings shall not be required to provide, or cause any Group Member to provide, cooperation under this Section 3.9(b) that (A) unreasonably interferes with the ongoing business of the Group or Holdings, (B) causes any representation or warranty in this Agreement to be breached, (C) causes any closing condition set forth in Article IV to fail to be satisfied or otherwise causes the breach of this Agreement or any material agreement to which Holdings is a party or the breach prior to Closing of any other material agreement to which a Group Member is a party (provided, the effect of any such breach shall be excluded when determining if the condition set forth in Section 4.2(a) is satisfied) or (D) involves any binding commitment by any Group Member or Holdings which commitment is not conditioned on the Closing and does not terminate without liability to Holdings or the Group upon the termination of this Agreement), including but not limited to (i) arranging for senior management of the Company and, if requested by Buyer, any other Group Member (x) to meet at reasonable times and on a reasonable number of occasions with rating agencies, prospective lenders and investors in presentations, meetings, road shows and due diligence sessions, (y) to provide reasonable and customary management and legal representations to auditors and (z) to provide reasonable and timely assistance with the preparation of business projections and similar materials, (ii) otherwise reasonably cooperating with the marketing efforts of Buyer and its financing sources for any of the Debt Financing, (iii) upon request, furnishing Buyer and its financing sources with timely financial and other pertinent information regarding the Company as shall exist (or if not existing, using reasonable best efforts to prepare such financial or other pertinent information) that it reasonably believes to be accurate in all material respects and as may be reasonably requested by Buyer, including the financial statements and financial data and related material (including appropriate management’s discussion and analysis) consistent with the requirements of the Securities Act and the rules and regulations promulgated thereunder for a registered offering of debt securities or, in the case of an offering pursuant to Rule 144A, as customarily applied to an offering under Rule 144A for a private offering of debt securities, as the case may be, (and including, with respect to any audited financial statements, the report of the Company’s auditors thereon) (the “Required Financial Information”), (iv) satisfying the conditions set forth in paragraphs (k) and (i) of Exhibit F to the Debt Commitment Letter and clause (y) of the last sentence of numbered paragraph 9 in the Debt Commitment Letter (to the extent satisfaction of such conditions requires actions by or cooperation of Holdings or any of the Group and subject to the proviso to clause (v) of this Section 3.9(b)), subject to such provisions of the Debt Commitment Letter being in the form provided to Holdings prior to the signing of this Agreement, (v) assisting Buyer and its financing sources (including by participating in drafting sessions) in the timely preparation (provided that, for the avoidance of doubt, Buyer shall be responsible for the preparation and finalization of all Offering Documents) of (A) offering, information or syndication documents for any of the Financing or any alternative to all or any portion thereof (“Offering Documents”), including but not limited to (x) a

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prospectus or an offering memorandum, prepared in accordance with customary practices for any registered offering of debt securities or an offering under Rule 144A, as the case may be, and consistent with the Securities Act for a registered offering of debt securities or, in the case of an offering pursuant to Rule 144A, as customarily applied to an offering under Rule 144A for a private offering of debt securities, as the case may be, with respect to any High Yield Financing (or any alternative thereto) that Buyer is seeking to obtain and (y) an offering memorandum or prospectus prepared in accordance with customary practices for asset-backed facilities of comparable terms and size with respect to any ABS Financing (or any alternative thereto) that Buyer is seeking to obtain, including in each case under clauses (x) and (y) above by timely providing the Required Financial Information and such other financial and pertinent information (such as tabular, compiled or other financial data), as shall exist (or if not existing, using reasonable best efforts to prepare such financial or other pertinent information) that Holdings or such Group Member reasonably believes to be accurate in all material respects and as may be reasonably requested by Buyer, and (B) materials for rating agency presentations, (vi) facilitating the pledging of collateral and obtaining surveys and title insurance as reasonably requested by Buyer, (vii) using reasonable best efforts to obtain comfort letters from the auditors of the Company or any other Group Member and consent from such auditors for Buyer, the Company and any applicable Group Member to use any of their audit reports (including but not limited to by including such reports in any Offering Documents), (viii) taking all necessary actions to cause each Subsidiary (as defined in each indenture or other agreement in Schedule 3.9(b), respectively) not to be a “Restricted Subsidiary” (as defined in, and for all purposes under, such indenture or agreement), in each case no later than September 30, 2005, (x) other than those set forth in Schedule 3.9(b) with respect to the relevant indenture or other agreement and (y) except as otherwise provided in such Schedule 3.9(b), (ix) taking such corporate actions as shall be reasonably necessary to permit the consummation of the Debt Financing and to permit the proceeds thereof to be made available to the Company at the Closing, (x) using reasonable best efforts to obtain legal opinions as may reasonably be requested by Buyer and (xi) using reasonable best efforts to provide and execute necessary documents and certificates, including officer’s certificates, as may be reasonably requested by Buyer. In no event shall any Group Member be required to pay any commitment or similar fee or (except as otherwise expressly contemplated by this Agreement) incur any liability in connection with the Debt Financing prior to the Closing. Buyer shall, from and after the Closing or promptly after the termination of this Agreement pursuant to Section 7.1(a) (other than Section 7.1(a)(iii)), (i) promptly upon request by Holdings reimburse Holdings for all out-of-pocket costs incurred in good faith by Holdings and, in the event of such termination, the Group in connection with such cooperation and (ii) indemnify and hold harmless Holdings and the Group Members and their respective directors, employees and representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with the arrangement of the Debt Financing and any information utilized in connection therewith (other than information provided by Holdings or any Group Member).

               (c)   Holdings shall cause the Company to use reasonable best efforts to enter into any Permitted Extension no later than October 11, 2005.

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     3.10   Debt Tender Offer; Repayment of Third-Party Indebtedness.

               (a)   Short-Dated Notes. As soon as practicable after the date of this Agreement, Holdings shall cause the Company to launch a tender offer and Consent Solicitation (as defined below) (the “Debt Tender Offer”) for those series of the Company’s debt securities listed on Schedule 3.10(a) (the “Short-Dated Notes”), on the terms set forth on such schedule and Buyer shall assist Holdings and the Company in connection therewith. Promptly upon the receipt of the Requested Bond Consents with respect to any series of Short-Dated Notes or the Requested Indenture Consents with respect to the 1986 Indenture, the 1994 Indenture and the 2001 Indenture, the Company will enter into a supplemental indenture or supplemental indentures reflecting the amendments to such indentures approved by such Requested Bond Consent or Requested Indenture Consent, as the case may be, and will use its reasonable best efforts to cause the relevant indenture trustee to promptly enter into such supplemental indenture or supplemental indentures; provided, that the amendments contained in such supplemental indentures shall become operative upon the acceptance of the applicable notes in the Debt Tender Offers, Exchange Offers and/or Alternative Tender Offers (as defined below), as applicable. The closing of any Debt Tender Offer shall be conditioned on the occurrence of the Closing, and the parties shall use their reasonable best efforts to cause the Debt Tender Offer to close on the Closing Date. Upon the closing of the Debt Tender Offer, at Closing and in accordance with the terms of the Debt Tender Offer, Buyer shall cause the Company to accept for purchase and purchase the Short-Dated Notes tendered in the Debt Tender Offer (the “Tendered Notes”) and provide to the Company or cause the Company to obtain (whether through the Financing or use of cash on hand) cash in an amount sufficient to fund the purchase of all Tendered Notes, including any applicable premiums, and all related fees and expenses (the “Tender Amount”). For purposes of the Agreement, “Consent Solicitation” shall mean a solicitation of the Requested Bond Consents and the Requested Indenture Consents from the holders of the applicable debt securities; “Requested Bond Consents” shall mean the consents of holders of a majority in principal amount of the holders of the applicable series of the Company’s debt securities outstanding under the 1986 Indenture, 1994 Indenture or 2001 Indenture, as the case may be, to the amendments to such series of debt securities described in Schedule 3.10(a) or 3.10(b) or in the applicable Consent Solicitation materials, as the case may be (but in the case of the 2001 Indenture, only with the prior written consent of Holdings, which shall not be unreasonably withheld, taking into account Holdings’ judgment as to the impact on the success of the related Debt Tender Offer, Exchange Offer and/or Alternative Tender Offer of such amendments), and “Requested Indenture Consents” shall mean the consents of holders of a majority in principal amount of all of the debt securities outstanding under the 1986 Indenture, 1994 Indenture or 2001 Indenture, as the case may be, to the amendments to such indenture described in Schedule 3.10(a) or 3.10(b) or in the applicable Consent Solicitation materials, as the case may be (but in the case of the 2001 Indenture, only with the prior written consent of Holdings, which shall not be unreasonably withheld, taking into account Holdings’ judgment as to the impact on the success of the related Debt Tender Offer, Exchange Offer or Alternative Tender Offer of such amendments).

               (b)   Long-Dated Notes. As soon as practicable and no later than October 17, 2005, Holdings shall either (i) through one or more of its Affiliates (other than any Group Member) (any such Affiliate, an “Exchange Offeror”), launch offer(s) to exchange all of the series of the Company’s debt securities listed on Schedule 3.10(b) (the “Long-Dated Notes”) in

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exchange for debt securities of the applicable Exchange Offeror in amounts and on terms as described in Schedule 3.10(b), which offers shall also contain a Consent Solicitation (the “Exchange Offers”) or (ii) cause the Company to launch tender offer(s) for all of the Long-Dated Notes, which offers shall also contain a Consent Solicitation (the “Alternative Tender Offers” ), on the terms set forth on Schedule 3.10(b). Promptly upon the receipt of the Requested Bond Consents with respect to any series of Long-Dated Notes or the Requested Indenture Consents with respect to the 1994 Indenture or the 2001 Indenture, the Company will enter into a supplemental indenture or supplemental indentures reflecting the amendments to such indentures approved by such Requested Bond Consent or Requested Indenture Consent, as the case may be, and will use its reasonable best efforts to cause the relevant indenture trustee to promptly enter into such supplemental indenture or supplemental indentures; provided, that the amendments contained in such supplemental indentures shall become operative upon the acceptance of the applicable notes in the Debt Tender Offers, Exchange Offers and/or Alternative Tender Offers, as applicable. The closing of the Exchange Offers shall be conditioned on the occurrence of the Closing, and the parties shall use their reasonable best efforts to cause the Exchange Offers to close on the Closing Date. Upon any closing of the Exchange Offers, at Closing and in accordance with the terms of the Exchange Offers, Holdings shall cause the Exchange Offerors to accept for exchange the Long-Dated Notes tendered in the Exchange Offers (the “Exchanged Notes”). In the event any Exchange Offer is completed with respect to any one or more series of the Long-Dated Notes, then at Closing, Buyer shall pay to the applicable Exchange Offeror cash in an amount equal to the face amount plus any accrued and unpaid interest with respect to all Exchanged Notes (such value, the “Exchange Value”) with respect to each such series, and as soon as practicable after completion of the Exchange Offer, Holdings shall deliver to Buyer the Exchanged Notes or evidence of cancellation thereof. This covenant is intended to be for the benefit of, and shall be enforceable by, each applicable Exchange Offeror as if such Person were a party hereto. The closing of any Alternative Tender Offer shall be conditioned on the occurrence of the Closing, and the parties shall use their reasonable best efforts to cause the Alternative Tender Offers to close on the Closing Date. Upon any closing of the Alternative Tender Offers, at Closing and in accordance with the terms of the Alternative Tender Offers, Holdings shall cause the Company to accept for purchase and purchase the Long-Dated Notes tendered in the Alternative Tender Offers (any Long-Dated Notes so accepted in an Alternative Tender Offer shall be deemed to be “Tendered Notes” under the Agreement except that the purchase of such Long-Dated Notes shall be funded by Buyer in accordance with the provisions of Schedule 3.10(b) instead of the provisions of Section 3.10(a)). Holdings shall indemnify and hold harmless Buyer and its directors, employees, representatives and Affiliates from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with the Exchange Offers and any information utilized in connection therewith (other than information provided by Buyer or its Affiliates other than Group Members).

               (c)   Certain Other Indebtedness. Not less than two business days prior to the Closing Date, Holdings shall deliver to Buyer payoff letters from third-party lenders or trustees, as applicable, in form and substance reasonably satisfactory to Buyer, with respect to all Indebtedness of the Company required to be identified on Schedule 3.10(c) or entered into after the date hereof. Such payoff letters shall correctly specify the amount, including any applicable premiums or fees and expenses, necessary to repay such Indebtedness and completely discharge the obligations of the Group with respect thereto. At Closing, Buyer shall provide to the

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Company or cause the Company to obtain (whether through the Financing or use of cash on hand) the aggregate amount necessary to make such repayment and discharge, and shall cause the Company or another Group Member to discharge such Indebtedness in accordance with the delivery instructions provided in such payoff letters. The amount of such Indebtedness to be repaid at Closing is referred to as the “Closing Debt Amount” and, together with the Tender Amount, the “Debt Payment Amount”.

               (d)   On the Closing Date, Holdings shall cause each Group Member to permanently terminate the unsecured credit facilities identified on Schedule 3.10(d), and all related agreements, to which such Group Member is a party, it being understood and agreed that the Interim Credit Agreement will be terminated by the applicable Group Member prior to the repayment of the Affiliate Indebtedness.

     3.11   Insurance. Except as set forth in Section 3.7 and this Section 3.11, coverage of any Group Members or any of their respective businesses, operations, personnel and other risks attributable to them under all insurance policies of Ford and its Affiliates (other than the Group Members) shall cease as of the Closing Date. To the extent that Ford retains in effect blanket policies of umbrella liability insurance, then from the Closing Date until the last day of the 2006 policy year (the “Coverage Period”), Holdings shall cause Ford to maintain blanket policies of umbrella liability insurance coverage (subject to the terms of those policies) for the Group (the “Ford Insurance”) for liabilities, costs or damages relating to any event occurring prior to the Closing Date (but not occurring after the Closing Date), and upon the request of Buyer, Holdings shall use its commercially reasonable efforts to assert any and all claims for payment made by the Company at the request of Buyer within the Coverage Period under the Ford Insurance (“Pre-Closing Claim”); provided that nothing herein shall require Ford or any of its Affiliates to maintain or preserve in effect any policies of insurance which it does not otherwise maintain or preserve in effect for entities other than the Group Members or for its business other than the business of the Group. Any Pre-Closing Claim shall be processed by Ford in the same manner and shall be given the same priority relative to other claims as if such claim had been made by Ford or one of its Affiliates. Holdings (or its designee) will promptly remit to the Company any and all amounts recovered pursuant to Ford Insurance for any Pre-Closing Claim. The Company shall provide, or cause the Group to provide, all assistance and information reasonably requested by Holdings in connection with processing Pre-Closing Claims and providing information to its insurance underwriters, in each case in a manner consistent with the practices of Ford and the Company prior to the date hereof and Holdings shall consult with the Company, and keep the Company reasonably informed with respect to, any of the foregoing. Holdings shall coordinate with the Company to provide such information relating to the Ford Insurance as the Company may reasonably request, in a manner consistent with the practices of Ford and the Company prior to the Closing, including providing the Company with notice of any cancellation or termination of such Ford Insurance as promptly as practicable after (i) receiving any notice thereof or (ii) reaching a decision to provide a notice of cancellation or termination. None of Holdings, Ford or any Ford Affiliate assumes or intends to incur any liability to Buyer or any Group Member or any of their respective Affiliates in connection with its obligations under this Section 3.11. The Company shall pay the Company’s allocable cost for such insurance (based on the amount paid by the Company with respect to coverage for the period from December 15, 2004 to December 15, 2005) and shall promptly reimburse Holdings or its designee for all other reasonable out-of-pocket costs and expenses whatsoever incurred (a) at Buyer’s request or (b) in

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providing the assistance described in this Section 3.11 (“Assistance Costs”). “Assistance Costs” shall include third party expenses, including without limitation attorneys’ fees and claims adjustment expenses, paid in connection with investigating, preparing, or pursuing recoveries from insurance contracts and retroactive or prospective premium increases to the extent (and only to the extent) attributable to losses incurred in connection with the Group following the Closing.

ARTICLE IV

CONDITIONS PRECEDENT

     4.1   Conditions Precedent to Obligations of Parties. The respective obligations of each of the parties hereto hereunder are subject to the satisfaction, at or prior to the Closing Date, of each of the following conditions:

               (a)   No Injunction. At the Closing Date, there shall be no injunction, restraining order or decree of any nature of any Governmental Authority that is in effect that restrains or prohibits the consummation of the transactions contemplated by this Agreement; provided, however, that the party or parties invoking this condition shall have used its or their reasonable best efforts to have any such injunction, order or decree vacated or denied.

               (b)   Regulatory Authorizations. The applicable waiting periods specified under the HSR Act with respect to the transactions contemplated by this Agreement shall have lapsed or been terminated and those other consents and approvals required to consummate the transactions contemplated by this Agreement from (i) the CBC, (ii) the European Commission under the ECMR or the antitrust or competition Governmental Authority of any member state of the European Union, (iii) the Australian Authority, (iv) the antitrust or competition Governmental Authorities of those other jurisdictions in which the Group owns a material amount of assets and (v) Governmental Authorities in Ireland and Bermuda with respect to the Irish Insurance Laws and the Bermuda Insurance Laws, shall have been obtained or the relevant waiting periods shall have lapsed, as applicable (provided that the condition set forth in clause (v) shall not apply following February 15, 2006). All other consents and approvals from any other Governmental Authority required to consummate the transactions contemplated by this Agreement, the failure of which to obtain would have a material adverse effect on the business, condition (financial or otherwise) or results of operations of the Group, taken as a whole, shall have been obtained.

     4.2   Conditions Precedent to Obligation of Buyer. The obligation of Buyer to consummate the transactions contemplated by this Agreement is subject to the satisfaction at or prior to the Closing Date of each of the following additional conditions:

               (a)   Accuracy of Representations and Warranties. Each of the representations and warranties of Holdings set forth in this Agreement, in each case, made as if none of such representations and warranties contained any qualifications or limitations as to “materiality” or Material Adverse Effect, shall be true and accurate, in each case, as of the date hereof and as of the Closing Date as though made on and as of the Closing Date except (i) those

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representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and accurate as of such date or with respect to such period, and (ii) where the failure of such representations and warranties to be true and accurate as so made, individually or in the aggregate, would not reasonably be expected to have or constitute a Material Adverse Effect; provided, that the representations and warranties of Holdings in (x) the first sentence of Section 2.1(h) and Section 2.1(i) shall be true in all respects, without disregarding the reference to Material Adverse Effect contained in either such subsection, (y) the first sentence of Section 2.1(e), the first sentence of Section 2.1(c)(i) and clause (a) of the last sentence of 2.1(c)(ii) shall be true in all respects (provided that Holdings shall have an opportunity to repay to the Company prior to Closing any amounts distributed in a manner that would cause the representation in such clause (a) of the last sentence of Section 2.1(c)(ii) not to be true and correct), and (z) Section 2.1(b), the second and third sentences of Section 2.1(c)(i), Section 2.1(c)(ii) (other than clause (a) of the last sentence of such section) and Section 2.1(e) (other than the first sentence of such section) shall be true in all material respects.

               (b)   Performance of Agreement. Holdings shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants contained in this Agreement to be performed or complied with by it prior to or at the Closing Date; provided that, Holdings shall have complied in all respects with the covenants contained in Section 3.2(a)(viii) unless the amounts (or securities or other assets) distributed or paid in violation of such covenant (if any) shall have been repaid to the Group.

               (c)   Certificate. Buyer shall have received a certificate of Holdings, dated the Closing Date, executed on behalf of Holdings by an authorized signatory certifying that the conditions specified in paragraphs (a) and (b) above have been satisfied.

               (d)   Letter of Credit. Subject to the requirements, terms and conditions set forth on Schedule 4.2(d), at the Closing, if the ABS Financing is implemented (whether bridge or otherwise), Ford shall have caused an Eligible Letter of Credit Provider (as defined on Schedule 4.2(d)) to issue a letter of credit in the stated amount of $200,000,000 for the benefit of BNY Midwest Trust Company, as trustee under the Base Indenture (as defined on Schedule 4.2(d)), as supplemented by the LOC Series Supplement (as defined on Schedule 4.2(d)), in the form described on Schedule 4.2(d) (the “Ford Letter of Credit”), for the account of and at the expense of Ford or an Affiliate thereof, it being agreed by Ford that it shall use reasonable best efforts to obtain the letter of credit contemplated by this Section 4.2(d).

               (e)   Required Consents. (i) Consents of holders of a majority in principal amount of all the debt securities issued and outstanding under the 2001 Indenture to the amendments to such indentures described in Schedule 3.10(b) shall have been received and may not be withdrawn, and (ii) an indenture supplement to the 2001 Indenture implementing the amendments to the 2001 Indenture described in Schedule 3.10(b) has been executed by the Company and the trustee for the 2001 Indenture, is in effect, and the amendments to be effected thereby have become operative.

               (f)   FIRPTA. Buyer shall have received a certificate complying with the Code and Treasury Regulations, in form and substance reasonably satisfactory to Buyer, duly

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executed and acknowledged, certifying that Holdings or its shareholder, as applicable, is not a “foreign person” for purposes of Section 1445 of the Code.

     4.3   Conditions Precedent to the Obligation of Holdings. The obligation of Holdings to consummate the transactions contemplated by this Agreement is subject to the satisfaction at or prior to the Closing Date of each of the following additional conditions:

               (a)   Accuracy of Representations and Warranties. Each of the representations and warranties of Buyer set forth in this Agreement, in each case, made as if none of such representations and warranties contained any qualifications or limitations as to “materiality”, shall be true and accurate, in each case, as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and accurate as of such date or with respect to such period), except where the failure of such representations and warranties to be true and accurate as so made, individually or in the aggregate, would not reasonably be expected to materially impair Buyer’s ability to perform its obligations under this Agreement; provided, that the representations and warranties of Buyer in Section 2.2(b) shall be true in all material respects.

               (b)   Performance of Agreements. Buyer shall have performed in all material respects all obligations and agreements, and complied in all material respects with all covenants contained in this Agreement to be performed or complied with by it prior to or at the Closing Date.

               (c)   Certificate. Holdings shall have received a certificate of Buyer, dated the Closing Date, executed on behalf of Buyer by an authorized signatory, to the effect that the conditions specified in paragraphs (a) and (b) above have been satisfied.

ARTICLE V

EMPLOYEE AND LABOR MATTERS

     5.1   Comparability of Benefits. For one year following the Closing Date, Buyer shall, or shall cause its Affiliates to, provide compensation (including rate of annual base salary or wages and annual and long-term cash incentive opportunities) and employee benefits to each Group Employee employed by a Group Member on the Closing Date and who is not represented by a labor organization that are substantially comparable in the aggregate to the compensation and employee benefits that are in effect for such Group Employee immediately prior to the Closing Date, and for each Group Employee who is represented by a labor organization, Buyer shall and shall cause its Affiliates to comply with Section 5.8. Nothing in this Section 5.1 shall limit the right of any Group Member to terminate the employment of any employee at any time following the Closing Date.

     5.2   Continuity of Employment. It is agreed that prior to or in connection with the Closing, Buyer shall take no action to cause Holdings or any Group Member to terminate the employment of any Group Employee, and neither Holdings nor any Group Member shall be under any obligation to terminate any Group Employee prior to the Closing Date.

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     5.3   Welfare Plans. To the extent that after the Closing Date Buyer chooses to satisfy its obligations under Section 5.1 through the substitution of a “welfare benefit plan” (as defined in section 3(1) of ERISA) maintained by Buyer or any of its Affiliates for the benefit of Group Employees for such a plan maintained by any Group Member immediately prior to the Closing Date, Buyer shall (a) cause there to be waived any eligibility requirements or pre-existing condition limitations under such substitute plan and (b) take into account, in determining any deductible and maximum out-of-pocket limitations imposed under such substitute plan after the Closing Date but during the plan year in which the Closing Date occurs, to claims incurred and amounts paid by, and amounts reimbursed to, covered Group Employees prior to the Closing Date during the plan year in which the Closing Date occurs with respect to similar plans maintained by such Group Member immediately prior to the Closing.

     5.4   Retirement Plans. For one year following the Closing Date, Buyer shall, or shall cause its Affiliates to, maintain in full force and effect the retirement plans maintained by Group Members immediately prior to the Closing Date identified in Schedule 5.4 for Group Employees who are not represented by a labor organization, including The Hertz Corporation Account Balance Defined Benefit Pension Plan, The Hertz Corporation Benefit Equalization Plan, The Hertz Corporation Supplement Retirement and Savings Plan, The Hertz Corporation Supplemental Executive Retirement Plan and the features of The Hertz Corporation 2005 Executive Long Term Incentive Plan relating to retirement, in each case without any amendment that is materially adverse to Group Employees who participate in any such plans immediately prior to the Closing Date (other than any such amendment necessary to comply with applicable Law or to preserve the customary Tax treatment of amounts paid thereunder). With respect to the Group Employees who are represented by a labor organization, Buyer shall, and shall cause its Affiliates to, comply with Section 5.8 with respect to the treatment of any retirement plans maintained for the benefit of any such Group Employee.

     5.5   Vacation and Severance. For a period of one year following the Closing Date, Buyer shall maintain a vacation, holiday and time off policy, plan, practice, program or arrangement for the benefit of each Group Employee who is not represented by a labor organization that is not materially adverse in the aggregate from such policy, plan, practice, program or arrangement in effect immediately prior to the Closing Date with respect to such Group Employee. For a period of one year following the Closing Date, Buyer shall maintain a severance pay plan, practice, program or arrangement for the benefit of each Group Employee who is not represented by a labor organization that is not materially adverse in the aggregate from such policy, plan, practice or arrangement in effect immediately prior to the Closing Date with respect to such Group Employee. For Group Employees who are represented by a labor organization, Buyer shall, and shall cause its Affiliates to, comply with Section 5.8 with respect to the treatment of any vacation, holiday, time off and/or severance arrangements maintained for the benefit of any such Group Employees. Effective as of the Closing, Ford and its Affiliates shall be released from any liability with respect to the agreements of the Company governing special change-in-control, employment and severance arrangements with certain Group Employees in effect as of the date of this Agreement, which agreements are identified in Schedule 5.5, and Buyer shall assume any and all liability of the Company, Ford and its Affiliates under such agreements and at all times thereafter maintain such agreements in accordance with their terms and conditions; provided, however, that Ford shall retain responsibility for Ford Options granted to Group Employees under the Ford Option Plan and

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referenced in any such agreements, consistent with the provisions of Section 5.9 of this Agreement.

     5.6   WARN Act. The Buyer and its Affiliates shall not at any time prior to 90 days after the Closing Date, effectuate a “plant closing” or “mass layoff” as those terms are defined in the Worker Adjustment and Retraining Notification Act of 1988 (“WARN”) or effectuate any similar triggering event under any other applicable Law, affecting in whole or in part any site of employment, facility, operating unit or Group Employee. Buyer agrees to provide any required notice under WARN and any other applicable Law and to otherwise comply with any such statute with respect to any “plant closing” or “mass layoff” (as defined in WARN) or any similar triggering event under any other applicable Law occurring on or after the Closing or arising as a result of the transactions contemplated hereby.

     5.7   Cash Bonus Plans. From the Closing Date through the end of the applicable bonus year in which the Closing Date occurs, Buyer shall (a) continue to maintain the annual cash bonus plans, cash management incentive and local cash incentive plans and other cash arrangements maintained by Group Members and disclosed on Schedule 5.7 as in effect immediately prior to the Closing Date (the “Bonus Plans”) and (b) pay to the Group Employees who participated in such plans immediately prior to the Closing Date cash bonus amounts at such level(s) and at such time(s) as the terms of the Bonus Plans provide; provided, however, that, except as otherwise provided in any applicable change in control agreement or in any other applicable severance plan, policy or arrangement, notwithstanding anything to the contrary in any Bonus Plan, each Group Employee whose employment is terminated by Buyer or any of its Affiliates on or after the Closing Date, but prior to the end of the applicable bonus year other than for “cause” (as such term is defined in the employment, change in control, or severance agreement or plan, or employee manual, that is applicable, respectively, to each Group Employee who participates in any Bonus Plan) shall be entitled to receive a cash bonus pursuant to the applicable Bonus Plan equal to the pro rata portion (based on the number of days worked by the Group Employee during the applicable performance period) of the annual target bonus that such Group Employee would have been entitled to receive under the applicable Bonus Plan in respect of the bonus year in which such date of termination occurs (if the Group Employee had remained employed by Buyer and its Affiliates through the date such bonus would otherwise be payable).

     5.8   Collective Bargaining Agreements. Effective as of the Closing, Buyer shall cause the Group Members to comply fully with the terms of all collective bargaining agreements or similar contracts with representatives of the Group’s employees.

     5.9   Options on Ford Shares. Each of Holdings and Buyer acknowledge the following: (a) certain Group Employees have been granted options which as of the date hereof, subject to certain terms and conditions, entitle them to purchase, at specified prices, shares of common stock of Ford (“Ford Options”) pursuant to Ford’s 1998 Long-Term Incentive Plan (the “Ford Option Plan”) and/or the Company’s Hertz Long-Term Equity Compensation Plan (the “Company Option Plan”), as applicable; and (b) pursuant to the terms of the Ford Option Plan and the Company Option Plan, the Ford Options held thereunder by Group Employees immediately prior to the Closing may remain outstanding for periods of time following the Closing. In connection with the exercise or expiration, as applicable, of any such Ford Options following the Closing, each of Holdings, Buyer and Company shall cooperate with any

42

reasonable request for information or actions to be taken made by any such party, and shall take such actions as are from time to time reasonably requested by Holdings or Ford to facilitate the administration of the Ford Option Plan or Company Option Plan, as applicable, including but not limited to (i) informing Ford promptly of the death or other change in employment status of any holder of Ford Options granted under the Ford Option Plan or the Company Option Plan (collectively, the “Options”) that results in the forfeiture of, or otherwise relates to the exercisability of, any such Options, (ii) providing Ford with changes in address and contact information of any holder of any Option, to the extent such changes relate to the exercisability or forfeiture of any Options granted and (iii) providing such other information to Ford or its designated administrator/recordkeeper as needed to administer such Options. Such information shall be provided at the same intervals at which it was historically provided to Ford or its Affiliates or to third party service providers of the Ford Option Plan or the Company Option Plan, as applicable, prior to the date hereof.

     5.10   Cooperation Regarding Pension Plans. From and after the date hereof, each of Holdings, Buyer and the Company shall cooperate and consult with each other with regard to any negotiations or communications with, requests to furnish information to or actions to be taken at the request of any Governmental Authority concerning any pension plan.

     5.11   Employee Discount Program. For a period of one year following the Closing Date, Group Employees may participate in Ford’s “A Plan” employee discount program for vehicles on the same terms available to Ford employees.

ARTICLE VI

TAX MATTERS

     6.1   Liability for Taxes.

               (a)   Federal and Consolidated Income Tax Liabilities. Ford shall be responsible for and shall indemnify and hold harmless Buyer Indemnitees from and against, and shall pay, all Federal and Consolidated Income Tax Liabilities (i) attributable to any Pre-Closing Period, (ii) pursuant to Treas. Reg. § 1.1502-6 (or comparable provision of state, local or foreign law or regulation) by virtue of a Group Member’s being or having been a member of a consolidated, combined, affiliated, unitary or other Tax group on or prior to the Closing Date, to the extent a Group Member is liable for the Income Taxes of a Person that is not a Group Member (iii) arising by virtue of any Tax Sharing Agreement entered into on or prior to the Closing that is not cancelled pursuant to Section 6.2 or (iv) attributable to the transfer of the Shares.

               (b)   Tax Liabilities Other than Federal and Consolidated Income Tax Liabilities. Except as otherwise provided in Section 6.1(c) or 6.7, the Company shall be responsible for, and shall pay or cause to be paid, all Taxes relating to the Group Members, excluding Federal and Consolidated Income Tax Liabilities for which Ford is responsible under Section 6.1(a).

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               (c)   Subpart F. Ford shall be responsible for and shall indemnify and hold harmless Buyer Indemnitees from and against, and shall pay, all Taxes attributable to any inclusion under Section 951 of the Code by any Group Member at the end of the taxable year of the applicable controlled foreign corporation (as defined in Section 957 of the Code) that includes the Closing Date arising out of any transaction not in the ordinary course of business occurring between the date hereof and through the Closing.

               (d)   Reimbursement. After the Closing, Ford or Buyer (each a “party”), as the case may be, shall provide or shall cause to be provided reimbursement for any Taxes paid by one party or its Affiliates which are the responsibility of the other party or its Affiliates in accordance with the terms of this Section 6.1 or 6.7. Within a reasonable time prior to the payment of any such Taxes, the indemnified party paying such Taxes shall give written notice to the indemnifying party of the Taxes payable and the amount which is the liability of each party, although failure to do so will not relieve the indemnifying party of its liability hereunder except to the extent the indemnifying party is actually prejudiced. Subject to the delivery of prior written notice of the payment of any such Taxes, the party required to provide reimbursement hereunder shall pay such amount on the later to occur of (i) the date payment is made by the party paying such Taxes and (ii) five Business Days after receipt of such prior written notice.

               (e)   Allocation of Closing Date Items. Pursuant to Treas. Reg. § 1.1502-76(b)(1)(ii)(B), Ford and the Buyer agree that deductions arising on the Closing Date in connection with the Exchange Offer and other transactions the expense of which is economically borne by Buyer shall be allocated to the U. S. federal (and, if applicable, state and local) Tax period of the Group beginning the day after the Closing Date.

               (f)   Expenses. For purposes of this Section 6.1 and 6.7, the terms “Taxes” and “Transfer Taxes” shall include all liabilities for Taxes and Transfer Taxes, as the case may be, and any reasonable out of pocket expenses incurred after the Closing Date, including attorney and professional fees, connected with such liabilities for Taxes or Transfer Taxes, as the case may be.

     6.2   Tax Sharing Agreements. On or prior to the Closing Date, Ford shall terminate, or shall cause to be terminated, all Tax Sharing Agreements between any of the Group Members, on the one hand, and Ford or its Affiliates, on the other hand (including, but not limited to, the Tax Sharing Agreement dated March 10, 1997 between Ford and the Company and the Company’s Affiliates (and all amendments thereto)), such that, after the Closing, neither Ford or its Affiliates nor any Group Member shall be bound thereby or have any obligation or liability thereunder. Any intercompany receivables or payables arising out of any such Tax Sharing Agreement shall be cancelled prior to or at the Closing, including, but not limited to, (i) the receivable of approximately $249 million, which is related to the use of prior-year net operating losses of the Group, and associated interest, (ii) any amounts that would otherwise be payable, currently or in the future, related to the use of the Group’s foreign tax credits, and associated interest and (iii) any receivable under the Default Tax Sharing Agreement between Ford Motor Company of Australia Limited and each entity listed in Schedule 1 to the Default Tax Sharing Agreement and the Tax Funding Agreement between Ford Motor Company of Australia Limited and each entity listed in Schedule 1 to the Tax Funding Agreement. Notwithstanding anything to the contrary herein, the Ford Group shall be entitled to retain any amount paid by any Group

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Member to the Ford Group pursuant to a Tax Sharing Agreement on or prior to June 30, 2005 and shall, at or prior to the Closing, reimburse the Company for any amount paid by any Group Member pursuant to any Tax Sharing Agreement after June 30, 2005. The Ford Group shall not permit any Group Member to pay for any Group Relief without the written consent of Buyer, and any intercompany payable owed by any Group Member in respect of Group Relief shall be cancelled on or prior to the Closing Date. The Ford Group shall not withdraw or withdraw its consent to the surrender of any U.K. Tax losses by way of Group Relief initiated on or before the date hereof.

     6.3   Tax Returns, Elections, etc. (a) Ford and Buyer shall cause each Group Member to join, to the extent permitted by law for all Pre-Closing Periods, in (i) (A) the consolidated U. S. federal Income Tax Returns of Ford, and (B) combined, consolidated or unitary Returns for state and local Taxes including one or more members of the Ford Group with respect to which the relevant Group Member(s) filed such a Return for the 2003 or 2004 taxable year or (ii) is required by the applicable Taxing Authority to file such a Return. Ford shall file or cause to be filed all Returns set forth in the immediately preceding sentence and shall cause the income, gains, deductions, losses and credits of the relevant Group Members to be included on such Returns (except to the extent provided in Section 6.1(e)). All Tax items of relevant Group Members shall, to the extent permitted by applicable Tax law, be reported on Consolidated or Combined Returns on a basis consistent with the last previous such Returns filed as of the date hereof in respect of such Group Member(s) to the extent the failure to do so could reasonably be expected to have a material cost to Buyer or any Group Member. Ford shall not cause any Group Member(s) (i) to fail to file any Return in respect of any Group Member(s) that is required to be filed on or prior to the Closing Date (taking into account extensions) or (ii) to file any such Return in a manner inconsistent with the last previous Return filed as of the date hereof in respect of such Group Member(s) unless (A) filing on such basis is not permitted by applicable Tax law or (B) failing to file on such basis would not reasonably be expected to have a material cost to Buyer or any Group Member.

               (b)   Buyer shall file, or cause to be filed, all Returns relating to the business or assets of the Group Members other than those Returns described in Section 6.3(a).

               (c)   Ford shall not, and shall not permit any of its Affiliates, to amend any Returns or make or change any Tax elections or accounting methods with respect to any Group Member(s), without the consent of Buyer, relating to a Pre-Closing Period to the extent such amendment could reasonably be expected to have a material cost to Buyer or any Group Member.

     6.4   Tax Audits, Assistance and Cooperation. (a) Ford or Buyer, as the case may be, shall notify such other party within twenty (20) days, upon receipt by such first party or any of its Affiliates of notice of any pending or threatened federal, state, local or foreign Tax audits, examinations, notices of deficiency or other adjustments, assessments or redeterminations (“Tax Matters”) relating to Taxes for which such other party or its Affiliates may be responsible under Section 6.1.

               (b)   Ford shall have the sole right to control, contest, resolve and defend against any Tax Matters relating to Taxes of any Group Member for which Ford is obligated to

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indemnify Buyer under Section 6.1, and to employ counsel of its choice at its own expense; provided, however, that (i) Ford shall keep Buyer informed with respect to the commencement, status and nature of any such Tax Matter, notify Buyer of significant developments with respect to such Tax Matter and consult with Buyer with respect to any issue that could reasonably be expected to have a material cost to Buyer or any Group Member, and (ii) neither Ford nor any of its respective Affiliates shall enter into any settlement of, or otherwise compromise, any such Tax Matter to the extent that any such settlement or compromise could reasonably be expected to have a material cost to Buyer or any Group Member unless Ford indemnifies and holds harmless Buyer Indemnitees from and against any such cost.

               (c)   Buyer shall have the sole right to control all Tax Matters of any Group Member not controlled by Ford pursuant to Section 6.4(b).

               (d)   Assistance and Cooperation. After the Closing Date, each of Ford and Buyer shall (and shall cause their respective Affiliates, including each of the Group Members, to):

          (i)    assist the other party in preparing any Returns which such other party is responsible for preparing and/or filing in accordance with Section 6.3;

          (ii)    maintain and make available to the other party, on such other party’s reasonable request, copies of any and all information, books and records necessary to prepare and/or file any Return or to respond to audits by any Taxing Authority, for the full period of the applicable statute of limitations, including any extensions thereof, with respect to the relevant Taxes. After the applicable period, Ford or Buyer may dispose of such information, books and records provided that prior to such disposition, Ford or Buyer shall give the other party the opportunity to take possession of such information, books and records;

          (iii)    upon reasonable notice and without undue interruption to the business of such party or the Group Members, as the case may be, provide access during normal business hours to the books and records of such party or the Group Members relating to the Taxes of the Group Members prior to the Closing Date;

          (iv)    promptly furnish the other party with copies of all correspondence received from any Taxing Authority in connection with any Tax Matter of any Group Member or information request with respect to any taxable period for which the other party may have a liability under Section 6.1; and

          (v)    timely provide to the other party powers of attorney or similar authorizations reasonably necessary to carry out the purposes of this Section 6.4.

               (e)   Disputes. If the parties disagree as to the calculation of any amount relating to Taxes governed by Section 6.1, the parties shall promptly consult with each other and endeavor in good faith, for a period of 30 days, to resolve any such disagreements (each disagreement not so resolved, a “Tax Dispute”). Thereafter, either party may submit the resolution of any Tax Disputes to a mutually agreed upon nationally recognized accounting firm (the “Accounting Arbitrator”) to resolve the dispute. The Accounting Arbitrator shall only be authorized as directed by the parties on any one issue to either (i) decide in favor of and choose

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the position of either of the parties or (ii) to decide upon a compromise position within the range of positions presented by the parties to the Accounting Arbitrator. The Accounting Arbitrator shall base its decision solely upon the presentations of the parties to the Accounting Arbitrator at a hearing held before the Accounting Arbitrator and upon any materials made available by either party and not upon independent review. The Accounting Arbitrator shall be instructed to resolve the Tax Disputes and such resolution shall be (i) set forth in writing and signed by the Accounting Arbitrator, (ii) delivered to Buyer and Ford as soon as practicable after the Tax Disputes are submitted to the Accounting Arbitrator but not later than the 30th day after the Accounting Arbitrator is instructed to resolve the Tax Disputes, (iii) made in accordance with this Agreement, and (iv) final, binding and conclusive on the parties on the date of delivery of such resolution. Any expenses relating to the engagement of the Accounting Arbitrator shall be shared equally by the parties.

     6.5   Refunds and Tax Credits. Subject to the provisions of Section 6.6, (a) Ford shall be entitled to retain, or Ford shall be entitled to receive immediate payment from the relevant Group Member or Buyer of, any refund or credit with respect to Taxes, plus any interest received with respect thereto (net of any Tax cost arising out of such receipt) from the applicable Taxing Authorities, relating to any Group Member that are described as being the responsibility of Ford in Section 6.1(a) and (b) Buyer, the Company or any Group Member shall be entitled to retain, or shall be entitled to receive immediate payment from Ford of, any other refund or credit with respect to Taxes, plus any interest received with respect thereto (net of any Tax cost arising out of such receipt) from the applicable Taxing Authorities, relating to any Group Member.

          Buyer and Ford shall cooperate, and shall cause their respective Affiliates to cooperate, with respect to claiming any refund or credit with respect to Taxes referred to in this Section 6.5. Such cooperation shall include providing all relevant information available to Ford or Buyer (through the Company or otherwise), as the case may be, with respect to any such claim; filing and diligently pursuing such claim (including by litigation, if appropriate); paying over to Ford or Buyer, as the case may be, and in accordance with this provision, any amount received by Buyer (or any Group Member) or Ford (or any member of the Ford Group), as the case may be, with respect to such claim; and, in the case of the party filing such a claim, consulting with the other party prior to agreeing to any disposition of such claim, provided that the foregoing shall be done in a manner so as not to interfere unreasonably with the conduct of the business of the parties. The party that is to enjoy the economic benefit of a refund under this Section 6.5 shall bear the reasonable out-of-pocket expenses of the other party incurred in seeking such refund. Any dispute regarding a party’s entitlement to a payment in respect of a refund shall be resolved pursuant to the Tax Dispute resolution mechanism in Section 6.4(e).

     6.6   Carrybacks. To the extent permitted by law, Buyer shall cause the Group to elect to relinquish any carryback of net operating losses, net capital losses, unused tax credits and other deductible or creditable tax attributes arising in a period beginning after the Closing Date to a consolidated, combined or unitary Return for any Pre-Closing Period. In cases where the Group is not permitted by law to relinquish the carryback, any net Tax benefit actually realized by the Ford Group (as reasonably determined by Ford as set forth in reasonably detailed calculations to be provided by Ford to Buyer) shall be remitted by Ford to Buyer at the time such Tax benefit is realized.

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     6.7   Transfer Taxes. Notwithstanding any provision of this Agreement to the contrary, all Transfer Taxes shall be borne 50% by Buyer and 50% by Ford. Buyer shall file, or shall cause to be filed, to the extent permitted by applicable law, all Returns, as may be required to comply with the provisions of such Tax laws relating to Transfer Taxes. Ford shall cooperate with Buyer in connection with all such filings and shall file those Returns Buyer is not permitted to file.

ARTICLE VII

MISCELLANEOUS

     7.1   Termination and Abandonment.

               (a)   General. This Agreement may be terminated and the transactions contemplated hereby may be abandoned at any time, but not later than the Closing Date:

          (i)    by mutual written consent of Buyer and Holdings;

          (ii)    by Buyer or Holdings if an injunction, restraining order, decree or other action of any Governmental Authority of competent jurisdiction is issued, enacted, promulgated, enforced or entered that prohibits the consummation of the transactions contemplated by this Agreement and such injunction, restraining order, decree or other action is final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this clause (ii) shall have used its reasonable best efforts to have such injunction, order, decree or other action vacated, denied, annulled, quashed or lifted;

          (iii)    by Buyer if there has been a violation or breach by Holdings of any covenant, representation or warranty contained in this Agreement which has prevented the satisfaction of any condition to the obligations of Buyer set forth in Section 4.2(a) or 4.2(b) and such violation or breach has not been waived by Buyer and has not been, or cannot be, cured by Holdings within thirty days after written notice thereof from Buyer;

          (iv)    by Holdings if there has been a violation or breach by Buyer of a any covenant, representation or warranty contained in this Agreement which has prevented the satisfaction of any condition to the obligations of Holdings set forth in Section 4.3(a) or 4.3(b) and such violation or breach has not been waived by Holdings and has not been, or cannot be, cured by Buyer within thirty days after written notice thereof from Holdings (provided that the failure of Buyer to fund (or cause to be funded) the Purchase Price and the other amounts described in Section 1.1 at the Closing as required hereunder shall not be subject to cure hereunder, and in the event of such breach, Holdings may terminate this Agreement immediately by delivery of notice in writing as provided in Section 7.3); or

          (v)    by either Buyer or Holdings if the Closing shall not have been consummated on or before February 28, 2006; provided that the right to terminate this Agreement pursuant to this clause (v) shall not be available to the party (if any) whose failure to fulfill or cause to be fulfilled any obligation under this Agreement has been the primary cause of the failure of the Closing to occur on or before such date.

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               (b)   Procedure Upon Termination. In the event of the termination and abandonment of this Agreement, written notice thereof shall promptly be given to the other parties hereto and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto.

               (c)   Survival of Certain Provisions. The respective obligations of the parties hereto pursuant to Sections 3.1(b) and (c), 3.3(d), the last sentence of Section 3.9(b), the last sentence of Section 3.10(b) and this Article VII shall survive any termination of this Agreement.

               (d)   Effect of Termination. In the event of a termination of this Agreement pursuant to Section 7.1(a), no party shall have any liability to the other party except (i) in connection with an intentional material breach of this Agreement occurring prior to such termination, (ii) as provided in Section 7.1(c) and (iii) as provided in the following sentence. In the event that the conditions to the Closing set forth in Sections 4.1 and 4.2 hereunder (other than those conditions that by their nature cannot be satisfied until the Closing) are satisfied or waived and Buyer breaches (whether or not intentional) its obligation to effect the Closing pursuant to Article I and satisfy its obligations to fund (or cause to be funded) all payments pursuant to Section 1.1 because of a failure to receive the proceeds of one or more of the debt financings contemplated by the Debt Commitment Letters or the failure to have received the proceeds of any alternative debt financing (a “Debt Receipt Failure”), then, except as set forth on Schedule 7.1(d), upon Holdings’ termination of this Agreement pursuant to Section 7.1(a)(iv) or by either party pursuant to Section 7.1(a)(v), Buyer shall pay $125 million (the “Termination Fee”) to Holdings or as directed by Holdings as promptly as reasonably practicable (and, in any event, within two Business Days following such termination). Notwithstanding anything else in this Agreement to the contrary: (1) if in the circumstances in which Buyer becomes obligated to pay the Termination Fee (or has been excused from paying such Termination Fee for the reason set forth on Schedule 7.1(d)), Buyer is not otherwise in breach of this Agreement such that the conditions set forth in Section 4.3(a) or 4.3(b) would not be satisfied (excluding Buyer’s failure in and of itself to fund, or cause to be funded, all payments pursuant to Section 1.1 and otherwise effect the Closing because of a Debt Receipt Failure, but not excluding any other breach, including for the avoidance of doubt any breach of Section 2.2(e) or Section 3.9, that would cause the conditions set forth in Section 4.3(a) or 4.3(b) not to be satisfied), then the right of Holdings to receive payment of the Termination Fee (which shall be zero if payment thereof has been excused for the reason set forth on Schedule 7.1(d)) in accordance herewith shall be the sole and exclusive remedy of Holdings against Buyer for any loss or damage suffered as a result of the breach of any representation, warranty, covenant or agreement contained in the Agreement by Buyer and the failure of the transactions to be consummated (it being understood that in any other case Holdings’ right to recover any other or additional damages and remedies available to it in respect of any intentional material breach of this Agreement by Buyer shall not be limited in any respect, subject to the limitation set forth in the immediately following clause (2)); and (2) in no event shall Buyer and the Guarantors, on the one hand, or Holdings and Ford, on the other hand, be subject to liability in excess of $300 million in the aggregate (inclusive of the Termination Fee in the case of Buyer or the Guarantors) for all losses and damages arising from or in connection with breaches by Buyer or Holdings or Ford, as the case may be, of any of the representations, warranties, covenants and agreements contained in this Agreement (other than those set forth in Article VI and in addition, following any Closing, other than the representations and warranties set forth as surviving the Closing in Section 2.4).

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     7.2   Expenses. Except as otherwise provided in this Agreement, Holdings, Buyer and each Group Member shall each bear its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby.

     7.3   Notices. All notices, requests, demands, waivers and other communications required or permitted to be given under this Agreement shall be in writing and shall be given by personal delivery or sending by United States Postal Service Express Mail or an overnight courier service, proof of delivery requested, or sent by telecopy, to the following addresses:

               (a)   if to Holdings, to it at:

Ford Holdings LLC
c/o Ford Motor Company
One American Road
Dearborn, Michigan 48126
Attention: Secretary
Telecopy: 313-248-8713

          with a copy to (which shall not constitute notice):

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin
                 Peter S. Malloy
Telecopy: 212-455-2502

               (b)   if to the Company, to it at:

The Hertz Corporation
225 Brae Boulevard
Park Ridge, New Jersey 07656-0713
Attention: Senior Vice President, General Counsel & Secretary
Telecopy: 201-307-2748

          with a copy to (which shall not constitute notice):

Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin
                 Peter S. Malloy
Telecopy: 212-455-2502

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               (c)   if to Buyer, to it at:

CCMG Holdings, Inc.,
c/o M&C Corporate Services Limited (on behalf of Clayton, Dubilier & Rice Fund VII, L.P.)
P.O. Box 309GT
Ugland House
South Church Street
George Town, Grand Cayman
Cayman Islands, British West Indies
Telecopy: 345-949-8080

          with a copy to (which shall not constitute notice):

Clayton, Dubilier & Rice, Inc.
375 Park Avenue
18th Floor
New York, New York 10152
Attention: David H. Wasserman
Telecopy: 212-893-7061

          with a copy to (which shall not constitute notice):

The Carlyle Group
1001 Pennsylvania Avenue, NW
Suite 220 South
Washington, DC 2004-2505
4 World Financial Center, 23rd Floor
New York, NY 10080
Attention: Gregory S. Ledford
Telecopy: 202-347-1818

          with a copy to (which shall not constitute notice):

Merrill Lynch Global Private Equity
4 World Financial Center, 23rd Floor
New York, NY 10080
Attention: George Bitar
                 Robert End
Telecopy: 212-449-1119

          with a copy to (which shall not constitute notice):

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Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
Attention: Franci J. Blassberg
                 Kevin M. Schmidt
Telecopy: 212-909-6836

or to such other Person or address as a party shall specify by notice in writing to the other parties. All such notices, requests, demands, waivers and communications shall be deemed to have been given on the date of personal receipt or proven delivery or, in the case of notice by telecopier, when receipt thereof is confirmed by telephone.

     7.4   Entire Agreement. This Agreement (including the Schedules and Exhibits hereto) and the Confidentiality Agreement constitute the entire agreement between the parties hereto and supersedes all prior agreements and understandings, oral and written, between the parties hereto with respect to the subject matter hereof.

     7.5   Exclusive Remedy. (a) Except as set forth in Section 2.4 and except for Sections 3.1(d), 3.1(e), 3.3(e), 3.6, 3.7, 3.9(b) (last sentence), 3.10(b) (last sentence), 3.11, 4.2(f), 5.1, 5.3 through 5.7, 5.9 through 5.11, Article VI, and Sections 7.2 through 7.16, and in the Confidentiality Agreement, from and after the Closing, the parties hereto waive any rights and claims that a party may have against any other party, whether in law or in equity, relating to the transactions contemplated hereby or thereby, including claims for contribution or other rights of recovery arising out of or relating to any Laws (including Environmental Laws), claims for breach of contract (including, without limitation, claims for breach of any certificate or instrument delivered hereunder except to the extent expressly referred to in one of the provisions specified above), breach of representation or warranty or covenant, negligent misrepresentation and all claims for breach of duty; provided, however, that nothing set forth in this Agreement shall limit the rights, remedies and claims of any party with respect to any fraud or willful misconduct.

               (b)   The parties hereto agree that the current, former and prospective direct or indirect stockholders of Buyer and its Affiliates (other than Buyer) are not parties to this Agreement and (i) Holdings, and its Affiliates shall not have any right to cause any monies to be contributed to Buyer by any current, former or prospective direct or indirect stockholder of Buyer or any of its Affiliates and (ii) except to the extent provided in the Guarantees and, to the extent in effect, the Confidentiality Agreement, no current, former or prospective direct or indirect stockholder of Buyer or any Affiliate thereof (other than Buyer) or any of their partners, directors, officers, managers, members, agents or representatives shall owe any contractual obligation to Holdings or its Affiliates in connection with this transaction.

               (c)   Subject to Section 2.2(h), no investigation by Buyer or other information received by Buyer shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Holdings or the Company hereunder.

     7.6   No Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns, and nothing in this

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Agreement, expressed or implied, is intended to confer on any Person other than the parties hereto, or their respective successors and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement other than Sections 1.1 and 3.10; Section 3.6; Article VI; and Section 3.7, which are intended to be for the benefit of the applicable Exchange Offeror; Ford and its Affiliates; Ford Group and the Buyer Indemnitees; and the directors and officers of the Group prior to the Closing Date, respectively, and may be enforced by such Persons.

     7.7   Assignability. This Agreement shall not be assigned by any of the parties hereto whether by operation of law or otherwise without the prior written consent of the other parties hereto; provided that Buyer may, without the prior written consent of the other parties, (x) assign this Agreement and all of its rights hereunder to its lenders and debt providers for collateral security purposes and (y) assign all of its rights (or, as provided in Article I, certain of its rights) to a direct or indirect wholly owned subsidiary of Buyer (provided that, notwithstanding any such assignment, Buyer shall remain liable to perform all of its obligations hereunder); and provided further, that at any time after the Closing, Holdings may assign this Agreement to Ford or any Affiliate of Ford, subject to the written assumption by Ford or such Affiliate of all the obligations of Holdings hereunder (provided that, notwithstanding any such assignment, Holdings shall remain liable to perform all of its obligations hereunder).

     7.8   Amendment and Modification; Waiver. Subject to applicable Law, this Agreement may be amended, modified and supplemented by a written instrument authorized and executed on behalf of the parties hereto at any time prior to the Closing with respect to any of the terms contained herein. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and executed by the party so waiving. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other or subsequent breach.

     7.9   Severability. If any provision of this Agreement or the application thereof under certain circumstances is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

     7.10   Section Headings. The section headings contained in this Agreement are inserted for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

     7.11   Interpretation. Unless the context requires otherwise, all words used in this Agreement in the singular number shall extend to and include the plural; all words in the plural number shall extend to and include the singular; and all words in any gender shall extend to and include all genders.

     7.12   Definitions. As used in this Agreement:

          “1986 Indenture” means the Indenture dated as of April 1, 1986 between the Company and JPMorgan Chase Bank, N.A., as trustee (as the same may be amended or supplemented).

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          “1994 Indenture” means the Indenture dated as of December 1, 1994 between the Company and First Fidelity Bank, N.A., as trustee (as the same may be amended or supplemented).

          “2001 Indenture” means the Indenture dated as of March 6, 2001 between the Company and the Bank of New York, as trustee (as the same may be amended or supplemented).

          “Affiliate” means, with respect to a specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such specified Person. As used in this definition, the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by agreement or otherwise; provided that each of the Guarantors and their Affiliates shall be considered Affiliates of Buyer.

          “Board of Directors” means the board of directors of any specified Person and any committees thereof.

          “Business Day” means any day on which banks are not required or authorized to close in the City of New York.

          “Buyer Indemnitees” means Buyer and its Affiliates and, from and after the Closing, each Group Member, together with successors, assigns, representatives, employees, officers and directors of any of them.

          “Consolidated or Combined Return” means any Return (whether or not domestic) that is filed or that is required to be filed, and that includes one or more Group Members or items therefrom on the one hand and one or more members of the Ford Group or items therefrom on the other hand.

          “Federal and Consolidated Income Tax Liabilities” means any and all Taxes of any Group Member relating to either (a) any U. S. federal Income Taxes or (b) any Income Taxes with respect to which (i) any Group Member has or will file, or is required pursuant to Section 6.3(a) to file, a Consolidated or Combined Return, (ii) one or more Group Members is liable for the Income Taxes of a Person other than a Group Member under a provision of state, local or foreign law or regulation comparable to Treas. Reg. §1.1502-6 imposing several liability upon members of a consolidated, combined, affiliated, unitary or other Tax group by virtue of a Group Member’s being or having been a member of such a group on or prior to the Closing Date, or (iii) one or more Group Members is liable (if such Income Taxes are attributable to a consolidated, combined, affiliated, unitary or other Tax group) under principles of successor or transferee liability relating to an event or transaction occurring on or prior to the Closing Date.

          “Ford Group” means Ford and its present or former Affiliates other than any Group Member.

          “Group Relief” means the group relief for U.K. corporation tax purposes contained in Chapter IV of Part X of the Taxes Act relating to the surrender of Tax losses between members of the same group and any equivalent system outside the United Kingdom for the surrender of Tax losses between members of a group.

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          “Holdings Note” means the $1,185.0 million principal amount subordinated promissory note issued by the Company to Holdings on June 10, 2005.

          “Income Tax” means any Tax on or measured by net income, profits or earnings.

          “Indebtedness” means the principal amount of any indebtedness for borrowed money and any accrued interest, prepayment premiums and penalties related thereto.

          “Interim Credit Agreement” means the Credit Facility, dated as of May 26, 2005, among the Company, Hertz Canada Limited, JPMorgan Chase Bank and the other banks and financial institutions party thereto.

          Buyer has “Knowledge” of a particular fact or other matter if, and only if, any of the individuals listed on Schedule 7.12(a) has actual knowledge thereof.

          Holdings has “Knowledge” of a particular fact or other matter if, and only if, any of the individuals listed on Schedule 7.12(b) has actual knowledge thereof.

          “Law” means any law, statute, order, ordinance, rule or regulation of any Governmental Authority.

          “Person” means an individual, corporation, limited liability company, partnership, association, joint venture, trust, unincorporated organization or other entity, as well as any syndicate or group that would be deemed to be a Person under section 13(a)(3) of the Securities Exchange Act of 1934, as amended.

          “Pre-Closing Period” means any Tax year or period (or portion thereof) ending on or prior to the Closing Date.

          “Rule 144A” means Rule 144A promulgated under the Securities Act.

          “Tax Sharing Agreements” means the Tax Sharing Agreement dated March 10, 1997 between Ford and Company and the Company’s Affiliates (and all amendments thereto), the Default Tax Sharing Agreement between Ford Motor Company of Australia Limited and each entity listed in Schedule 1 to the Default Tax Sharing Agreement, the Tax Funding Agreement between Ford Motor Company of Australia Limited and each entity listed in Schedule 1 to the Tax Funding Agreement and all other Tax sharing, Organschaft profit and loss allocation, indemnification or similar agreements in effect between any of the Group Members and any other Person (other than solely with other Group Members), except for (a) customary agreements to indemnify lenders or security holders in respect of Taxes and (b) customary Tax sharing obligations under commercial lease agreements.

          “Transfer Taxes” means all transfer, documentary, sales, use, registration and other similar Taxes (including all applicable real estate transfer taxes) incurred in connection with the transfer of the Shares pursuant to this Agreement. Transfer Taxes shall not include Income Taxes.

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     7.13   Company Actions. To the extent that this Agreement calls for any Group Member to take any action prior to the Closing Date, it is understood and agreed by the parties that Holdings shall, and to the extent that this Agreement calls for any Group Member to take any action on or following the Closing Date, Buyer shall, cause such Group Member to take such action (subject to any limitations or standards of effort contained therein).

     7.14   Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument.

     7.15   Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of New York, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of the United States District Court for the Southern District of New York or any court of the State of New York located in such district in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction or venue by motion or other request for leave from any such court and (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than such courts sitting in the State of New York. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER IN ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.

     7.16   Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of New York.

          IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.

CCMG HOLDINGS, INC.
By:	/s/ David H. Wasserman
	Name: David H. Wasserman
	Title:

FORD HOLDINGS LLC
By:	/s/ Ann Marie Petach
	Name: Ann Marie Petach
	Title: Chairman of the Board of Directors
(solely with respect to Article VI and
Sections 3.2(xxiv), 3.2(xxv), 4.2(d),
5.11, 7.15 and 7.16)
FORD MOTOR COMPANY
By:	/s/ Ann Marie Petach
	Name: Ann Marie Petach
	Title: Vice President and Treasurer