BANDAG, INCORPORATED AND SUBSIDIARIES
                                                                    Exhibit 10.1

                              TERMINATION AGREEMENT

          THIS  TERMINATION  AGREEMENT  is  entered  into as of the  20th day of
January,  2000  by  and  between  Bandag,  Incorporated,   an  Iowa  corporation
("Bandag") and Sam Ferrise II ("Employee").

                                    RECITALS

          WHEREAS,  Bandag and Employee  are parties to that  certain  Severance
Agreement  dated  as of  the  4th  day  of  May,  1999  (the  "Bandag  Severance
Agreement"); and

          WHEREAS,  Employee is voluntarily  terminating  his employment and all
positions  with  Bandag  and is  simultaneously  being  employed  as an  at-will
employee by Tire Distribution  Systems,  Inc. ("TDS"), an indirect  wholly-owned
subsidiary of Bandag; and

          WHEREAS,  contemporaneously  with  the  execution  of a new  severance
agreement  between  Employee and TDS, the parties  hereto wish to terminate  the
Bandag Severance Agreement in its entirety;

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

          1.   Effective  with the execution and delivery by Employee and TDS of
               a  severance  agreement  between  Employee  and TDS,  the  Bandag
               Severance  Agreement  shall  be  terminated  and  shall  be of no
               further  force  or  effect  and all  obligations  of  Bandag  and
               Employee thereunder shall thereupon terminate.

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

Employee:                            Bandag, Incorporated


/s/ Sam Ferrise II                   By: /s/ Martin G. Carver
- ---------------------------------        -------------------------------------
Sam Ferrise II                           Martin G. Carver, Chairman of the
                                         Board, Chief Executive Officer and
                                         President