CONFORMED COPY

 

SECURITY AND PLEDGE AGREEMENT

 

SECURITY AND PLEDGE AGREEMENT (the “Agreement”), dated as of December 9, 2004,
by and among FEDERAL-MOGUL CORPORATION, a Michigan corporation (the “Parent”),
and each of its direct or indirect subsidiaries party to the Credit Agreement
(as hereinafter defined) (the “Grantors”), each of which Grantors is a debtor
and debtor-in-possession in a case pending under Chapter 11 of the Bankruptcy
Code, and CITICORP USA, INC. (“CUSA”), as administrative agent for the lenders
(the “Lenders”) party to the Credit Agreement and as collateral agent for the
Secured Parties (as defined in Section 1 below), including without limitation
Bank One (as defined in Section 1 below) (in such capacities, the
“Administrative Agent”). Capitalized terms not defined herein shall have the
meanings given in the Credit Agreement.

 

W I T N E S S E T H :

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the Administrative Agent, the Lenders and the Grantors are entering into a
Revolving Credit and Guaranty Agreement dated as of the date hereof (as amended,
restated, modified or supplemented from time to time, the “Credit Agreement”);

 

WHEREAS, it is a condition precedent to the making of Loans and the issuance of
Letters of Credit that each Grantor shall have granted a security interest,
pledge and lien on its Collateral specified herein, such security interest,
pledge and lien to have the status and priority specified in Section 2.24 of the
Credit Agreement; and

 

WHEREAS, the grant of such security interest, pledge and lien has been
authorized pursuant to Sections 364(c)(2), 364(c)(3) and 364(d)(1) of the
Bankruptcy Code by the Approval Order;

 

WHEREAS, to supplement the Approval Order without in any way diminishing or
limiting the effect of the Approval Order or the security interest, pledge and
lien granted thereunder, the parties hereto desire to more fully set forth their
respective rights in connection with such security interest, pledge and lien;
and

 

WHEREAS, this Agreement has been approved by the Approval Order;

 

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NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

Section 1. Grant of Security and Pledge. Each of the Grantors hereby transfers,
grants, bargains, sells, conveys, hypothecates, assigns, pledges and sets over
to the Administrative Agent for its benefit and the ratable benefit of the
holders from time to time of the Secured Obligations (as defined in Section 2
below), including without limitation Lenders and Bank One, NA, its banking
Affiliates and their respective successors and assigns (collectively, “Bank
One”) (all such holders, with the Administrative Agent, collectively, the
“Secured Parties”), and hereby grants to the Administrative Agent for the
ratable benefit of the Secured Parties a perfected pledge and security interest
in, all of the Grantors’ right, title and interest in and to the following (the
“Collateral”), which pledge and security interest shall be (x) junior to the
liens described in clauses (xii) and (xiii) of the definition of “Permitted
Liens” in Section 1.01 of the Credit Agreement and (y) subject to the Carve-Out:

 

(a) all “accounts” as defined in the Uniform Commercial Code as in effect from
time to time in the State of New York, or when the context implies, the Uniform
Commercial Code as in effect from time to time in any other applicable
jurisdiction (the “UCC”), including by way of example and not of limitation, all
present and future accounts, accounts receivable and other rights of each of the
Grantors to payment for goods sold or leased or for services rendered (except
those evidenced by instruments or chattel paper), whether now existing or
hereafter arising and wherever arising, and whether or not they have been earned
by performance (collectively, the “Accounts”);

 

(b) (i) all “inventory” as defined in the UCC, and (ii) all goods and
merchandise now owned or hereafter acquired by each of the Grantors wherever
located, whether in the possession of a Grantor or of a bailee or other person
for sale, storage, transit, processing, use or otherwise consisting of whole
goods, components, supplies, materials, or consigned, returned or repossessed
goods which are held for sale or lease or to be furnished (or have been
furnished) under any contract of service or which are raw materials,
work-in-process, finished goods or materials used or consumed in such Grantor’s
business or processed by or on behalf of any Grantor (regardless of whether
characterized as inventory under the UCC) (collectively, the “Inventory”);

 

(c) (i) all “equipment” as defined in the UCC, and (ii) all machinery, all
manufacturing, distribution, selling, data processing and office equipment, all
furniture, furnishings, appliances, fixtures and trade fixtures, tools, tooling,
molds, dies, vehicles, vessels, aircraft and all other goods of every type and
description (other than Inventory), in each instance whether now owned or
hereafter acquired by each of the Grantors and wherever located (collectively,
the “Equipment”);

 

(d) all works of art now owned or hereafter acquired by each of the Grantors,
including, without limitation, paintings, sketches, drawings, prints,
sculptures, crafts, tapestries, porcelain, carvings, artifacts, renderings and
designs;

 

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(e) all “general intangibles” as defined in the UCC, including by way of example
and not of limitation, all rights, interests, choses in action, causes of
action, claims and all other intangible property of each of the Grantors of
every kind and nature (other than Accounts, Trademarks, Patents and Copyrights),
in each instance whether now owned or hereafter acquired by such Grantor,
including, without limitation, all general intangibles; all corporate and other
business records; all loans, royalties, and other obligations receivable; all
inventions, designs, trade secrets, computer programs, software, printouts and
other computer materials, goodwill, registrations, copyrights, licenses,
franchises, customer lists, credit files, correspondence, and advertising
materials; all customer and supplier contracts, firm sale orders, rights under
license and franchise agreements (including all license agreements with any
other Person in connection with any of the Patents and Trademarks or such other
Person’s names or marks, whether such Grantor is a licensor or licensee under
any such license agreement), and other contracts and contract rights; all
interests in partnerships and joint ventures; all tax refunds and tax refund
claims; all right, title and interest under leases, subleases, licenses and
concessions and other agreements to the extent assignable relating to real or
personal property; all payments due or made to each of the Grantors in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of any property by any person or governmental authority; all credits
with and other claims against carriers and shippers; all rights to
indemnification; all reversionary interests in pension and profit sharing plans
and reversionary, beneficial and residual interest in trusts; all proceeds of
insurance of which each of the Grantors is beneficiary; and all letters of
credit, guaranties, liens, security interests and other security held by or
granted to each of the Grantors; and all other intangible property, whether or
not similar to the foregoing (collectively, the “General Intangibles”);

 

(f) all “deposit accounts” as defined in the UCC (the “Deposit Accounts”);

 

(g) all “investment property” as defined in the UCC (the “Investment Property”);

 

(h) all “chattel paper” as defined in the UCC, including by way of example and
not of limitation, all electronic chattel paper, all instruments, all notes and
debt instruments and all payments thereunder and instruments and other property
from time to time delivered in respect thereof or in exchange therefor, and all
bills of lading, warehouse receipts and other documents of title and documents,
in each instance whether now owned or hereafter acquired by each of the
Grantors;

 

(i) all property or interests in property now or hereafter acquired by each of
the Grantors which may be owned or hereafter may come into the possession,
custody or control of the Administrative Agent or any agent or affiliate of the
Administrative Agent in any way or for any purpose (whether for

 

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safekeeping, deposit, custody, pledge, transmission, collection or otherwise),
and all rights and interests of each of the Grantors, now existing or hereafter
arising and however and wherever arising, in respect of any and all (i) notes,
drafts, letters of credits, stocks, bonds, and debt and equity securities,
whether or not certificated, and warrants, options, puts and calls and other
rights to acquire or otherwise relating to the same; (ii) money (including all
cash and cash equivalents held in the Letter of Credit Account); (iii) proceeds
of loans, including, without limitation, Loans made under the Credit Agreement;
and (iv) insurance proceeds and books and records relating to any of the
property covered by this Agreement; together, in each instance, with all
accessions and additions thereto, substitutions therefor, and replacements,
proceeds and products thereof;

 

(j) all of each Grantor’s now owned or existing and filed and hereafter acquired
or arising and filed trademarks, service marks, trademark or service mark
registrations, trade names, trademark or service mark applications, trade
styles, prints and labels on which said trademarks, trade names, trade styles
and service marks have appeared or appear, designs and general intangibles of
like nature, now existing or hereafter adopted or acquired, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof, or any other country or political subdivision thereof (except for
“intent to use” applications for trademark or service mark registrations filed
pursuant to Section 1(b) of the Lanham Act, unless and until an Amendment to
Allege Use or a Statement of Use under Sections 1(c) and 1(d) of said Act has
been filed), and including, without limitation, each mark, registration, and
application listed on Schedule 3.12 to the Credit Agreement and made a part
hereof (as the same may be amended pursuant hereto from time to time), and (i)
renewals thereof, (ii) all income, royalties, damages and payments now and
hereafter due and/or payable with respect thereto, including, without
limitation, damages and payment for past or future infringements thereof, (iii)
the right to sue for past, present and future infringements thereof, (iv) all
rights corresponding thereto throughout the world, and (v) together in each case
with the goodwill of each Grantor’s business connected with the use of each such
trademark, service mark, trade name and trade dress (all of the foregoing being
herein referred to as the “Trademarks”);

 

(k) all of each Grantor’s now owned or existing and filed and hereafter acquired
or arising and filed patents and patent applications of the United States and
any other country, and all registrations and recordings thereof, including,
without limitation, applications, registrations and recordings in the United
States Patent and Trademark Office or in any similar office or agency of the
United States, any State thereof or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by each
Grantor, and including without limitation the inventions and improvements
described and claimed therein, and those patents and patent applications listed
on Schedule 3.12 to the Credit Agreement and made a part hereof, and (i) all
reissues, divisions,

 

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continuations, renewals, extensions and continuations in part thereof, (ii) all
income, royalties, damages and payments now and hereafter due and/or payable
under and with respect thereto, including, without limitation, damages and
payments for past or future infringements thereof, (iii) the right to sue for
past, present and future infringements thereof and (iv) all rights, title and
interests corresponding thereto throughout the world (all of the foregoing
patents and applications, and the goodwill of Assignor’s business connected with
and symbolized by the foregoing, together with the items described in clauses
(i)-(iv), are sometimes hereinafter individually and/or collectively referred to
as the “Patents”);

 

(l) all of each Grantor’s now owned, registered and unregistered, and hereafter
acquired or arising, registered and unregistered, copyrights and copyright
applications of the United States, or any other country, and all registrations
and recordings thereof, including, without limitation, applications,
registrations and recordings in the United States Copyright Office, the Library
of Congress or in any similar office or agency of the United States, any State
thereof, or any other country or political subdivision thereof, including those
listed on Schedule 3.12 to the Credit Agreement and made a part hereof (as the
same may be amended pursuant hereto from time to time), and (i) the renewals
thereof, (ii) all income, royalties, damages and payments now and hereafter due
and/or payable with respect thereto, including damages and payments for past or
future infringements thereof, (iii) the right to sue for past, present and
future infringements thereof, and (iv) all rights, title, and interests
corresponding thereto throughout the world (all of the foregoing being herein
referred to as the “Copyrights”);

 

(m) all of each Grantor’s now held or hereafter acquired interest in any written
agreement naming any Grantor as licensor or licensee (including, without
limitation, those listed on Schedule 3.12 to the Credit Agreement, granting any
right under any Copyright, including, without limitation, the grant of rights to
manufacture, distribute, exploit and sell materials derived from any Copyright
(the “Copyright Licenses”);

 

(n) all books, records, ledger cards and other property at any time evidencing
or relating to the Accounts, Equipment, General Intangibles, Deposit Accounts,
Investment Property, Trademarks, Patents, Copyrights or Copyright Licenses;

 

(o) all shares of capital stock owned by any Grantor, including, without
limitation, all shares of capital stock listed on Schedule 3 hereto (as such
schedule may be amended or supplemented from time to time) of the issuers listed
thereon (individually, an “Issuer”, and collectively, the “Issuers”) and all
shares of capital stock of any Issuer obtained in the future by such Grantor and
the certificates, if any, representing or evidencing such shares and any
interest of such Grantor on the books and records of such Issuer or on the books
and records of

 

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any securities intermediary pertaining to such shares, and, subject to Section 9
below, all dividends, distributions, cash, warrants, rights, options,
instruments, securities and other property or proceeds from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of such shares, and all rights and privileges of any Grantor with
respect to such shares (the “Pledged Shares”);

 

(p) all interests in any general partnership, limited partnership, limited
liability partnership or other partnership held by any Grantor, including,
without limitation, all partnership interests listed in Schedule 4 hereto (as
such schedule may be amended or supplemented from time to time) of the
partnerships listed thereon (individually, a “Partnership”, and collectively,
the “Partnerships”) and all partnership interests in any Partnership obtained in
the future by such Grantor and the certificates, if any, representing or
evidencing such interests and any interest of such Grantor on the books and
records of such Partnership or on the books and records of any securities
intermediary pertaining to such interest, and, subject to Section 9 below, all
dividends, distributions, cash, warrants, rights, options, instruments,
securities and other property or proceeds from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of such
interests, and all rights and privileges of any Grantor with respect to such
interests (the “Pledged Partnership Interests”);

 

(q) all interests in any limited liability company or unlimited liability
company held by any Grantor, including, without limitation, all limited
liability company and unlimited liability company interests listed in Schedule 5
hereto (as such schedule may be amended or supplemented from time to time) of
the limited liability companies and the unlimited liability company listed
thereon (individually, a “Company”, and collectively, the “Companies”) and all
interests in any Company obtained in the future by such Grantor and the
certificates, if any, representing or evidencing such interests and any interest
of such Grantor on the books and records of such Company or on the books and
records of any securities intermediary pertaining to such interest, and, subject
to Section 9 below, all dividends, distributions, cash, warrants, rights,
options, instruments, securities and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of such interests, and all rights and privileges of any Grantor
with respect to such interests (the “Pledged Company Interests”);

 

(r) all Intercompany Indebtedness (the Pledged Shares, the Pledged Partnership
Interests, the Pledged Company Interests and the Intercompany Indebtedness being
collectively called the “Pledged Collateral”);

 

(s) all letter-of-credit rights, as defined in the UCC (the “Letter of Credit
Rights”);

 

(t) all health-care-insurance receivables, as defined in the UCC;

 

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(u) all other personal property of each of the Grantors, whether tangible or
intangible, and whether now owned or hereafter acquired; and

 

(v) all proceeds and products of any of the foregoing, in any form, including,
without limitation, any claims against third parties for loss or damage to or
destruction of any or all of the foregoing and, to the extent not otherwise
included, all (i) payments under insurance (whether or not the Administrative
Agent is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral and (ii) cash.

 

Notwithstanding anything contained herein to the contrary, the total amount of
shares of capital stock or other ownership interests pledged pursuant to this
Agreement of (x) FM International, LLC or (y) any Person that is not
incorporated or organized in the United States (other than Federal-Mogul, S.A. –
France), shall in no event exceed sixty-six percent (66%) of the total
outstanding shares of capital stock or such other ownership interests thereof
(the “Foreign Issuer Limit”).

 

For avoidance of doubt, it is expressly understood and agreed that, to the
extent the UCC is revised subsequent to the date hereof such that the definition
of any of the foregoing terms included in the description of Collateral is
changed, the parties hereto desire that any property which is included in such
changed definitions which would not otherwise be included in the foregoing grant
on the date hereof be included in such grant immediately upon the effective date
of such revision. Notwithstanding the immediately preceding sentence, the
foregoing grant is intended to apply immediately on the date hereof to all
Collateral to the fullest extent permitted by applicable law regardless of
whether any particular item of Collateral is currently subject to the UCC.

 

Section 2. Security For Obligations. This Agreement and the Collateral secure
the payment of the Secured Obligations. The “Secured Obligations” are (i) all
Obligations and (ii) all obligations of each of the Grantors in respect of
Indebtedness permitted by clause (y) of Section 6.03(vi) of the Credit
Agreement, as in effect on the date hereof, in each case whether for principal,
interest, fees, expenses or otherwise.

 

Section 3. Delivery of Pledged Collateral; Other Actions. Upon written request
by the Administrative Agent (and without further order of the Bankruptcy Court),
all certificates or instruments representing or evidencing the Pledged
Collateral, other than that portion of the Pledged Collateral which is subject
to the Stock Liens, shall be delivered to and held by the Administrative Agent
pursuant hereto and shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Administrative Agent. Upon the occurrence and during the
continuance of any Event of Default, the Administrative Agent shall have the
right (for the ratable

 

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benefit of the Secured Parties) at any time in its discretion and without notice
to the Grantors, to transfer to or to register in the name of the Administrative
Agent or any of its nominees any or all of the Pledged Collateral.

 

Section 4. Representations and Warranties. Each Grantor, jointly and severally,
represents and warrants as follows:

 

(a) As of the Closing Date, all of the Inventory and/or Equipment (other than
motor vehicles and other immaterial amounts of Inventory and Equipment) is
located at the places specified in Schedule 1 hereto. As of the Closing Date,
the jurisdictions of formation, organization or incorporation, as the case may
be, the chief places of business and chief executive offices of each of the
Grantors and the offices where each Grantor keeps its records concerning any
Accounts and any Receivables and all originals of all chattel paper which
evidence any Account are located at the places specified in Schedule 2 hereto.
As of the Closing Date, all trade names under which the Grantors have sold and
will sell Inventory are listed on Schedule 3.12 to the Credit Agreement.

 

(b) Each of the Grantors owns the Collateral free and clear of any lien,
security interest, charge or encumbrance except for the security interest
created by this Agreement and except as otherwise permitted under Section 6.01
of the Credit Agreement. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording office, except such as may have been filed (x) in favor of the
Administrative Agent relating to this Agreement and (y) in favor of any holder
of a Lien permitted under Section 6.01 of the Credit Agreement.

 

(c) As of the Closing Date, no Grantor owns any material Trademarks, Patents or
Copyrights or has any material Trademarks, Patents or Copyrights registered in,
or the subject of pending applications in, the United States Patent and
Trademark Office, the United States Copyright Office or any similar office or
agency in any other country or any political subdivision thereof, other than
those described in Schedule 3.12 to the Credit Agreement. As of the Closing
Date, the registrations for the Trademarks, Patents and Copyrights disclosed on
such Schedule 3.12 to the Credit Agreement are subsisting and have not been
adjudged invalid or unenforceable, in whole or in part, and each Patent,
Trademark and Copyright is valid and enforceable. None of the material
Trademarks, Patents or Copyrights has been abandoned or dedicated.

 

(d) Each Grantor, as the case may be, is the sole and exclusive owner of the
entire right, title and interest in and to each of its Trademarks, Patents and
Copyrights, free and clear of any liens, charges and encumbrances except for
Liens permitted pursuant to Section 6.01 of the Credit Agreement.

 

(e) As of the Closing Date, no Grantor owns or holds any Pledged Collateral
other than that described in Schedules 4, 5 and 6.

 

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(f) The Pledged Shares have been duly authorized and validly issued and are
fully paid and non-assessable.

 

(g) As of the Filing Date, each Grantor, as the case may be, is the record and
beneficial owner of the Pledged Collateral described in Schedule 4, 5 and 6 free
and clear of any Lien, security interest or other charge or encumbrance, except
as permitted under Section 6.01 of the Credit Agreement.

 

(h) As of the Closing Date, except as disclosed on Schedule 3 and subject to the
Foreign Issuer Limit, the Pledged Shares constitute all of the issued and
outstanding shares of stock of each of the Issuers which is a Borrower or a
Subsidiary of a Borrower and no such Issuer is under any contractual obligation
to issue any additional shares of stock or any other securities, rights or
indebtedness.

 

(i) As of the Closing Date, except as disclosed on Schedule 4 and subject to the
Foreign Issuer Limit, the Pledged Partnership Interests, if any, constitute all
of the issued and outstanding interests in each of the Partnerships, if any, and
no Partnership is under any contractual obligation to issue any additional
interests or any other rights or indebtedness.

 

(j) As of the Closing Date, except as disclosed on Schedule 5 and subject to the
Foreign Issuer Limit, the Pledged Company Interests constitute all of the issued
and outstanding interests in each of the Companies and no Company is under any
contractual obligation to issue any additional interests or any other rights or
indebtedness.

 

(k) Upon the entry by the Bankruptcy Court of the Approval Order, (i) each
Grantor will be duly authorized to execute and deliver this Agreement to the
Administrative Agent, and (ii) this Agreement will constitute the legal, valid
and binding obligation of the Grantors, enforceable against the Grantors in
accordance with its terms.

 

(l) As of the Closing Date, all letters of credit to which any Grantor has
rights are listed on Schedule 6 (as amended or supplemented from time to time)
hereto, and the Grantors, upon the request of the Administrative Agent made in
the exercise of its business judgment, have obtained the consent of each issuer
of any material letter of credit to the assignment of the proceeds of the letter
of credit to the Administrative Agent.

 

Section 5. Further Assurances.

 

(a) Each of the Grantors agrees that from time to time, at its expense, it will
promptly execute and deliver all further instruments and documents, and take all
further action, that may be necessary, or that the Administrative Agent may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby or to enable the Administrative Agent
to exercise and enforce any of its rights and remedies hereunder with respect to
any

 

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Collateral. Without limiting the generality of the foregoing, and without
further order of the Bankruptcy Court, each of the Grantors will execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary, or as the Administrative
Agent may reasonably request, in order to perfect and preserve the security
interests granted or purported to be granted hereby.

 

(b) Each of the Grantors agrees that within ten (10) days of the identification
of the existence of a claim in tort belonging to a Grantor which has arisen in
the course of such Grantor’s business (a “Commercial Tort Claim”), such Grantor
shall (i) notify the Administrative Agent of such Commercial Tort Claim, and
provide sufficient information to enable the Administrative Agent to evaluate
each such Commercial Tort Claim, including, but not limited to (v) information
regarding the Person(s) against whom such Commercial Tort Claim may be made, (w)
the nature of such Commercial Tort Claim, (x) the amount of damages claimed by
the Grantor, (y) the name and address of counsel representing the Grantor with
respect to such Commercial Tort Claim, if any, and (z) such other and further
information as the Administrative Agent deems necessary and desirable under the
circumstances; and (ii) upon request by the Administrative Agent, execute such
documentation as the Administrative Agent may request to assign and to grant to
the Administrative Agent a senior perfected security interest in each such
Commercial Tort Claim.

 

(c) Each Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, relative to all or
any part of the Collateral without the signature of such Grantor where permitted
by law. A carbon, photographic or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof is sufficient as
a financing statement where permitted by law.

 

(d) Each Grantor will furnish to the Administrative Agent from time to time
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Administrative Agent
may reasonably request, all in reasonable detail.

 

(e) Each Grantor hereby covenants and agrees that with respect to any material
letter of credit hereafter arising it shall obtain the consent of the issuer
thereof to the assignment of the proceeds of the letter of credit to the
Administrative Agent.

 

Section 6. As to Equipment and Inventory. Each Grantor shall:

 

(a) Keep the Equipment and Inventory (other than Inventory sold in the ordinary
course of business) at the places specified therefor in Schedule 1 hereto or,
upon 30 days’ prior written notice to the Administrative Agent, at other places
in jurisdictions where all action required by Section 5 hereof shall have been
taken to assure the continuation of the perfection of the security interest of
the

 

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Administrative Agent (for the ratable benefit of the Secured Parties) with
respect to the Equipment and Inventory.

 

(b) Subject to provisions of the Credit Agreement, maintain or cause to be
maintained in good repair, working order and condition, excepting ordinary wear
and tear and damage due to casualty, all of the Equipment, and make or cause to
be made all appropriate repairs, renewals and replacements thereof, to the
extent not obsolete and consistent with past practice of such Grantor, as
quickly as practicable after the occurrence of any loss or damage thereto which
are necessary or reasonably desirable to such end, except where the failure to
do any of the foregoing would not result in a material adverse effect on the
assets, properties or condition (financial or otherwise) of the Grantors, taken
as a whole.

 

(c) Until satisfaction in full of the Secured Obligations, at any time when an
Event of Default has occurred and is continuing: (i) each Grantor will perform
any and all reasonable actions requested by the Administrative Agent to enforce
the Administrative Agent’s security interest in the Inventory and all of the
Administrative Agent’s rights hereunder, such as leasing warehouses to the
Administrative Agent or its designee, placing and maintaining signs, appointing
custodians, transferring Inventory to warehouses, and delivering to the
Administrative Agent warehouse receipts and documents of title in the
Administrative Agent’s name; (ii) if any Inventory is in the possession or
control of any of the Grantor’s agents, contractors or processors or any other
third party, each such Grantor will notify the Administrative Agent thereof and
will notify such agents, contractors or processors or third party of the
Administrative Agent’s security interest therein and, upon request, instruct
them to hold all such Inventory for the Administrative Agent and such Grantor’s
account, as their interests may appear, and subject to the Administrative
Agent’s instructions; (iii) the Administrative Agent shall have the right to
hold all Inventory subject to the security interest granted hereunder; and (iv)
if the Administrative Agent shall have given a Default Notice, at any time after
the expiration of the Default Notice Period, to take possession of the Inventory
or any part thereof and to maintain such possession on such Grantor’s premises
or to remove any or all of the Inventory to such other place or places as the
Administrative Agent desires in its sole discretion. If the Administrative Agent
exercises its right to take possession of the Inventory, such Grantor, upon the
Administrative Agent’s demand, will assemble the Inventory and make it available
to the Administrative Agent at such Grantor’s premises at which it is located.

 

Section 7. As to Accounts.

 

(a) Each Grantor shall keep its chief place of business and chief executive
office and the office where it keeps its records concerning the Accounts, and
the offices where it keeps all originals of all chattel paper which evidence
Accounts, at the location therefor specified in Section 4(a) hereof or, upon 30
days’ prior written notice to the Administrative Agent, at such other

 

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locations in a jurisdiction where all actions required by Section 5 hereof shall
have been taken with respect to the Accounts. Each Grantor will hold and
preserve such records and chattel paper and will permit representatives of the
Administrative Agent, at any time during normal business hours, to inspect and
make abstracts from such records and chattel paper in accordance with Section
5.06 of the Credit Agreement.

 

(b) Except as otherwise provided in this subsection (b), each Grantor shall
continue to collect in accordance with its customary practice, at its own
expense, all amounts due or to become due to such Grantor under the Accounts
and, prior to the occurrence and continuance of an Event of Default, such
Grantor shall have the right to adjust, settle or compromise the amount or
payment of any Account, or release wholly or partly any account debtor or
obligor thereof, or allow any credit or discount thereon, all in accordance with
its customary practices. In connection with such collections, the Grantors may,
upon the occurrence and during the continuation of an Event of Default, take
(and at the direction of the Administrative Agent shall take) such action as the
Grantors or the Administrative Agent may reasonably deem necessary or advisable
to enforce collection of the Accounts; provided, that upon written notice by the
Administrative Agent to any Grantor, following the occurrence and during the
continuation of an Event of Default and after the expiration of the Default
Notice Period, of its intention so to do, the Administrative Agent shall have
the right to notify the account debtors or obligors under any Accounts of the
assignment of such Accounts to the Administrative Agent and to direct such
account debtors or obligors to make payment of all amounts due or to become due
to such Grantor thereunder directly to the Administrative Agent and, upon such
notification and at the expense of such Grantor, to enforce collection of any
such Accounts, and to adjust, settle or compromise the amount or payment
thereof, in the same manner and to the same extent as such Grantor might have
done. After receipt by such Grantor of the notice referred to in the proviso to
the preceding sentence, (i) all amounts and proceeds (including instruments)
received by such Grantor in respect of the Accounts shall be received in trust
for the benefit of the Administrative Agent (for the ratable benefit of the
Secured Parties) hereunder, shall be segregated from other funds of the Grantors
and shall be forthwith paid over to the Administrative Agent in the same form as
so received (with any necessary endorsement) to be held as cash collateral and
either (A) released to the Grantors if such Event of Default shall have been
cured or waived or (B) if such Event of Default shall be continuing, applied as
provided by Section 17 hereof, and (ii) the Grantors shall not adjust, settle or
compromise the amount or payment of any Account, or release wholly or partly any
account debtor or obligor thereof, or allow any credit or discount thereon.

 

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Section 8. As to Trademarks, Patents, Copyrights and Copyright Licenses. Except
to the extent failure to do any of the following could not reasonably be
expected to have a material adverse effect on the condition (financial or
otherwise), operation or properties of the Grantors taken as a whole:

 

(a) (i) Each Grantor shall, either itself or through licensees, continue to use
the Trademarks as each is currently used in the Grantor’s business in order to
maintain the Trademarks in full force free from any claim of abandonment for
nonuse, and (ii) each such Grantor will not (and will not permit any licensee
thereof to) do any act or knowingly omit to do any act whereby any Trademark may
become invalidated, unless, in the cases of clauses (i) and (ii), such failure
to maintain or use a Trademark is not reasonably likely to have a material
adverse effect on the condition (financial or otherwise), operation or
properties of the Grantors taken as a whole.

 

(b) Unless and until an Event of Default shall have occurred, the Administrative
Agent hereby grants to the Grantors the exclusive and nontransferable right and
license to make, have made, use and sell the inventions disclosed and claimed in
the Patents for the Grantors’ own benefit and account and for none other. Each
Grantor agrees that it will not sell or assign its interest in, or grant any
sublicense under, the license granted to the Grantors under this subsection (b)
without the prior written consent of the Administrative Agent. From and after
the occurrence of any Event of Default, the Grantors’ license with respect to
the Patents as set forth in this subsection (b) shall terminate, and the
Administrative Agent shall have, in addition to all other rights and remedies
given it by this Agreement, those allowed by law.

 

(c) Each Grantor hereby agrees that the license granted to the Administrative
Agent with respect to each of the Patents shall be without any liability for
royalties or other related charges from the Administrative Agent to the
Grantors. The assignment granted to the Administrative Agent herein with respect
to each of the Patents shall terminate on the earlier of (i) the expiration of
such Patent, and (ii) the payment in full of all of the Secured Obligations and
the termination of the Commitments.

 

(d) No Grantor will do any act, or omit to do any act, whereby the Patents or
Copyrights may become abandoned or dedicated and each such Grantor shall notify
the Administrative Agent immediately if it knows of any reason or has reason to
know that the application or registration of any of the Patents or Copyrights
may become abandoned or dedicated, unless such abandonment or dedication is not
reasonably likely to have a material adverse effect on the condition (financial
or otherwise), operations or properties of the Grantors taken as a whole.

 

(e) No Grantor will, either itself or through any agent, employee, licensee or
designee, (i) file an application for the registration of any Patent or
Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof or
(ii) file any assignment of any Patent or Trademark, which such Grantor may
acquire from a third party, with the United States Patent and Trademark Office
or any similar office or agency in any other country or any political
subdivision thereof,

 

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unless such Grantor shall, within 30 days after the date of such filing, notify
the Administrative Agent thereof, and, upon request of the Administrative Agent
in the exercise of its business judgment, execute and deliver any and all
assignments, agreements, instruments, documents and papers as the Administrative
Agent may request to evidence the Administrative Agent’s interest in such Patent
or Trademark and the goodwill and general intangibles of such Grantor relating
thereto or represented thereby, and such Grantor hereby constitutes the
Administrative Agent its attorney-in-fact to execute and file all such writings
for the foregoing purposes, all lawful acts of such attorney being hereby
ratified and confirmed; such power being coupled with an interest is irrevocable
until the Secured Obligations are paid in full.

 

(f) Each Grantor will take all necessary steps in any proceeding before the
United States Patent and Trademark Office, the United States Copyright Office,
the Library of Congress or any similar office or agency in any other country or
any political subdivision thereof in order to maintain in all material respects
each registered Trademark, Patent and Copyright, and to pursue each application
for registration of any Trademark, Patent and Copyright not listed on Schedule
3.12 to the Credit Agreement, including, without limitation, filing of renewals,
payment of maintenance fees, filing of affidavits of use, filing of affidavits
of incontestability and opposition, and participation in opposition,
interference and cancellation proceedings, unless failure to take such steps is
not reasonably likely to have a material adverse effect on the condition
(financial or otherwise), operation or properties of the Grantors, taken as a
whole.

 

(g) Each Grantor will, without further order of the Bankruptcy Court, perform
all acts and execute and deliver all further instruments and documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, and the United States
Copyright Office, respectively, reasonably requested by the Administrative Agent
at any time to evidence, perfect, maintain, record and enforce the
Administrative Agent’s interest in all Trademarks, Patents and Copyrights or
otherwise in furtherance of the provisions of this Agreement, and each Grantor
hereby authorizes the Administrative Agent to execute and file one or more
accurate financing statements (and similar documents) or copies thereof or of
this Agreement with respect to Patents, Trademarks and Copyrights signed only by
the Administrative Agent.

 

(h) Each Grantor will, upon acquiring knowledge of any use by any person of any
term or design likely to cause confusion with any Trademark, promptly notify the
Administrative Agent of such use, and if requested by the Administrative Agent,
shall join with the Administrative Agent, at such Grantor’s expense, in such
action as the Administrative Agent, in its reasonable discretion, may deem
advisable for the protection of the Administrative Agent’s interest in and to
the Trademarks.

 

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(i) Each Grantor agrees that, should it obtain rights to any Patent, Trademark,
Copyright or Copyright License which is not now identified on Schedule 3.12 to
the Credit Agreement, or become entitled to the benefit of any reissue,
division, continuation, renewal, extension, or continuation-in-part of any
Trademark, Patent, Copyright or Copyright License, (i) such Grantor shall give
prompt written notice thereof to the Administrative Agent, (ii) the provisions
of Section 1 of this Agreement shall automatically apply to any such Trademark,
Patent, Copyright or Copyright License, and (iii) any such Trademark, Patent,
Copyright or Copyright License shall automatically become part of the
Collateral.

 

(j) If any Grantor becomes aware that any Trademark, Patent, Copyright or
Copyright License is infringed or misappropriated by a third party, such Grantor
shall promptly notify the Administrative Agent and shall, if reasonably
requested by the Administrative Agent, promptly sue for infringement or
misappropriation and for recovery of all damages caused by such infringement or
misappropriation, or, with the prior written consent of the Administrative
Agent, shall take such other actions as the Administrative Agent shall
reasonably deem appropriate under the circumstances to protect such Trademark,
Patent, Copyright or Copyright License.

 

(k) Each Grantor shall continue to use reasonable and proper statutory notice in
connection with its use of each registered Patent, Trademark and Copyright.

 

(l) This Agreement is executed for collateral purposes only and upon payment in
full of the Secured Obligations and termination of the Commitments, the
Administrative Agent shall, at the Grantors’ expense, execute and deliver to the
Grantors all deeds, assignments and other instruments as may be necessary or
proper to re-vest in the Grantors full title to the Trademarks, Patents,
Copyrights and Copyright Licenses, subject to any disposition thereof which may
have been made by the Administrative Agent pursuant hereto or pursuant to the
Credit Agreement.

 

Section 9. As to the Pledged Collateral; Voting Rights; Dividends; Etc.

 

(a) So long as no Event of Default shall have occurred and be continuing, and
subject to the rights of the parties secured by the Stock Liens on such Pledged
Collateral:

 

(i) the Grantors (as applicable) shall be entitled to exercise any and all
voting and other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this Agreement
or the Credit Agreement;

 

(ii) notwithstanding the provisions of Section 1 hereof, such Grantors shall be
entitled to receive and retain any and all dividends,

 

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interest or distributions paid in respect of the Pledged Collateral; provided,
that any and all

 

(A) dividends, interest or distributions paid or payable other than in cash in
respect of, and instruments and other property received, receivable or otherwise
distributed in respect of, or in exchange for, any Pledged Collateral, and

 

(B) dividends, interest or distributions paid or payable in cash in respect of
any Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in-surplus; and

 

(C) cash paid, payable or otherwise distributed in respect of, or in redemption
of, or in exchange for, any Pledged Collateral;

 

shall be, and shall be forthwith delivered to the Administrative Agent, to hold
as Pledged Collateral and shall, if received by any of the Grantors, be received
in trust for the benefit of the Administrative Agent (for the ratable benefit of
the Secured Parties), be segregated from the other property or funds of such
Grantor, and be forthwith delivered to the Administrative Agent as Pledged
Collateral in the same form as so received (with any necessary endorsement); and

 

(iii) the Administrative Agent shall execute and deliver (or cause to be
executed and delivered) to the Grantors (as applicable) all such proxies and
other instruments as the Grantors (as applicable) may reasonably request for the
purpose of enabling such Grantor to exercise the voting and other rights which
it is entitled to exercise pursuant to paragraph (i) above and to receive the
dividends which it is authorized to receive and retain pursuant to paragraph
(ii) above;

 

(b) Upon the occurrence and during the continuance of an Event of Default, and
subject to the rights of the parties secured by the Stock Liens on such Pledged
Collateral:

 

(i) upon written notice from the Administrative Agent to the Grantors (as
applicable) to such effect, all rights of such Grantors (as applicable) to
exercise the voting and other consensual rights which it would otherwise be
entitled to exercise pursuant to Section 9(a)(i) and to receive the dividends
which it would otherwise be authorized to receive and retain pursuant to Section
9(a)(ii) shall cease, and all such rights shall thereupon become vested in the
Administrative Agent, who shall thereupon have the sole right to exercise such
voting and other consensual rights and to receive and hold as Pledged Collateral
any such dividends; and

 

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(ii) all dividends which are received by such Grantors contrary to the
provisions of paragraph (i) of this Section 9(b) shall be received in trust for
the benefit of the Administrative Agent (for the ratable benefit of the Secured
Parties), shall be segregated from other funds of the Grantors and shall be
forthwith paid over to the Administrative Agent as Pledged Collateral in the
same form as so received (with any necessary endorsement).

 

Section 10. As to Material Government Contracts. Except as to actions to be
taken by the Administrative Agent, each Grantor represents, warrants and
covenants as follows:

 

(a) Exhibit A-1 lists all Material Government Contracts to which such Grantor is
a party as of the Closing Date. A “Material Government Contract” is a contract
between a Grantor and either (i) the federal government of the United States or
any agency or instrumentality thereof (the “Federal Government”) or (ii) a state
or local government or any agency or instrumentality thereof, that provides (or
can reasonably be expected to provide) for payments to such Grantor in an
aggregate amount exceeding $100,000.

 

(b) Such Grantor has executed and delivered to the Administrative Agent
assignments and notices of assignment, substantially in the forms of Exhibits
A-2 and A-3, with respect to each of its Material Government Contracts with the
Federal Government.

 

(c) Each Grantor will, from time to time, amend and supplement Exhibit A-1 to
include each Material Government Contract entered into by it after the Closing
Date, by delivering to the Administrative Agent a supplemental schedule of
Material Government Contracts. Concurrently therewith, such Grantor will execute
and deliver to the Administrative Agent assignments and notices of assignment,
substantially in the forms of Exhibits A-2 and A-3, with respect to each
Material Government Contract with the Federal Government listed on such
supplemental schedule.

 

(d) Each Grantor will, from time to time, execute and deliver to the
Administrative Agent all assignments, notices of assignment and other documents
required to be filed with any state or local government or agency to insure that
such Grantor’s Material Government Contracts with such government or agency are
validly assigned to the Administrative Agent to the extent that such validity is
governed by applicable provisions of state or local law.

 

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(e) If an Event of Default shall have occurred and be continuing for at least 10
days (or if the maturity of the Loans shall have been accelerated pursuant to
Article 7 of the Credit Agreement), the Administrative Agent may, at the
Grantors’ expense:

 

(i) file, deliver and record with the Federal Government in accordance with the
Assignment of Claims Act of 1940, as amended, 31 U.S.C. Section 3727 and 41
U.S.C. Section 15 (the “Assignment of Claims Act”) any or all assignments and/or
notices of assignment executed and delivered to the Administrative Agent
pursuant to subsection (b) or (c) above; and

 

(ii) file, deliver and/or record with the relevant state or local government or
agency any or all assignments, notices of assignment and/or other documents
executed and delivered to the Administrative Agent pursuant to subsection (d)
above.

 

(f) When the Administrative Agent files any notice of assignment referred to in
subsection (b) or (c) above with the governmental authority or agency or other
office described therein, the relevant security interest granted hereby will
constitute a valid assignment of the Material Government Contract identified
therein, to the extent that such validity is governed by the Assignment of
Claims Act.

 

Section 11. Insurance. Upon the occurrence and during the continuance of any
Event of Default, all insurance payments in respect of Inventory and Equipment
shall be held, applied and paid to the Administrative Agent as specified in
Section 17 hereof.

 

Section 12. Transfers to Others; Liens; Additional Shares and Interests.

 

(a) Each Grantor shall not sell, assign (by operation of law or otherwise) or
otherwise dispose of any of the Collateral, except for dispositions otherwise
permitted by the Credit Agreement or other Loan Documents.

 

(b) Each Grantor shall not create or suffer to exist any lien, security interest
or other charge or encumbrance upon or with respect to any of the Collateral to
secure any obligation of any person or entity, except for the security interest
created by this Agreement and the Approval Order, or except as otherwise
permitted under Section 6.01 of the Credit Agreement.

 

(c) Each of the Grantors (as applicable) agrees that it will (i) cause each of
the Issuers that are wholly-owned Subsidiaries not to issue any stock or other
securities in addition to or substitution for the Pledged Shares issued by such
Issuer, except to the respective Grantor, and (ii) pledge hereunder, subject to
the Foreign Issuer Limit, immediately upon its acquisition (directly or
indirectly) thereof, any and all such additional shares of stock or other
securities of each Issuer.

 

(d) Each of the Grantors (as applicable) agrees that it will (i) cause each of
the Partnerships, if any, that are wholly-owned Subsidiaries not to issue any
interests in addition to or substitution for the Pledged Partnership Interests
issued

 

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by such Issuer, except to the respective Grantor, and (e) pledge hereunder,
subject to the Foreign Issuer Limit, immediately upon its acquisition (directly
or indirectly) thereof, any and all such additional interests of each
Partnership.

 

(e) Each of the Grantors (as applicable) agrees that it will (i) cause each of
the Companies that are wholly-owned Subsidiaries not to issue any interests in
addition to or substitution for the Pledged Company Interests issued by such
Company, except to the respective Grantor and (ii) pledge hereunder, subject to
the Foreign Issuer Limit, immediately upon its acquisition (directly or
indirectly) thereof, any and all such additional interests of each Company.

 

Section 13. Release of Lien on Southfield, Michigan Property. Provided that no
Event of Default shall have occurred and be continuing, the Administrative Agent
will release any and all Liens encumbering the Grantors’ fee interest in the
real estate located at 26555 Northwestern Highway, Southfield, Michigan for the
sole purpose of enabling the Grantors to fulfill the obligations of the lessor
in connection with the tenant’s exercise of its purchase option set forth in
Article 33 of that certain Ground Lease dated as of June 30, 1982 between
Federal-Mogul Corporation and Northwestern Associates Limited Partnership, as
amended by that certain First Amendment to Ground Lease dated as of February 1,
2003. Such release shall be effected upon not less than ten (10) days written
notice from Grantors to the Administrative Agent, which notice shall be
accompanied by an officer’s certificate from an authorized officer of
Federal-Mogul Corporation confirming compliance with the provisions of Article
33 of such Ground Lease and the loan documents in connection with such
transaction and specifying the total consideration to be received by the
Grantors in connection with such transaction.

 

Section 14. Administrative Agent Appointed Attorney-in-Fact. Each Grantor hereby
irrevocably appoints the Administrative Agent such Grantor’s attorney-in-fact
(which appointment shall be irrevocable and deemed coupled with an interest),
with full authority in the place and stead of such Grantor and in the name of
such Grantor or otherwise, from time to time in the Administrative Agent’s
discretion, upon and during the occurrence and continuation of an Event of
Default at any time after the Administrative Agent has given a Default Notice
and the Default Notice Period has expired, to take any action and to execute any
instrument which the Administrative Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:

 

(i) to obtain and adjust insurance required to be paid to the Administrative
Agent pursuant to Section 11 hereof,

 

(ii) to ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral,

 

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(iii) to receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (i) or (ii) above,

 

(iv) to receive, endorse and collect all instruments made payable to the
Grantors representing any dividend or other distribution in respect of the
Pledged Collateral or any part thereof and to give full discharge for the same,
and

 

(v) to file any claims or take any action or institute any proceedings which the
Administrative Agent may deem necessary or desirable for the collection of any
of the Collateral or otherwise to enforce the rights of the Administrative Agent
with respect to any of the Collateral.

 

Section 15. Administrative Agent May Perform. If any Grantor fails to perform
any agreement contained herein, the Administrative Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Administrative
Agent incurred in connection therewith shall be payable by the Grantors under
Section 18(b) hereof.

 

Section 16. The Administrative Agent’s Duties. The powers conferred on the
Administrative Agent hereunder are solely to protect the interests of the
Secured Parties in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the safe custody of any Collateral in its
possession and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral, including, without limitation, ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Pledged Collateral, whether or not the
Administrative Agent has or is deemed to have knowledge of such matters. By
accepting the benefits of this Agreement and the security interests granted
hereunder, Bank One hereby irrevocably appoints the Administrative Agent as its
collateral agent hereunder and, at the discretion of the Administrative Agent,
to take or refrain from taking such actions as agent on behalf of Bank One to
exercise or refrain from exercising such powers under this Agreement as are
delegated by the terms hereof, as appropriate, together with all powers
reasonably incidental thereto. The Administrative Agent shall have no duties or
responsibilities to Bank One except as expressly set forth in this Agreement and
in the Approval Order, and subject in all respects to the limitations on
liability set forth in the Approval Order.

 

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Section 17. Remedies. If any Event of Default shall have occurred and be
continuing at any time after the Administrative Agent has given the Default
Notice and the Default Notice Period has expired, and subject to the provisions
of Article 7 of the Credit Agreement:

 

(a) The Administrative Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, and without application to or order of the Bankruptcy Court, all the
rights and remedies of a secured party on default under the UCC and also may (i)
require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon request of the Administrative Agent forthwith, assemble all or
part of the Collateral as directed by the Administrative Agent and make it
available to the Administrative Agent at a place to be designated by the
Administrative Agent which is reasonably convenient to both parties and (ii)
without notice except as specified in the following sentence, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of the Administrative Agent’s offices or elsewhere, for cash, on credit
or for future delivery, and at such price or prices and upon such other terms as
the Administrative Agent may deem commercially reasonable. Each Grantor agrees
that, to the extent notice of such sale shall be required by law, at least ten
days’ notice to such Grantor of the time and place of any public sale or the
time after which any private sale is to be made shall constitute reasonable
notification. The Administrative Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given. The Administrative
Agent may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned.

 

(b) The Administrative Agent may instruct the Grantors not to make any further
use of the Patents, Copyrights or Trademarks or any mark similar thereto for any
purpose to the extent that such use would be inconsistent with the exercise by
the Administrative Agent of any other remedies under this Section.

 

(c) The Administrative Agent may license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Trademarks,
Patents or Copyrights throughout the world for such term or terms, on such
conditions, and in such manner, as the Administrative Agent shall in its sole
discretion determine.

 

(d) The Administrative Agent may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of the
Grantors in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
each of the Grantors hereby releases the Administrative Agent from, and agrees
to hold the Administrative Agent free and harmless from and against any claims
arising out of, any action taken or omitted to be taken with respect to any such
license agreement.

 

(e) In the event of any such license, assignment, sale or other disposition of
the Collateral, or any of it, each Grantor shall supply its know-how

 

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and expertise relating to the manufacture and sale of the products bearing or in
connection with the Trademarks, Patents or Copyrights, and its customer lists
and other records relating to the Trademarks, Patents or Copyrights and to the
distribution of said products, to the Administrative Agent or its designee.

 

(f) In order to implement the assignment, sale or other disposal of any of the
Trademarks, Patents or Copyrights, the Administrative Agent may, at any time,
pursuant to the authority granted in Section 14 hereof, execute and deliver on
behalf of the Grantors, one or more instruments of assignment of the Trademarks,
Patents or Copyrights (or any application of registration thereof), in form
suitable for filing, recording or registration in any country.

 

(g) All cash proceeds received by the Administrative Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Administrative Agent, be held by the
Administrative Agent as collateral for, and promptly thereafter applied (after
payment of any amounts payable to the Administrative Agent pursuant to Section
18 hereof) to the Secured Obligations ratably, as between the Obligations and
the Secured Obligations owing to Bank One as described in clause (y) of Section
6.03(vi) of the Credit Agreement, as in effect on the date hereof) and at any
time, in whole or in part against, all or any part of the Obligations in such
order as the Administrative Agent shall elect. Any surplus of such cash or cash
proceeds held by the Administrative Agent and remaining after payment in full of
all the Secured Obligations shall be paid over to the Grantors or to whomsoever
may be lawfully entitled to receive such surplus.

 

(h) If at any time when the Administrative Agent shall determine to exercise its
right to sell all or any part of the Pledged Collateral pursuant to this Section
17, such Pledged Collateral or the part thereof to be sold shall not be
effectively registered under the Securities Act of 1933, as amended, and as from
time to time in effect, and the rules and regulations thereunder (the
“Securities Act”), the Administrative Agent is hereby expressly authorized to
sell such Pledged Collateral or such part thereof by private sale in such manner
and under such circumstances as the Administrative Agent may deem necessary or
advisable in order that such sale may legally be effected without such
registration. Without limiting the generality of the foregoing, in any such
event the Administrative Agent, in compliance with applicable securities laws,
(i) may proceed to make such private sale notwithstanding that a registration
statement for the purpose of registering such Pledged Collateral or such part
thereof shall have been filed under such Securities Act, (ii) may approach and
negotiate with a restricted number of potential purchasers to effect such sale
and (iii) may restrict such sale to purchasers as to their number, nature of
business and investment intention, including without limitation to purchasers
each of whom will represent and agree to the satisfaction of the Administrative
Agent that such purchaser is purchasing for its own account, for investment, and
not with a view to the distribution or sale of such Pledged Collateral, or part
thereof, it being understood that the

 

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Administrative Agent may cause or require each Grantor, and each Grantor hereby
agrees upon the written request of the Administrative Agent, to cause (A) a
legend or legends to be placed on the certificates to be delivered to such
purchasers to the effect that the Pledged Collateral represented thereby have
not been registered under the Securities Act and setting forth or referring to
restrictions on the transferability of such securities; and (B) the issuance of
stop transfer instructions to such Issuer’s transfer agent, if any, with respect
to the Pledged Collateral, or, if such Issuer transfers its own securities, a
notation in the appropriate records of such Issuer. In the event of any such
sale, each Grantor does hereby consent and agree that the Administrative Agent
shall incur no responsibility or liability for selling all or any part of the
Pledged Collateral at a price which the Administrative Agent may deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might be realized if the sale were public and deferred until after
registration as aforesaid.

 

Section 18. Indemnity and Expenses.

 

(a) Each Grantor, jointly and severally, agrees to indemnify the Administrative
Agent from and against any and all claims, losses and liabilities growing out of
or resulting from this Agreement (including, without limitation, enforcement of
this Agreement), except claims, losses or liabilities directly arising from the
Administrative Agent’s own gross negligence, willful misconduct or bad faith.

 

(b) The Grantors will upon demand pay to the Administrative Agent the amount of
any and all reasonable expenses, including the reasonable fees and disbursements
of its counsel and of any experts and agents, which the Administrative Agent may
incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or the sale of, collection from, or
other realization upon, any of the Collateral, (iii) the exercise or enforcement
of any of the rights of the Administrative Agent hereunder or (iv) the failure
by any of the Grantors to perform or observe any of the provisions hereof.

 

(c) The Grantors assume all responsibility and liability arising from the use of
the Trademarks, Patents and Copyrights, and the Grantors hereby, jointly and
severally, indemnify and hold the Administrative Agent harmless from and against
any claim, suit, loss, damage or expense (including reasonable attorneys’ fees)
arising out of any alleged defect in any product manufactured, promoted or sold
by any of the Grantors in connection with any Trademark or out of the
manufacture, promotion, labeling, sale or advertisement of any such product by
any of the Grantors, except as the same may have resulted from the gross
negligence, willful misconduct or bad faith of the Administrative Agent.

 

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(d) Each of the Grantors agrees that the Administrative Agent does not assume,
and shall have no responsibility for, the payment of any sums due or to become
due under any agreement or contract included in the Collateral or the
performance of any obligations to be performed under or with respect to any such
agreement or contract by any of the Grantors, and except as the same may have
resulted from the gross negligence or willful misconduct of the Administrative
Agent, each of the Grantors hereby jointly and severally agrees to indemnify and
hold the Administrative Agent harmless with respect to any and all claims by any
person relating thereto.

 

Section 19. Security Interest Absolute. All rights of the Administrative Agent
and security interests hereunder, and all obligations of each of the Grantors
hereunder, shall be absolute and unconditional, irrespective of any circumstance
which might constitute a defense available to, or a discharge of, any guarantor
or other obligor in respect of the Secured Obligations.

 

Section 20. Amendments; Etc. No amendment or waiver of any provision of this
Agreement, nor any consent to any departure by any of the Grantors herefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Grantors, the Administrative Agent, the number of Lenders specified in
Section 10.10 of the Credit Agreement and, solely with respect to (I) any
amendment or modification to (v) the definition of “Collateral” in a manner
adverse to Bank One (it being understood that any sale, transfer or other
disposition of assets permitted by the Approval Order shall not constitute such
an amendment or modification to the definition of “Collateral”), (w) the
definition of “Secured Parties” to remove Bank One as a “Secured Party”, (x)
clause (ii) of the definition of “Secured Obligations”, (y) the last two
sentences of Section 15 or (z) clause (g) of Section 16, to the extent any
amendment or modification to such clause (g) would alter the ratable application
of the cash proceeds referred to therein as between the Obligations and the
Secured Obligations described in clause (ii) of the definition thereof or (II)
any such amendment or modification which would have the effect of the foregoing
described in clauses (v) through (z), signed by Bank One, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.

 

Section 21. Addresses for Notices. All notices and other communications provided
for hereunder shall be in writing and shall be given in accordance with the
applicable provisions of the Credit Agreement and, in the case of Bank One, to
JPMorgan Chase Bank, 270 Park Avenue, 20th Floor, New York, NY 10017, Attention:
Ann Kurinskas, Telephone: (212) 270-0408 and Telecopy: (212) 270-0453.

 

Section 22. Continuing Security Interest. This Agreement shall create a
continuing security interest in the Collateral and shall (a) remain in full
force and effect until payment in full of the Secured Obligations, (b) be
binding upon each of the Grantors, their successors and assigns and (c) inure,
together with the rights

 

24

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and remedies of the Administrative Agent hereunder, to the benefit of each
Secured Party and their respective successors, transferees and assigns. Upon the
payment in full of the Secured Obligations, the security interest granted hereby
shall terminate and all rights to the Collateral shall revert to the Grantors
subject to any existing liens, security interests or encumbrances on such
Collateral. Upon any such termination, the Administrative Agent will, at the
Grantor’s expense, execute and deliver to the Grantors such documents as the
Grantors shall reasonably request to evidence such termination.

 

Section 23. Release of Collateral. If any of the Collateral shall be sold,
transferred or otherwise disposed of by any Grantor in a transaction permitted
by the Credit Agreement (but other than to any other Grantor), then the security
interest in such Collateral granted hereunder (but not in any Proceeds thereof)
shall be automatically released upon the consummation of such sale, transfer or
other disposition. The Administrative Agent, at the request and sole expense of
such Grantor, shall execute and deliver to such Grantor all releases or other
documents reasonably necessary or desirable to evidence the release of the
security interest in such Collateral effected pursuant to this Section 24. The
Administrative Agent shall be entitled to rely fully on a certificate of the
Parent stating that any disposition of assets is permitted under the Credit
Agreement and shall have no obligation to independently verify whether such
disposition is so permitted, and the Administrative Agent’s receipt of such a
certificate shall be a condition precedent to the obligations of the
Administrative Agent to execute any releases or other documents.

 

Section 24. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, except as required by
mandatory provisions of law and except to the extent that the validity or
perfection of the security interest hereunder, or remedies hereunder, in respect
of any particular Collateral are governed by the laws of a jurisdiction other
than the State of New York and by Federal law (including, without limitation,
the Bankruptcy Code) to the extent the same has pre-empted the law of the State
of New York or such other jurisdiction.

 

Section 25. Inconsistency. In the event of any conflict or inconsistency between
the terms of this Agreement and the terms of the Credit Agreement, the terms of
the Credit Agreement shall control.

 

Section 26. Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

 

Section 27. Additional Grantors. Any Subsidiary of the Parent may become a party
hereto by signing and delivering to the Administrative Agent a Security
Agreement Supplement, substantially in the form of Exhibit B hereto, whereupon
such Subsidiary shall become a “Grantor” as defined herein.

 

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CONFORMED COPY

 

IN WITNESS WHEREOF, each of the Grantors and the Administrative Agent have
caused this Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first above written.

 

GRANTORS: FEDERAL-MOGUL CORPORATION

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

J.W.J. HOLDINGS INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

CARTER AUTOMOTIVE COMPANY, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

President and Treasurer

FEDERAL-MOGUL VENTURE CORPORATION

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL GLOBAL PROPERTIES INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

President and Treasurer

 

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FEDERAL-MOGUL WORLD WIDE, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

President and Treasurer

FELT PRODUCTS MFG. CO. By:   /s/ David A. Bozynski    

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL U.K. HOLDINGS INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL GLOBAL INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

T&N INDUSTRIES INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

 

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FERODO AMERICA, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

GASKET HOLDINGS, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL MYSTIC, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL PRODUCTS INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL FX, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

President

 

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FEDERAL-MOGUL POWERTRAIN, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL PISTON RINGS, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

MCCORD SEALING, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL DUTCH HOLDINGS, INC.

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

FEDERAL-MOGUL IGNITION COMPANY

By:

 

/s/ David A. Bozynski

   

Name:

 

David A. Bozynski

   

Title:

 

Vice President and Treasurer

 

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ADMINISTRATIVE AGENT: CITICORP, USA, INC., as Administrative Agent

By:

 

/s/ Shane V. Azzara

   

Name:

 

Shane V. Azzara

   

Title:

 

Vice President