<PAGE>

       Travelers Casualty & Surety Company of America, One Tower Square,
                           Hartford, CT 06183-6014

Contract
Of Indemnity


We, the undersigned, (hereinafter referred to as the "Indemnitors") hereby
request Travelers Casualty & Surety Company of America One Tower Square,
Hartford, CT  06183-6014 (the "Surety") to furnish the Bond identified below
(the "Bond") and as an inducement therefor, make the following representations
of fact, promises and agreements.

REPRESENTATIONS OF FACT:

     1. All of the Indemnitors are either principals with respect to the Bond or
        parents of or subsidiaries of, or affiliated with, such principals.

     2. Each of the Indemnitors has a substantial interest in the principals'
        obtaining the Bond, and it is understood that one of the purposes of
        this Contract of Indemnity is to induce the Surety to furnish the Bond.

     3. The Indemnitors have the full power and authority to execute, deliver
        and perform this Contract of Indemnity and to carry out the obligations
        stated herein.  The Indemnitors further acknowledge and agree that (a)
        the execution, delivery and performance of this Contract of Indemnity by
        such Indemnitors, (b) the compliance with the terms and provisions
        hereof, and (c) the carrying out of the obligations contemplated herein,
        do not, and will not, conflict with and will not result in a breach or
        violation of any terms, conditions or provisions of the charter
        documents or bylaws of such Indemnitors, or any law, governmental
        authority against Indemnitors, or any other agreement binding upon
        Indemnitors, or constitute a default hereunder.

PROMISES AND AGREEMENTS:  In consideration of the furnishing of the Bond by the
Surety and for other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the Indemnitors hereby jointly and severally
promise and agree as follows:

     1. To pay or cause to be paid to the Surety all premiums for the Bond, as
        they fall due, until the Surety has been provided with evidence
        satisfactory to it and its counsel that the Bond has been duly
        discharged.

     2. To indemnify and exonerate the Surety and its successors, assigns,
        affiliates, associates, employees, agents and subsidiary companies from
        and against any and all loss, claim, demand, liability, cost, charge,
        suit, judgment and expense of any kind whatsoever, including, without
        limitation, all payments made under the Bond, all court costs and all
        counsel fees whether incurred before or after a final judgment
        (hereinafter referred to, collectively, as "Loss"), which any of them
        may incur or sustain directly or indirectly as a result of or in
        connection with the furnishing of, or performance under, the Bond, or
        the
<PAGE>

        enforcement of this Contract of Indemnity. To this end each of the
        Indemnitors covenants and agrees:

        (a) To promptly reimburse the Surety upon demand for all sums paid on
            account of each Loss and that (1) originals or photocopies of claim
            drafts, or of payment records kept in the ordinary course of
            business, including computer printouts, verified by affidavit, shall
            be prima facie evidence of the fact and amount of such Loss, and (2)
            the Surety shall be entitled to reimbursement for any and all
            disbursements made by it in good faith, under the belief that it was
            liable, or that such disbursement was necessary or expedient. The
            Indemnitors waive, to the fullest extent allowed by applicable law,
            each and every right which they may have to contest any payment by
            Surety of any Loss.

        (b) If the Surety makes a demand pursuant to Section 2(a) above and the
            Indemnitors do not comply with such demand within five (5) days, the
            Indemnitors shall be liable to the Surety for interest on the unpaid
            amount of such demand at the highest rate (including any default
            rate) charged from time to time by any lender under the Credit
            Agreement (as defined in Section 12(b) below) or the highest rate
            allowed by applicable law, whichever is less. It is the intent of
            the Surety that such interest shall at no time exceed any usury
            limitation imposed by applicable law with respect to the obligations
            of the Indemnitors hereunder.

        (c) The Indemnitors shall treat all premium information as confidential
            and shall not make public any premium information or disclose
            premium information to any other surety, except as may be required
            by law.

        (d) The Surety shall have the exclusive right to determine for itself
            and the Indemnitors whether any claim or suit brought against the
            Surety or any principal upon the Bond shall be settled or defended,
            and its decision shall be binding and conclusive upon the
            Indemnitors.

     3. This Contract of Indemnity shall apply to Bond number 103529229 REL,
        dated December 29, 2000, issued on behalf of T&N Limited, Gasket
        Holdings Incorporated (d/b/a Flexitallic) and Ferodo America, Inc. as
        Principals and in favor of Travelers Casualty & Surety Company of
        America, a copy of which is attached to this Contract of Indemnity, and
        to riders, endorsements, continuations, renewals, substitutions,
        increases or decreases in the penal sum, and reinstatements or
        replacements of the Bond, but not to any other bonds, undertakings,
        guarantees or other instruments of suretyship heretofore or hereafter
        issued by the Surety.

     4. If the Surety procures the execution of the Bond by other companies, or
        executes the Bond with co-sureties, or reinsures any portion of the Bond
        with reinsuring companies, then the terms and conditions of this
        Contract of Indemnity shall apply and operate for the benefit of such
        other companies, co-sureties and reinsurers as their interests may
        appear.

     5. Indemnitors acknowledge and agree that the obligations contained in this
        Contract of Indemnity are a material part of the consideration for the
        issuance of the Bond.
<PAGE>

     6. The validity and effect of this Contract of Indemnity shall not be
        impaired by, the Surety shall incur no liability on account of, and the
        Indemnitors need not be notified of:

         (a) The Surety's consent or failure to consent to changes in the terms
             of the Bond or the obligation of performance secured by the Bond.

         (b) The taking, failing to take, or release of any security,
             collateral, indemnity agreement or similar instrument relating to
             the Bond.

         (c) The release by the Surety of any one or more of the Indemnitors.

         (d) Information which may come to the attention of the Surety which
             affects or might affect its rights and liabilities or those of the
             Indemnitors or any of them.

     7.  No Indemnitor shall have any right of indemnity or contribution or any
         right to seek collection of any outstanding obligation against any
         other Indemnitor or its property until all obligations of the
         Indemnitors to the Surety under this Contract of Indemnity have been
         satisfied in full.

     8.  The Indemnitors acknowledge and agree that their obligations hereunder
         will remain in full force and effect notwithstanding that one or more
         principals under the Bond may have been sold or dissolved or
         experienced a change of ownership or been otherwise altered in any way.

     9.  This Contract of Indemnity creates no obligations other than with
         respect to the Bond. Other bonds that the Surety may have issued or may
         in the future issue shall remain entitled to the benefit of any and all
         indemnity agreements other than this Contract of Indemnity, but shall
         not have the benefit of this Contract of Indemnity.

     10. The obligations created by this Contract of Indemnity are entitled to
         the benefit of liens upon certain assets of Federal-Mogul Corp. and the
         other Indemnitors pursuant to collateral documents dated on or about
         the date hereof, which liens are in favor of First Union National Bank,
         as trustee, Wilmington Trust Company, as trustee and ABN AMRO, as
         trustee, in each case for the benefit of various secured parties
         including the Surety.

     11. From and after the time of the withdrawal of T&N Limited from the
         Center For Claims Resolution ("CCR"), the Indemnitors shall use
         reasonable efforts to cause CCR to reduce proportionately the penal
         sums of the Bond and the bonds of the other Assurance Providers (as
         defined in the Bond). In the event of such a reduction, Schedule A to
         the Bond shall be adjusted as may be agreed to by the Surety, the
         Indemnitors and the obligee of the Bond.

     12. An Event of Default under this Contract of Indemnity ("Event of
         Default") shall exist if any of the following occurs:

         (a) the Surety shall make payment with respect to any Demand (as
             defined in the Bond);
<PAGE>

         (b) any amount owed by any Indemnitor under that certain Fourth Amended
             and Restated Credit Agreement, dated as of December 29, 2000, among
             Federal-Mogul Corporation, certain of its subsidiaries, the Lenders
             (as therein defined) and The Chase Manhattan Bank as Administrative
             Agent, as such credit agreement may be amended from time to time,
             (the "Credit Agreement") shall be declared or otherwise become due
             and payable prior to its maturity or regularly scheduled time for
             payment.

         (c) A failure to pay any premium on the Bond when such premium is
             due.

         (d) Any Security Document (as defined in the Credit Agreement) shall be
         amended in a matter prejudicial to the Surety without the consent of
         the Surety.

         (e) A breach of Section 13 of this Contract of Indemnity.

     13. The proceeds from (i) Asset Sales and (ii) Recovery Events (as such
         terms are defined in the Credit Agreement), in each case from and after
         December 29, 2000, shall not exceed $700,000,000 prior to January 1,
         2002 and $1,000,000,000 in the aggregate. The Indemnitors agree to give
         the Surety 30 days prior written notice of any such Asset Sale which is
         expected to generate proceeds of $50,000,000 or more together with a
         reasonable description of such Asset Sale. The Indemnitors acknowledge
         and agree that if this Section 13 is breached, the Surety will suffer
         irreparable damage for which money damages will not provide an adequate
         remedy. The Surety shall be entitled to equitable relief (including
         specific performance) to enforce this Section 13.

     14. Surety shall have the exclusive right for itself and the Indemnitors to
         determine in good faith whether any claim or suit upon the Bond shall,
         on the basis of liability, expediency or otherwise, be paid,
         compromised, defended or appealed.

     15. The undersigned authorize Surety to join any and all of the undersigned
         as parties defendant in any action, regardless of venue, brought
         against Surety on account of the Bond, and to enforce the obligations
         hereunder directly against any of the undersigned without the necessity
         of first proceeding against any principal of the Bond.

     16. The Indemnitors fully and unequivocally consent and agree that there is
         no obligation of Surety to extend or to renew the Bond or to provide
         any additional or further financial accommodations or forbearance of
         any kind or nature whatsoever.

     17. Any defect in the execution hereof by any of the undersigned, or the
         invalidity of any provision of this Contract of Indemnity by reason of
         the laws of any state or for any other reason shall not render the
         other provisions hereof invalid.

     18. All parties agree that any photocopied, faxed, microfilmed, scanned or
         electronically digitized copy of this Contract of Indemnity or the Bond
         (including any counterpart signature pages thereto) shall be as
         effective as the original for all purposes.
<PAGE>

     19. Separate suits may be brought under this Contract of Indemnity as
         causes of action accrue, and the pendency or termination of any such
         suits shall not bar any subsequent action by Surety.

     20. The Indemnitors shall pay or cause to be paid all reasonable legal fees
         and expenses of the Surety incurred in connection with the issuance of
         the Bond.

     21. The Surety hereby agrees it will instruct (it being understood that
         such obligation to instruct shall include an obligation to instruct the
         Trustee or any other Person to cease any contrary action) the Trustee
         that holds a security interest in the Receivables Subsidiary that
         neither the Trustee nor any other Person, directly or indirectly, shall
         exercise any right or remedy or take any action under this Agreement,
         the applicable Trust Agreement and/or the Domestic Pledge Agreement
         (including, but not limited to, any rights, remedies or actions
         pursuant to Section 5 of the Domestic Pledge Agreement and/or the
         appointment of the Trustee as an attorney-in-fact pursuant to the
         Domestic Pledge Agreement) with respect to the Pledged Stock listed in
         Schedule 1 of the Domestic Pledge Agreement relating to the Receivables
         Subsidiary or any of its successors in interest at any time prior to
         the date on which all Aggregate Unpaids (as such term is defined in the
         Purchase Agreement) have been paid in full in cash in accordance with
         the terms of the Transaction Documents (as such term is defined in the
         Purchase Agreement), which payment shall be confirmed in writing by the
         Blue Ridge Agent and the Falcon Agent. Each of the Blue Ridge Agent and
         the Falcon Agent shall be a third party beneficiary with respect to
         this Section. So long as the stock of the Receivables Subsidiary or any
         of its successors in interest is pledged to secure the obligations of
         the Indemnitors hereunder, this Section 21 shall not be amended,
         modified or supplemented without the prior written consent of the Blue
         Ridge Agent and the Falcon Agent, which consent shall be at the sole
         discretion of the Blue Ridge Agent and the Falcon Agent, and the
         provisions of this Section 21 shall be contained in any agreement that
         amends and restates this Contact of Indemnity. Terms used in this
         Section and not defined shall have the respective meanings ascribed to
         them in the Credit Agreement.

     22. The Indemnitors agree to provide to the Surety the same notices as
         Federal-Mogul Corp. is required to provide to the Administrative Agent
         under Section 10.6 of the Credit Agreement.

     23. This Contract of Indemnity shall inure to the benefit of the Surety,
         its successors and assigns, and shall be binding upon the Indemnitors
         and their respective successors and assigns.

EACH INDEMNITOR HAS READ THIS CONTRACT OF INDEMNITY CAREFULLY.  THERE ARE NO
SEPARATE AGREEMENTS OR UNDERSTANDINGS WHICH IN ANY WAY LESSEN THE OBLIGATION OF
ANY INDEMNITOR AS ABOVE SET FORTH.

     [Rest of page intentionally left blank; next page is signature page.]
<PAGE>

IN WITNESS WHEREOF, the Indemnitors have executed this Contract of Indemnity
this 29th ??? ?? December, 2000


ATTEST:                                 T&N LIMITED
                                          (98-0207360)


                                        /s/ James Zamoyski
                                        -------------------------------------
                                        Name: James Zamoyski
/s/ James D. Keller                     Title:_______________________________
------------------------------

ATTEST:                                 GASKET HOLDINGS INC.
                                          (06-0737139)


                                        /s/ James Zamoyski
                                        -------------------------------------
                                        Name: James Zamoyski
/s/ James D. Keller                     Title:_______________________________
------------------------------


ATTEST:                                 FERODO AMERICA, INC.
                                          (52-1225489)


                                        /s/ James Zamoyski
                                        -------------------------------------
                                        Name: James Zamoyski
/s/ James D. Keller                     Title:_______________________________
------------------------------


ATTEST:                                 F-M UK HOLDING LIMITED
                                          (91-0188349)


                                        /s/ David A. Bozynski
                                        -------------------------------------
                                        Name: David A. Bozynski
/s/ James D. Keller                     Title: Director
------------------------------


ATTEST:

                                        /s/ James Zamoyski
                                        -------------------------------------
                                        Name: James Zamoyski
/s/ James D. Keller                     Title: Director
------------------------------
<PAGE>

                                    FEDERAL-MOGUL CORPORATION
                                       (38-0533580)
                                    CARTER AUTOMOTIVE COMPANY, INC.
                                       (43-1374271)
                                    FEDERAL-MOGUL AVIATION, INC.
                                       (76-0554121)
                                    FEDERAL-MOGUL DUTCH HOLDINGS INC.
                                       (38-3399272)
                                    FEDERAL-MOGUL GLOBAL INC.
                                       (38-3399269)
                                    FEDERAL-MOGUL IGNITION COMPANY
                                       (34-4203131)
                                    FEDERAL-MOGUL PRODUCTS, INC.
                                       (43-1130207)
                                    FEDERAL-MOGUL U.K. HOLDINGS INC.
                                       (38-3399273)
                                    FEDERAL-MOGUL VENTURE CORPORATION
                                       (38-2938561)
                                    FEDERAL-MOGUL WORLD WIDE, INC.
                                       (38-3010848)
                                    FEDERAL-MOGUL GLOBAL PROPERTIES,
                                     INC. (38-3394578)
                                    FELT PRODUCTS MFG. CO.
                                       (38-3437889)
                                    AE GOETZE FB INC.
                                       (38-3301939)
                                    BRAKE ACQUISITION INC.
                                       (38-3270243)
                                    FEDERAL-MOGUL AFTERMARKET OF
                                     CANADA INC. (38-6066458)
                                    FEDERAL-MOGUL CAMSHAFTS, INC.
                                      (38-2437174)
                                    FEDERAL-MOGUL CAROLINA, INC.
                                      (75-2043967)
                                    FEDERAL-MOGUL ENGINEERED BEARINGS,
                                     INC. (34-1669750)
                                    FEDERAL-MOGUL FLOWERY BRANCH, L.L.C.
                                      (58-2244577)
                                    FEDERAL-MOGUL LAGRANGE, INC.
                                      (58-2139078)
                                    FEDERAL-MOGUL PISTON RINGS, INC.
                                      (38-2200604)
                                    FEDERAL-MOGUL POWERTRAIN, INC.
                                      (38-2719472)
                                    FEDERAL-MOGUL RPB, INC.
                                      (38-2964191)
<PAGE>

                                        FEDERAL-MOGUL SEALING SYSTEMS, INC.
                                          (63-1052282)
                                        FEDERAL-MOGUL SINTERED PRODUCTS-
                                         WAUPUN, INC. (31-1580616)
                                        FEDERAL-MOGUL SINTERED PRODUCTS,
                                         INC. (54-1027445)
                                        FEDERAL-MOGUL SOUTH BEND, INC.
                                          (51-0291959)
                                        FEDERAL-MOGUL SYSTEMS PROTECTION
                                        GROUP, INC.
                                          (23-0402320)
                                        FEDERAL-MOGUL TECHNOLOGY, INC.
                                          (38-3228564)
                                        FERODO TECHNICAL CENTER INC.
                                          (38-3247493)
                                        MCCORD SEALING, INC.
                                          (63-1070618)
                                        T&N INDUSTRIES INC.
                                          (22-2183324)
ATTEST:                                 WEYBURN ACQUISITION CORPORATION
                                          (38-2309173)


                                        /s/ Scott Argersinger
                                        -------------------------------------
                                        Name: Scott Argersinger
/s/ Douglas H. Williams                 Title: Authorized Representative
------------------------------