<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 103529126, 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 day of December, 2000


ATTEST:                                 T&N LIMITED
                                          (98-0207360)


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

ATTEST:                                 GASKET HOLDINGS INC.
                                          (06-0237139)


                                        /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
                                          (98-0188349)


                                        /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
                                          (38-3309173)


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