Document:

<PAGE>

                                                                    Exhibit 10.1

                AMENDED AND RESTATED DOMESTIC PLEDGE AGREEMENT
                ----------------------------------------------

          AMENDED AND RESTATED PLEDGE AGREEMENT, dated as of February 24, 1999,
     made by each of the signatories hereto (together with any other entity that
     may become a party hereto as provided herein, the "Grantors"), in favor of
                                                        --------
     FIRST UNION NATIONAL BANK, a national banking association (the "Trustee"),
                                                                     -------
     not individually but solely as Trustee under the Amended and Restated Trust
     Agreement, dated as of February 24, 1999 (as amended, supplemented or
     otherwise modified from time to time, the "Trust Agreement"), among
                                                ---------------
     Federal-Mogul Corporation, a Michigan corporation (the "Company"), the
                                                             -------
     Subsidiaries of the Company parties thereto and the Trustee.

                             W I T N E S S E T H:
                             - - - - - - - - - -

          WHEREAS, pursuant to the Loan Agreement, dated as of September 30,
     1998 (as amended, the "Loan Agreement"), among the Company, the several
                            --------------
     banks and other financial institutions from time to time parties thereto
     (the "Loan Agreement Lenders") and The Chase Manhattan Bank, as
           ----------------------
     Administrative Agent, the Loan Agreement Lenders have made and/or agreed to
     make loans to the Company upon the terms and subject to the conditions set
     forth therein;

          WHEREAS, pursuant to the 364-Day Revolving Credit Agreement, dated as
     of September 30, 1998 (as amended, the "364-Day Agreement"), among the
                                             -----------------
     Company, the several banks and other financial institutions from time to
     time parties thereto (the "364-Day Agreement Lenders") and The Chase
                                -------------------------
     Manhattan Bank, as Administrative Agent, the 364-Day Agreement Lenders have
     made and/or agreed to make loans to the Company upon the terms and subject
     to the conditions set forth therein;

          WHEREAS, pursuant to the Second Amended and Restated Credit Agreement,
     dated as of December 18, 1997 (as amended, the "1997 Credit Agreement");
                                                     ---------------------
     together with the Loan Agreement and the 364-Day Agreement, the "Existing
                                                                      --------
     Credit Agreements"), among the Company, each Foreign Subsidiary Borrower
     -----------------
     party thereto (together with the Company, the "Existing Borrowers"), the
                                                    ------------------
     banks and other financial institutions from time to time parties thereto
     (the "Existing Lenders") and The Chase Manhattan Bank, as Administrative
           ----------------
     Agent, the Existing Lenders have made and/or agreed to make loans to the
     Existing Borrowers upon the terms and subject to the conditions set forth
     therein, and the Company has guaranteed all of the obligations of the
     Foreign Subsidiary Borrowers and the Local Currency Borrowers (as defined
     in the 1997 Credit Agreement);

          WHEREAS, pursuant to the Third Amended and Restated Credit Agreement,
     dated as of  February 24, 1999 (as amended, modified, supplemented,
     extended or renewed from time to time, including pursuant to any amendment
     and restatement thereof, the "Credit Agreement"), among the Company, each
                                   ----------------
     Foreign Subsidiary Borrower party thereto, the Lenders parties thereto and
     The Chase Manhattan Bank, as Administrative Agent, the Existing Credit
     Agreements are being amended and restated
<PAGE>

                                                                               2

     and refinanced in their entirety, and the Lenders have agreed to make
     further Loans to the Borrowers;

          WHEREAS, each Borrower (as defined below) is a member of an affiliated
     group of companies that includes each Grantor;

          WHEREAS, the proceeds of the loans under the Existing Credit
     Agreements and of the Loans (as defined below) to be made under the Credit
     Agreement have been or will be used in part to enable the Borrowers to make
     valuable transfers to one or more of the other Grantors in connection with
     the operation of their respective businesses;

          WHEREAS, the Borrowers and the other Grantors are engaged in related
     businesses, and each Grantor will derive substantial direct and indirect
     benefit from the making of the Loans;

          WHEREAS, it is a requirement under the Indenture, dated as of June 29,
     1998 (as amended, supplemented or otherwise modified from time to time, the
     "New Public Debt Indenture"), among the Company, certain Subsidiaries of
      -------------------------
     the Company and the New Public Debt Trustee (as defined below), that
     certain of the assets in which a security interest is created hereunder
     must secure the securities issued under the New Public Debt Indenture (the
     "New Public Debt Securities") equally and ratably with all other
      --------------------------
     indebtedness secured thereby;

          WHEREAS, it is a requirement under the Indenture, dated as of August
     12, 1994 (as amended, supplemented or otherwise modified from time to time,
     the "1994 Public Debt Indenture"), between the Company and the 1994 Public
          --------------------------
     Debt Trustee (as defined below), that certain of the assets in which a
     security interest is created hereunder must secure the securities issued
     under the 1994 Public Debt Indenture (the "1994 Public Debt Securities")
                                                ---------------------------
     equally and ratably with all other indebtedness secured thereby;

          WHEREAS, in connection with any Bond Offering by the Company, the
     Credit Agreement permits the obligations in connection with such Bond
     Offering to be secured equally and ratably with the Credit Agreement by
     certain of the assets in which a security interest is created hereunder;

          WHEREAS, (i) the Company is the guarantor party to the Guaranty, dated
     as of June 30, 1995, as amended (the "ESOP Guaranty"), in favor of Bank of
                                           -------------
     America National Trust and Savings Association, as agent (in such capacity,
     the "ESOP Agent") under the Loan Agreement, dated as of June 30, 1995, as
          ----------
     amended (the "ESOP Loan Agreement"), with the Federal-Mogul Corporation
                   -------------------
     Salaried Employees' Stock Ownership Trust, as borrower, and Bank of America
     National Trust and Savings Association, as agent and (ii) it is a
     requirement of the ESOP Guaranty that the assets in which a security
     interest is created hereunder must secure the obligations of the Company
     under the ESOP Guaranty equally and ratably with all other indebtedness
     secured thereby;

          WHEREAS, each of the Grantors is a party to one or more of (i) the
     Pledge Agreement, dated as of  March 12, 1998, as amended, (ii) the
     Domestic Pledge
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                                                                               3

     Agreement, dated as of October 9, 1998, as amended, (iii) the New Domestic
     Pledge Agreement, dated as of October 9, 1998, as amended, (iv) the Foreign
     Subsidiary Holding Company Pledge Agreement, dated as of September 4, 1998,
     as amended, and (v) the Foreign Subsidiary Holding Company Pledge
     Agreement, dated as of October 9, 1998, as amended, each in favor of the
     Trustee (collectively, the "Existing Domestic Pledge Agreements"), which
                                 -----------------------------------
     secure all obligations secured hereby; and

          WHEREAS, it is a condition precedent to the obligation of  the Lenders
     (as defined below) to agree to amend and restate the Existing Credit
     Agreements and to continue to make their respective Loans to the Borrowers
     under the Credit Agreement that the Existing Domestic Pledge Agreements
     shall have been amended and restated as provided herein to reflect the
     amendment and restatement of the Existing Credit Agreements pursuant to the
     Credit Agreement;

          NOW, THEREFORE, in consideration of the premises and to induce the
     Administrative Agent (as defined below) and the Lenders to enter into the
     Credit Agreement and to induce the Lenders to make their respective Loans
     thereunder, each Grantor hereby agrees with the Trustee, for the ratable
     benefit of the Lenders, the ESOP Credit Parties and the Holders, that the
     Existing Domestic Pledge Agreements are hereby amended and restated in
     their entirety as follows:

                           SECTION 1. DEFINED TERMS

     1.1  Definitions. (a) Unless otherwise defined herein, terms defined in the
          -----------
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement

     (b)  The following terms shall have the following meanings:

          "Administrative Agent": The Chase Manhattan Bank, in its capacity as
           --------------------
     Administrative Agent under the Credit Agreement, and any successor
     Administrative Agent appointed thereunder.

          "Agreement": this Amended and Restated Domestic Pledge Agreement, as
           ---------
     the same may be amended, supplemented or otherwise modified from time to
     time.

          "Bond Offering": as defined in the Credit Agreement.
           -------------

          "Bond Offering Securities": the securities issued in connection with a
           ------------------------
     Bond Offering, to the extent the proceeds thereof are applied in accordance
     with the terms of the Credit Agreement and to the extent the terms of such
     Securities require that such securities be secured by certain of the assets
     in which a security interest is created hereunder.

          "Collateral": the collective reference to (a) all Pledged Stock, (b)
           ----------
     all Intercompany Loans and Intercompany Notes, and (c) to the extent not
     otherwise included, all Proceeds and products of any and all of the
     foregoing, in each case whether now owned by a Grantor or hereafter
     acquired by a Grantor.
<PAGE>

                                                                               4

          "Credit Agreement": as defined in the recitals hereto.
           ----------------

          "Credit Agreement Obligations": the collective reference to the unpaid
           ----------------------------
     principal of and interest on the Loans and all other obligations and
     liabilities of the Borrowers (including, without limitation, interest
     accruing at the then applicable rate provided in the Credit Agreement after
     the maturity of the Loans and interest accruing at the then applicable rate
     provided in the Credit Agreement after the filing of any petition in
     bankruptcy, or the commencement of any insolvency, reorganization or like
     proceeding, relating to any Borrower, whether or not a claim for post-
     filing or post-petition interest is allowed in such proceeding) to the
     Administrative Agent or any Lender (or, in the case of any Hedge Agreement
     referred to below, any Affiliate of any Lender), whether direct or
     indirect, absolute or contingent, due or to become due, or now existing or
     hereafter incurred, which may arise under, out of, or in connection with,
     the Credit Agreement, this Agreement, the Notes, the other Loan Documents
     or any Hedge Agreement or Reimbursement Agreement entered into by any
     Borrower with any Lender (or any Affiliate of any Lender) or any other
     document made, delivered or given in connection therewith, in each case
     whether on account of principal, interest, reimbursement obligations, fees,
     indemnities, costs, expenses or otherwise (including, without limitation,
     all fees and disbursements of counsel to the Administrative Agent or to the
     Lenders that are required to be paid by any Borrower pursuant to the terms
     of any of the foregoing agreements).

          "ESOP Agent": as defined in the recitals hereto.
           ----------

          "ESOP Credit Parties": the collective reference to the ESOP Agent and
           -------------------
     the ESOP Lenders.

          "ESOP Guaranty": as defined in the recitals hereto.
           -------------

          "ESOP Guaranty Obligations": the collective reference to all
           -------------------------
     obligations and liabilities of the Company to the ESOP Credit Parties under
     the ESOP Guaranty (including, without limitation, interest accruing at the
     then applicable rate provided in the ESOP Loan Agreement after the maturity
     of the loans made under the ESOP Loan Agreement and interest accruing at
     the then applicable rate provided in the ESOP Loan Agreement after the
     filing of any petition in bankruptcy, or the commencement of any
     insolvency, reorganization or like proceeding, relating to the Company,
     whether or not a claim for post-filing or post-petition interest is allowed
     in such proceeding).

          "ESOP Lenders": the lenders parties to the ESOP Loan Agreement.
           ------------
          "ESOP Loan Agreement": as defined in the recitals hereto.
           -------------------

          "Existing Credit Agreements": as defined in the recitals hereto.
           --------------------------

          "Guarantor Obligations": with respect to any Grantor other than the
           ---------------------
     Company, the collective reference to all obligations and liabilities of
     such Grantor which may arise under or in connection with the Subsidiary
     Guarantee to which such Grantor is a party, this Agreement or any other
     Loan Document to which such Grantor is a party, in each case whether on
     account of guarantee obligations, reimbursement obligations, fees,
<PAGE>

                                                                               5

     indemnities, costs, expenses or otherwise (including, without limitation,
     all fees and disbursements of counsel to the Administrative Agent or the
     Lenders that are required to be paid by such Grantor pursuant to the terms
     of this Agreement or any other Loan Document).

          "Hedge Agreements": as to any Person, all interest rate swaps,
           ----------------
     currency swaps, commodity swaps, caps or collar agreements or similar
     arrangements entered into by such Person providing for protection against
     fluctuations in interest rates, commodity prices or currency exchange rates
     or the exchange of nominal interest obligations, either generally or under
     specific contingencies.

          "Holder Representative": as defined in the Trust Agreement.
           ---------------------

          "Holders": the holders of the Public Debt Obligations (including, when
           -------
     the context permits, the relevant Public Debt Trustee acting on behalf of
     such holders).

          "Intercompany Loans": the collective reference to all loans and
           ------------------
     advances, whether or not evidenced by any promissory note or other
     instrument, made by any Grantor to (i) any Foreign Subsidiary or (ii) T & N
     Industries, Inc.; provided, that Intercompany Loans shall exclude any such
                       --------
     loans and advances to any Foreign Subsidiary to which all such outstanding
     loans and advances by all Grantors aggregate less than $25,000,000.

          "Intercompany Notes": the promissory notes listed on Schedule 1,
           ------------------                                  ----------
     together with any promissory note or other instrument evidencing an
     Intercompany Loan that may be issued to, or held by, any Grantor while this
     Agreement is in effect.

          "Issuers": the collective reference to each issuer of Pledged Stock.
           -------

          "New Public Debt Indenture": as defined in the recitals hereto.
           -------------------------

          "New Public Debt Securities": as defined in the recitals hereto.
           --------------------------

          "New Public Debt Trustee": The Bank of New York, as trustee under the
           -----------------------
     New Public Debt Indenture, and any successor trustee appointed thereunder.

          "New York UCC": the Uniform Commercial Code as from time to time in
           ------------
     effect in the State of New York.

          "1994 Public Debt Indenture": as defined in the recitals hereto.
           --------------------------

          "1994 Public Debt Securities": as defined in the recitals hereto.
           ---------------------------

          "1994 Public Debt Trustee": U.S. Bank Trust National Association, as
           ------------------------
     successor to Continental Bank, as trustee under the 1994 Public Debt
     Indenture, and any successor trustee appointed thereunder.

          "Notice of Acceleration": as defined in the Trust Agreement.
           ----------------------
<PAGE>

                                                                               6

          "Other Collateral": all Collateral other than Shared Collateral.
           ----------------

          "Pledged Securities": the collective reference to the Pledged Stock
           ------------------
     and the Intercompany Notes.

          "Pledged Stock": the shares of Capital Stock listed on Schedule 1,
           -------------                                         ----------
     together with any other shares, stock certificates, options or rights of
     any nature whatsoever in respect of the Capital Stock of any Person that
     may be issued or granted to, or held by, any Grantor while this Agreement
     is in effect; provided that in any event not more than 65% of the voting
                   --------
     stock of any Excluded Foreign Subsidiary is pledged hereunder and under the
     other Loan Documents.

          "Proceeds": all "proceeds" as such term is defined in Section 9-306(1)
           --------
     of the Uniform Commercial Code in effect in the State of New York on the
     date hereof and, in any event, shall include, without limitation, all
     dividends or other income from the Pledged Stock, collections thereon or
     distributions or payments with respect thereto.

          "Public Debt Indenture": each of the 1994 Public Debt Indenture, the
           ---------------------
     New Public Debt Indenture and any indenture entered into in connection with
     any Bond Offering Securities.

          "Public Debt Obligations": the unpaid principal of, and premium, if
           -----------------------
     any, and interest on, the Public Debt Securities (including, without
     limitation, interest accruing at the then applicable rate provided in the
     instruments governing the Public Debt Securities after the maturity of the
     Public Debt Securities and interest accruing at the then applicable rate
     provided in such instruments after the filing of any petition in
     bankruptcy, or the commencement of any insolvency, reorganization or like
     proceeding, relating to the Company, whether or not a claim for post-filing
     or post-petition interest is allowed in such proceeding).

          "Public Debt Securities": the collective reference to the 1994 Public
           ----------------------
     Debt Securities, the New Public Debt Securities and the Bond Offering
     Securities.

          "Public Debt Trustee": each of the 1994 Public Debt Trustee, the New
           -------------------
     Public Debt Trustee and any trustee under the instruments governing any
     Bond Offering Securities, in each case acting jointly or individually, as
     the context shall require.

          "Reimbursement Agreement": any letter of credit application, letter of
           -----------------------
     credit reimbursement agreement or similar agreement entered into by any
     Borrower with any Lender pursuant to which such Borrower agrees to
     reimburse such Lender in respect of a letter of credit issued by such
     Lender for the account of such Borrower; provided, that Reimbursement
                                              --------
     Agreement shall not include any such agreement relating to any letter of
     credit in respect of which the issuing Lender shall have delivered a
     written acknowledgement to the Administrative Agent to the effect that the
     obligations of the account party in respect of such letter of credit shall
     not be secured pursuant to the Security Documents or guaranteed pursuant to
     a Subsidiary Guarantee.
<PAGE>

                                                                               7

          "Secured Obligations": (a) with respect to the Company, the
           -------------------
     collective reference to (i) the Public Debt Obligations, (ii) the Credit
     Agreement Obligations, (iii) the ESOP Guaranty Obligations, and (iv) the
     Trustee Fees (as defined in the Trust Agreement); and (b) with respect to
     each Grantor other than the Company, the collective reference to (i) such
     Grantor's Guarantor Obligations, (ii) the Public Debt Obligations, (iii)
     the ESOP Guaranty Obligations, and (iv) the Trustee Fees (as defined in the
     Trust Agreement).

          "Secured Parties": the collective reference to (i) the Holders, (ii)
           ---------------
     the Lenders and the Administrative Agent, (iii) the ESOP Credit Parties and
     (iv) the Trustee.

          "Securities Act": the Securities Act of 1933, as amended.
           --------------

          "Shared Collateral": all Collateral constituting "shares of capital
           -----------------
     stock or evidence of Indebtedness of any Restricted Subsidiary" within the
     meaning of Section 10.09 of the 1994 Public Debt Indenture, Section 3.1 of
     the First Supplemental Indenture, dated June 30, 1998, in connection with
     the New Public Debt Indenture, or comparable provisions of any other Public
     Debt Indenture.

     1.2  Other Definitional Provisions.  (a)  The words "hereof," "herein",
          -----------------------------
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.

     (b)  The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.

     (c)  Where the context requires, terms relating to the Collateral or any
part thereof, when used in relation to a Grantor, shall refer to such Grantor's
Collateral or the relevant part thereof.

                     SECTION 2. GRANT OF SECURITY INTEREST

     2.1  Grant of Security Interest. Each Grantor hereby grants to the Trustee,
          --------------------------
for the ratable benefit of the Secured Parties as described more fully in the
next succeeding sentence a security interest in all of the Collateral now owned
or at any time hereafter acquired by such Grantor or in which such Grantor now
has or at any time in the future may acquire any right, title or interest, as
collateral security for the prompt and complete payment and performance when due
(whether at the stated maturity, by acceleration or otherwise) of the Secured
Obligations of such Grantor. The foregoing grant of a security interest by each
Grantor (i) in any Shared Collateral is granted to the Trustee, for the ratable
benefit of the Secured Parties, to secure all Secured Obligations of such
Grantor and (ii) in any Other Collateral is granted to the Trustee, for the
ratable benefit of the Lenders and the ESOP Credit Parties, to secure (x) in the
case of the Company, the Credit Agreement Obligations and the ESOP Guaranty
Obligations and (y) in the case of each other Grantor, the Guarantor Obligations
of such Grantor relating to the Credit Agreement and the ESOP Guaranty
Obligations.

     2.2  Limitation.  Anything herein or in any other Loan Document to the
          ----------
contrary notwithstanding, the maximum amount of Secured Obligations secured
pursuant hereto or
<PAGE>

                                                                               8

pursuant to any other Loan Document by the assets owned by any Grantor which is
a Subsidiary of the Company shall in no event exceed the amount which can be so
secured under applicable federal and state laws relating to the insolvency of
debtors.

                   SECTION 3. REPRESENTATIONS AND WARRANTIES

     To induce the Administrative Agent and the Lenders to enter into the Credit
Agreement and to induce the Lenders to make their respective extensions of
credit to the Borrowers thereunder, each Grantor hereby represents and warrants
to the Secured Parties that:

     3.1  Representations in the Credit Agreement.  In the case of each Grantor
          ---------------------------------------
other than the Company, the representations and warranties set forth in Article
VI of the Credit Agreement, as they relate to such Grantor or to the Loan
Documents to which such Grantor is a party, each of which is hereby incorporated
herein by reference, are true and correct, and the Trustee and each Secured
Party shall be entitled to rely on each of them as if they were fully set forth
herein, provided that each reference in each such representation and warranty to
the Company's knowledge shall, for the purposes of this subsection 3.1, be
deemed to be a reference to such Grantor's knowledge.

     3.2  Title; No Other Liens. Except for the security interest granted to the
          ---------------------
Trustee for the benefit of the Secured Parties and the other Liens permitted to
exist on the Collateral by the Credit Agreement, such Grantor owns each item of
the Collateral free and clear of any and all Liens or claims of others. No
public notice with respect to all or any part of the Collateral is of record in
any public office, except such as have been filed in favor of the Trustee, for
the benefit of the Secured Parties, pursuant to this Agreement or as are
permitted by the Credit Agreement.

     3.3  Perfected First Priority Liens.  The security interests granted
          ------------------------------
pursuant to this Agreement (a) upon delivery to the Trustee of the certificates
representing the Pledged Stock and the Intercompany Notes and the filing of UCC
Financing Statements in the offices set forth in Schedule 2, will constitute
valid perfected security interests in all of the Collateral in favor of the
Trustee, for the benefit of the Secured Parties, as collateral security for the
Secured Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor and (b) are prior to all other Liens on the Collateral in
existence on the date hereof; provided, that no representations are made with
                              --------
respect to the requirements of any laws of any jurisdiction other than the
United States or any State thereof.

     3.4  Pledged Securities.  (a)  The shares of Pledged Stock pledged by such
          ------------------
Grantor hereunder constitute all the issued and outstanding shares of all
classes of the Capital Stock of each Issuer owned by such Grantor; provided,
                                                                   --------
that with respect to each Issuer which is an Excluded Foreign Subsidiary, and
with respect to F-M International Group, Inc., not more than 65% of the voting
stock of any such Issuer is pledged hereunder.

     (b)  All the shares of the Pledged Stock have been duly and validly issued
and are fully paid and nonassessable.
<PAGE>

                                                                               9

     (c)  Each of the Intercompany Notes, when issued, will constitute the
legal, valid and binding obligation of the obligor with respect thereto,
enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

     (d)  Such Grantor is the record and beneficial owner of, and has good and
marketable title to, the Pledged Securities pledged by it hereunder, free of any
and all Liens or options in favor of, or claims of, any other Person, except the
security interest created by this Agreement.

     (e)  F-M International Group Inc. is the record and beneficial owner of,
and has good and marketable title to, the percentage of shares of each Foreign
Subsidiary, as listed on Schedule 3 hereto, free of any and all Liens or options
in favor of, or claims of, any other Person, and all such shares have been duly
and validly issued and are fully paid and nonassessable.

                             SECTION 4. COVENANTS

          Each Grantor covenants and agrees with the Trustee and the Secured
     Parties that, from and after the date of this Agreement until the Secured
     Obligations shall have been paid in full and the Commitments shall have
     terminated:

     4.1  Covenants in the Credit Agreement.  In the case of each Grantor other
          ---------------------------------
than the Company, such Grantor shall take, or shall refrain from taking, as the
case may be, each action that is necessary to be taken or not taken, as the case
may be, so that no Default or Event of Default is caused by the failure to take
such action or to refrain from taking such action by such Grantor or any of its
Subsidiaries.

     4.2  Payment of Obligations.  Such Grantor will pay and discharge or
          ----------------------
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including, without limitation, claims for labor, materials
and supplies) against or with respect to the Collateral, except that no such
charge need be paid if the amount or validity thereof is currently being
contested in good faith by appropriate proceedings, reserves in conformity with
GAAP with respect thereto have been provided on the books of such Grantor and
such proceedings could not reasonably be expected to result in the sale,
forfeiture or loss of any material portion of the Collateral or any interest
therein.

     4.3  Maintenance of Perfected Security Interest. (a) Such Grantor shall
          ------------------------------------------
maintain the security interest created by this Agreement as a perfected security
interest having at least the priority described in subsection 3.3 and shall
defend such security interest against the claims and demands of all Persons
whomsoever.

     (b)  Such Grantor will furnish to the Trustee and the Administrative Agent
from time to time statements and schedules further identifying and describing
the Collateral and such other
<PAGE>

                                                                              10

reports in connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.

     (c)  At any time and from time to time, upon the written request of the
Administrative Agent or the Trustee, and at the sole expense of such Grantor,
such Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the
Administrative Agent or the Trustee may reasonably request for the purpose of
obtaining or preserving the full benefits of this Agreement and of the rights
and powers herein granted, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code (or other
similar laws) in effect in any jurisdiction with respect to the security
interests created hereby.

     4.4  Notices.  Such Grantor will advise the Trustee and the Administrative
          -------
Agent promptly, in reasonable detail, of:

     (a)  any Lien (other than security interests created hereby or Liens
permitted under the Credit Agreement) on any of the Collateral which would
adversely affect the ability of the Trustee to exercise any of its remedies
hereunder; and

     (b)  of the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.

     4.5  Pledged Stock.  (a)  If such Grantor shall become entitled to receive
          --------
or shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in connection with
any reclassification, increase or reduction of capital or any certificate issued
in connection with any reorganization), option or rights in respect of the
Capital Stock of any Issuer, whether in addition to, in substitution of, as a
conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise
in respect thereof, such Grantor shall accept the same as the agent of the
Trustee, hold the same in trust for the Trustee and deliver the same forthwith
to the Trustee in the exact form received, duly indorsed by such Grantor to the
Trustee, if required, together with an undated stock power covering such
certificate duly executed in blank by such Grantor and with, if the Trustee so
requests, signature guaranteed, to be held by the Trustee, subject to the terms
hereof, as additional collateral security for the Secured Obligations of such
Grantor.  Any sums paid upon or in respect of the Pledged Stock pledged by any
Grantor upon the liquidation or dissolution of any Issuer shall be paid over to
the Trustee to be held by it hereunder as additional collateral security for the
Secured Obligations of such Grantor, and in case any distribution of capital
shall be made on or in respect of the Pledged Stock pledged by any Grantor or
any property shall be distributed upon or with respect to the Pledged Stock
pledged by any Grantor pursuant to the recapitalization or reclassification of
the capital of any Issuer or pursuant to the reorganization thereof, the
property so distributed shall, unless otherwise subject to a perfected security
interest in favor of the Trustee, be delivered to the Trustee to be held by it
hereunder as additional collateral security for the Secured Obligations of such
Grantor.  If any sums of money or property so paid or distributed in respect of
the Pledged Stock shall be received by such Grantor, such Grantor shall, until
such money or property is paid or delivered to the Trustee, hold such money or
property in trust for the Secured
<PAGE>

                                                                              11

Parties, segregated from other funds of such Grantor, as additional collateral
security for the Secured Obligations of such Grantor.

     (b)  Without the prior written consent of the Trustee, such Grantor will
not (i) vote to enable, or take any other action to permit, any Issuer to issue
any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange for
any stock or other equity securities of any nature of any Issuer, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Pledged Stock or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement), (iii) create, incur or
permit to exist any Lien or option in favor of, or any claim of any Person with
respect to, any of the Pledged Stock or Proceeds thereof, or any interest
therein, except for the security interests created by this Agreement or (iv)
enter into any agreement or undertaking restricting the right or ability of such
Grantor or the Trustee to sell, assign or transfer any of the Pledged Stock or
Proceeds thereof.

     (c)  In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Stock issued by it and will comply with such terms insofar as such terms are
applicable to it, (ii) it will notify the Trustee promptly in writing of the
occurrence of any of the events described in subsection 4.5(a) with respect to
the Pledged Stock issued by it and (iii) the terms of subsections 5.1(c) and 5.4
shall apply to it, mutatis mutandis, with respect to all actions that may be
                   ------- --------
required of it pursuant to subsection 5.1(c) or 5.4 with respect to the Pledged
Stock issued by it.

     (d)  In the case of each Issuer which is not a Grantor, the Grantor with
respect to such Issuer shall cause such Issuer to execute and deliver to the
Trustee an acknowledgement and consent in the form of Annex 1.

                        SECTION 5. REMEDIAL PROVISIONS

     5.1  Pledged Stock. (a) Unless a Notice of Acceleration shall be in effect
          -------------
and the Trustee shall have given notice to the Company of the Trustee's intent
to exercise its corresponding rights pursuant to subsection 5.1(b), each Grantor
shall be permitted to receive all cash dividends paid in respect of the Pledged
Stock, in each case paid in the normal course of business of the relevant Issuer
and consistent with past practice and to exercise all voting and corporate
rights with respect to the Pledged Stock; provided, however, that no vote shall
                                          --------  -------
be cast or corporate right exercised or other action taken which would impair
the Collateral or which would be inconsistent with or result in any violation of
any provision of the Credit Agreement, this Agreement or any other Loan
Document.

     (b)  If a Notice of Acceleration shall be in effect and the Trustee shall
give notice of its intent to exercise such rights to the Company, (i) the
Trustee shall have the right to receive any and all cash dividends, payments or
other Proceeds paid in respect of the Pledged Stock and make application thereof
to the Secured Obligations in the order specified in the Trust Agreement, and
(ii) any or all of the Pledged Stock shall be registered in the name of the
Trustee or its nominee, and the Trustee or its nominee may thereafter exercise
(x) all voting, corporate and other rights pertaining to such Pledged Stock at
any meeting of shareholders of the relevant Issuer or Issuers or otherwise and
(y) any and all rights of conversion, exchange and subscription
<PAGE>

                                                                              12

and any other rights, privileges or options pertaining to such Pledged Stock as
if it were the absolute owner thereof (including, without limitation, the right
to exchange at its discretion any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate structure of any Issuer, or upon the exercise by any Grantor or
the Trustee of any right, privilege or option pertaining to such Pledged Stock,
and in connection therewith, the right to deposit and deliver any and all of the
Pledged Stock with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Trustee may determine),
all without liability except to account for property actually received by it,
but the Trustee shall have no duty to any Grantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do so or
delay in so doing.

     (c)  Each Grantor hereby authorizes and instructs each Issuer of any
Pledged Stock pledged by such Grantor hereunder to (i) comply with any
instruction received by it from the Trustee in writing that (x) states that a
Notice of Acceleration is in effect and (y) is otherwise in accordance with the
terms of this Agreement, without any other or further instructions from such
Grantor, and each Grantor agrees that each Issuer shall be fully protected in so
complying, and (ii) if a Notice of Acceleration is in effect, pay any dividends
or other payments with respect to the Pledged Stock directly to the Trustee.

     5.2  Application of Proceeds.  All Proceeds of the Collateral received by
          -----------------------
the Trustee hereunder shall be held and applied in accordance with the Trust
Agreement.

     5.3  Code and Other Remedies. If a Notice of Acceleration is in effect, the
          -----------------------
Trustee, on behalf of the Secured Parties, may exercise, in addition to all
other rights and remedies granted to them in this Agreement and in any other
instrument or agreement securing, evidencing or relating to the Secured
Obligations, all rights and remedies of a secured party under the New York UCC
or any other applicable law. Without limiting the generality of the foregoing,
the Trustee, without demand of performance or other demand, presentment,
protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon any Grantor or any other Person (all and each of
which demands, defenses, advertisements and notices are hereby waived), may in
such circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Trustee, any Secured Party or elsewhere upon such terms
and conditions as it may deem advisable and at such prices as it may deem best,
for cash or on credit or for future delivery without assumption of any credit
risk. The Trustee or any Secured Party shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in any Grantor, which right or equity is
hereby waived and released. The Trustee shall apply the net proceeds of any
action taken by it pursuant to this subsection 5.3, after deducting all
reasonable costs and expenses of every kind incurred in connection therewith or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Trustee and the Secured Parties
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, to the payment in whole or in part of the Secured Obligations, in
the order specified in the Trust Agreement, and
<PAGE>

                                                                              13

only after such application and after the payment by the Trustee of any other
amount required by any provision of law, including, without limitation, Section
9-504(1)(c) of the New York UCC, need the Trustee account for the surplus, if
any, to any Grantor. To the extent permitted by applicable law, each Grantor
waives all claims, damages and demands it may acquire against the Trustee or any
Secured Party arising out of the exercise by them of any rights hereunder,
except to the extent arising from the gross negligence or willful misconduct of
the Trustee, such Secured Party or such Lender. If any notice of a proposed sale
or other disposition of Collateral shall be required by law, such notice shall
be deemed reasonable and proper if given at least 10 days before such sale or
other disposition.

     5.4   Registration Rights. (a) If the Trustee (upon directions received by
           -------------------
it pursuant the Trust Agreement) shall determine to exercise its right to sell
any or all of the Pledged Stock pursuant to Section 5.3, and if in the opinion
of the Trustee it is necessary or advisable to have the Pledged Stock, or that
portion thereof to be sold, registered under the provisions of the Securities
Act, the relevant Grantor will cause the Issuer thereof to (i) execute and
deliver, and cause the directors and officers of such Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Trustee (as directed pursuant to the
Trust Agreement), necessary or advisable to register the Pledged Stock, or that
portion thereof to be sold, under the provisions of the Securities Act, (ii) use
its best efforts to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the date of the
first public offering of the Pledged Stock, or that portion thereof to be sold,
and (iii) make all amendments thereto and/or to the related prospectus which, in
the opinion of the Trustee (as directed pursuant to the Trust Agreement), are
necessary or advisable, all in conformity with the requirements of the
Securities Act and the rules and regulations of the Securities and Exchange
Commission applicable thereto. Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions which the Trustee (as directed pursuant to the Trust Agreement)
shall designate and to make available to its security holders, as soon as
practicable, an earnings statement (which need not be audited) which will
satisfy the provisions of Section 11(a) of the Securities Act.

     (b)  Each Grantor recognizes that the Trustee may be unable to effect a
public sale of any or all the Pledged Stock, by reason of certain prohibitions
contained in the Securities Act and applicable state securities laws or
otherwise, and may be compelled to resort to one or more private sales thereof
to a restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. Each Grantor acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable than if such sale were a public sale and, notwithstanding such
circumstances, agrees that any such private sale shall be deemed to have been
made in a commercially reasonable manner. The Trustee shall be under no
obligation to delay a sale of any of the Pledged Stock for the period of time
necessary to permit the Issuer thereof to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if such Issuer would agree to do so.

     (c) Each Grantor agrees to use its best efforts to do or cause to be done
all such other acts as may be necessary to make such sale or sales of all or any
portion of the Pledged Stock pursuant to this subsection 5.4 valid and binding
and in compliance with any and all other
<PAGE>

                                                                              14

applicable Requirements of Law. Each Grantor further agrees that a breach of any
of the covenants contained in this subsection 5.4 will cause irreparable injury
to the Trustee and the Secured Parties, that the Trustee and the Secured Parties
have no adequate remedy at law in respect of such breach and, as a consequence,
that each and every covenant contained in this subsection 5.4 shall be
specifically enforceable against such Grantor, and such Grantor hereby waives
and agrees not to assert any defenses against an action for specific performance
of such covenants except for a defense that no Event of Default has occurred
under the Credit Agreements.

     5.5  Deficiency.  Each Grantor shall remain liable for any deficiency if
          ----------
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay its Secured Obligations and the fees and disbursements of any attorneys
employed by the Trustee to collect such deficiency.

                            SECTION 6. THE TRUSTEE

     6.1  Trustee's Appointment as Attorney-in-Fact, etc. (a) Each Grantor
          ----------------------------------------------
hereby irrevocably constitutes and appoints the Trustee and any officer or agent
thereof, with full power of substitution, as its true and lawful attorney-in-
fact with full irrevocable power and authority in the place and stead of such
Grantor and in the name of such Grantor or in its own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Agreement, and, without limiting
the generality of the foregoing, each Grantor hereby gives the Trustee the power
and right, on behalf of such Grantor, without notice to or assent by such
Grantor, to do any or all of the following:

          (i)   pay or discharge taxes and Liens levied or placed on or
     threatened against the Collateral, other than taxes being contested in good
     faith and by appropriate proceedings;

          (ii)  execute, in connection with any sale provided for in subsection
     5.3, any indorsements, assignments or other instruments of conveyance or
     transfer with respect to the Collateral; and

          (iii) (1) direct any party liable for any payment under any of the
     Collateral to make payment of any and all moneys due or to become due
     thereunder directly to the Trustee or as the Trustee shall direct; (2) ask
     or demand for, collect, and receive payment of and receipt for, any and all
     moneys, claims and other amounts due or to become due at any time in
     respect of or arising out of any Collateral; (3) sign and indorse
     assignments, verifications, notices and other documents in connection with
     any of the Collateral; (4) commence and prosecute any suits, actions or
     proceedings at law or in equity in any court of competent jurisdiction to
     collect the Collateral or any portion thereof and to enforce any other
     right in respect of any Collateral; (5) defend any suit, action or
     proceeding brought against such Grantor with respect to any Collateral; (6)
     settle, compromise or adjust any such suit, action or proceeding and, in
     connection therewith, give such discharges or releases as the Trustee may
     deem appropriate; and (7) generally, sell, transfer, pledge and make any
     agreement with respect to or otherwise deal with any of the Collateral as
     fully and completely as though the Trustee were the absolute owner thereof
<PAGE>

                                                                              15

     for all purposes, and do, at the Trustee's option and such Grantor's
     expense, at any time, or from time to time, all acts and things which the
     Trustee deems necessary to protect, preserve or realize upon the Collateral
     and the Trustee's security interests therein and to effect the intent of
     this Agreement, all as fully and effectively as such Grantor might do.

          Anything in this subsection 6.1 (a)  to the contrary notwithstanding,
     the Trustee agrees that it will not exercise any rights under the power of
     attorney provided for in this subsection 6.1(a) unless directed to do so in
     the manner specified in the Trust Agreement while a Notice of Acceleration
     is in effect.

     (b)  If any Grantor fails to perform or comply with any of its agreements
contained herein, the Trustee, at its option, but without any obligation so to
do, may perform or comply, or otherwise cause performance or compliance, with
such agreement.

     (c)  The expenses of the Trustee incurred in connection with actions
undertaken as provided in this subsection 6.1, together with interest thereon at
a rate per annum equal to the rate per annum at which interest would then be
payable on past due Base Rate Loans which are Revolving Credit Loans under the
Credit Agreement, from the date of payment by the Trustee to the date reimbursed
by the relevant Grantor, shall be payable by such Grantor to the Trustee on
demand.

     (d)  Each Grantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby are
released.

     6.2  Duty of Trustee.  The Trustee's sole duty with respect to the custody,
          ---------------
safekeeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the
same manner as the Trustee deals with similar property for its own account.
Neither the Trustee, any Secured Party nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize upon any of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of any Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof.  The powers
conferred on the Trustee and the Secured Parties hereunder are solely to protect
the Trustee's and the Secured Parties' interests in the Collateral and shall not
impose any duty upon the Trustee or any Secured Party to exercise any such
powers.  The Trustee and the Secured Parties shall be accountable only for
amounts that they actually receive as a result of the exercise of such powers,
and neither they nor any of their officers, directors, employees or agents shall
be responsible to any Grantor for any act or failure to act hereunder, except
for their own gross negligence or willful misconduct.

     6.3  Authority of Trustee.  Each Grantor acknowledges that the rights and
          --------------------
responsibilities of the Trustee under this Agreement with respect to any action
taken by the Trustee or the exercise or non-exercise by the Trustee of any
option, voting right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this
<PAGE>

                                                                              16

Agreement shall, as between the Trustee and the Secured Parties, be governed by
the Trust Agreement and by such other agreements with respect thereto as may
exist from time to time among them, but, as between the Trustee and the
Grantors, the Trustee shall be conclusively presumed to be acting as agent for
the Secured Parties with full and valid authority so to act or refrain from
acting, and no Grantor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.

                           SECTION 7. MISCELLANEOUS

     7.1  Amendments in Writing. None of the terms or provisions of this
          ---------------------
Agreement may be waived, amended, supplemented or otherwise modified except by
an instrument in writing executed by the Grantors and by the Trustee (pursuant
to instructions given in accordance with the Trust Agreement).

     7.2  Notices.  All notices, requests and demands to or upon the Trustee or
          -------
any Grantor hereunder shall be effected in the manner provided for in subsection
6.1 of the Trust Agreement; provided that any such notice, request or demand to
                            --------
or upon any Grantor other than the Company shall be addressed to such Grantor
c/o the Company and that any such notice, request or demand to or upon the
Trustee shall be addressed to the Trustee at its notice address set forth in the
Trust Agreement.

     7.3  No Waiver by Course of Conduct; Cumulative Remedies. Neither the
          ---------------------------------------------------
Trustee nor any Secured Party shall by any act (except by a written instrument
pursuant to subsection 7.1), delay, indulgence, omission or otherwise be deemed
to have waived any right or remedy hereunder or to have acquiesced in any
Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Trustee or any Secured Party, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Trustee or any Secured Party of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy which
the Trustee or such Secured Party would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any other rights or remedies provided
by law.

     7.4  Enforcement Expenses; Indemnification. (a) Each Grantor agrees to pay
          -------------------------------------
or reimburse each Secured Party and the Trustee for all its reasonable costs and
expenses incurred in enforcing or preserving any rights under this Agreement and
the other Loan Documents to which such Grantor is a party, including, without
limitation, the fees and disbursements of counsel to the Trustee.

     (b)  Each Grantor agrees to pay, and to save the Trustee and the Secured
Parties harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Agreement.
<PAGE>

                                                                              17

     (c)  Each Grantor agrees to pay, and to save the Trustee and the Secured
Parties harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Company would
be required to indemnify the Administrative Agent and the Lenders pursuant to
Section 13.05 of the Credit Agreement, and subsection 4.6 of the Trust
Agreement.

     (d)  The agreements in this subsection 7.4 shall survive repayment of the
Secured Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents and the Trust Agreement.

     7.5  Successors and Assigns.  This Agreement shall be binding upon the
          ----------------------
successors and assigns of each Grantor and shall inure to the benefit of the
Trustee and the Secured Parties and their successors and assigns; provided that
                                                                  --------
no Grantor may assign, transfer or delegate any of its rights or obligations
under this Agreement without the prior written consent of the Trustee.

     7.6  Counterparts.  This Agreement may be executed by one or more of the
          ------------
parties to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.

     7.7  Severability.  Any provision of this Agreement which is prohibited or
          ------------
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

     7.8  Section Headings.  The Section headings used in this Agreement are for
          ----------------
convenience of reference only and are not to affect the construction hereof or
be taken into consideration in the interpretation hereof.

     7.9  Integration. This Agreement and the other Loan Documents represent the
          -----------
agreement of the Grantors, the Administrative Agent, the Trustee and the Secured
Parties with respect to the subject matter hereof and thereof, and there are no
promises, undertakings, representations or warranties by the Trustee, the
Administrative Agent or any Secured Party relative to subject matter hereof and
thereof not expressly set forth or referred to herein or in the other Loan
Documents.

     7.10 GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
          -------------
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

     7.11 Submission To Jurisdiction; Waivers. Each Grantor hereby irrevocably
          -----------------------------------
and unconditionally:

     (a)  submits for itself and its property in any legal action or proceeding
relating to this Agreement and the other Loan Documents to which it is a party,
or for recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the
<PAGE>

                                                                              18

Courts of the State of New York, the courts of the United States of America for
the Southern District of New York, and appellate courts from any thereof;

     (b)   consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same;

     (c)   agrees that service of process in any such action or proceeding may
be effected by mailing a copy thereof by registered or certified mail (or any
substantially similar form of mail), postage prepaid, to such Grantor at its
address referred to in Section 7.2 or at such other address of which the Trustee
shall have been notified pursuant thereto;

     (d)   agrees that nothing herein shall affect the right to effect service
of process in any other manner permitted by law or shall limit the right to sue
in any other jurisdiction; and

     (e)   waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover in any legal action or proceeding referred to in this
Section any special, exemplary, punitive or consequential damages.

     7.12  Acknowledgements.  Each Grantor hereby acknowledges that:
           ----------------

     (a)   it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents to which it is a party;

     (b)   neither the Trustee nor any Secured Party has any fiduciary
relationship with or duty to any Grantor arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
the Grantors, on the one hand, and the Trustee and the Secured Parties, on the
other hand, in connection herewith or therewith is solely that of debtor and
creditor; and

     (c)   no joint venture is created hereby or by the other Loan Documents or
otherwise exists by virtue of the transactions contemplated hereby among the
Secured Parties, among the Secured Parties or among the Grantors and the Secured
Parties.

     7.13  WAIVER OF JURY TRIAL. EACH OF THE GRANTORS, AND, BY ACCEPTANCE OF THE
           --------------------
BENEFITS HEREOF, EACH OF THE TRUSTEE AND THE SECURED PARTIES, HERE BY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.

     7.14  Additional Grantors.  Each Subsidiary of the Company that is required
           -------------------
to become a party to this Agreement pursuant to Section 8.11 of the Credit
Agreement, shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 2 hereto.
<PAGE>

                                                                              19

     7.15  Releases.  (a)  At such time as the Loans and the other Secured
           --------
Obligations shall have been paid in full and the Commitments have been
terminated and the Holder Representatives on behalf of the Secured Parties have
so certified to the Trustee, the Collateral shall be released from the Liens
created hereby, and this Agreement and all obligations (other than those
expressly stated to survive such termination) of the Trustee and each Grantor
hereunder shall terminate, all without delivery of any instrument or performance
of any act by any party, and all rights to the Collateral shall revert to the
Grantors.  At the request and sole expense of any Grantor following any such
termination, the Trustee shall deliver to such Grantor any Collateral held by
the Trustee hereunder, and execute and deliver to such Grantor such documents as
such Grantor shall reasonably request to evidence such termination.  In
addition, the Trustee shall release the Collateral upon directions from the
Administrative Agent as provided in subsection 6.10 of the Trust Agreement.

     (b)   If any of the Collateral shall be sold, transferred or otherwise
disposed of by any Grantor in a transaction permitted by the Credit Agreement,
then the Trustee, 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 for the release of the Liens created hereby on such Collateral;
provided that the Company shall have delivered to the Trustee, at least ten
--------
Business Days prior to the date of the proposed release, a written request for
release identifying the relevant Grantor and the terms of the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with (i) a certification by the Company
stating that such transaction is in compliance with the Credit Agreement and the
other Loan Documents and (ii) a written confirmation by the Administrative Agent
that such release is permitted by the Credit Agreement. At the request and sole
expense of the Company, a Grantor shall be released from its obligations
hereunder in the event that all the Capital Stock of such Grantor shall be sold,
transferred or otherwise disposed of in a transaction permitted by the Credit
Agreement; provided that the Company shall have delivered to the Trustee, at
           --------
least ten Business Days prior to the date of the proposed release, a written
request for release identifying the relevant Grantor and the terms of the sale
or other disposition in reasonable detail, including the price thereof and any
expenses in connection therewith, together with (i) a certification by the
Company stating that such transaction is in compliance with the Credit Agreement
and the other Loan Documents and (ii) a written confirmation by the
Administrative Agent that such release is permitted by the Credit Agreement.

     (c)   The Trustee will, at any time, upon the written instruction of the
Administrative Agent, at the sole expense of the relevant Grantor, execute and
deliver to the relevant Grantor all releases or other documents reasonably
necessary or desirable for the release of the Liens created hereby on the
Collateral specified by the Administrative Agent in such instruction.

     (d)   By acceptance of the benefits hereof, each Secured Party acknowledges
and consents to the provisions of this subsection 7.15, agrees that the Trustee
shall incur no liability whatsoever to any Secured Party for any release
effected by the Trustee in accordance with this subsection 7.15 and agrees that
the Administrative Agent shall incur no liability whatsoever to any Secured
Party for any release directed or consented to by it in accordance with the
Credit Agreement.
<PAGE>

                                                                              20

     7.16  Foreign Issuers.  Notwithstanding any provision of this Agreement, to
           ---------------
the extent that the Trustee or the Administrative Agent is granted a security
interest, as security for the Secured Obligations, in any Pledged Securities
issued by any Foreign Subsidiary pursuant to another pledge agreement or other
security instrument acceptable to the Administrative Agent, the provision of
such other pledge agreement or security instrument shall control with respect to
such Pledged Securities.
<PAGE>

     IN WITNESS WHEREOF, each of the undersigned has caused this Pledge
Agreement to be duly executed and delivered as of the date first above written.

                              FEDERAL-MOGUL CORPORATION

                              By: ____________________
                              Name:
                              Title:
<PAGE>

                              FEDERAL-MOGUL IGNITION COMPANY
                              CARTER AUTOMOTIVE COMPANY, INC.
                              FEDERAL-MOGUL U.K. HOLDINGS INC.

                              By: ____________________
                              Name:
                              Title:<PAGE>   1
                                                                   EXHIBIT 10.31

                       PLANET POLYMER TECHNOLOGIES, INC.
                               EXECUTIVE AGREEMENT

        THIS EXECUTIVE AGREEMENT (the "Agreement") is made and entered into this
17th day of October, 2000, by and between PLANET POLYMER TECHNOLOGIES, INC., a
California corporation (the "Company"), and RICHARD C. BERNIER, an individual
("Executive").

                                    RECITALS

        A. The Company desires to be assured of the association and services of
Executive for the benefit of the Company.

        B. Executive is willing and desires to be employed by the Company as the
Company's President and Chief Executive Officer, and the Company is willing to
employ Executive in the aforementioned capacity, upon the terms, covenants and
conditions hereinafter set forth.

        C. The Company's Board of Directors (the "Board") is willing to appoint
Executive and Executive is willing and desires to be appointed, as a director
onto the Board, until the holding of the shareholders' annual meeting, in which
case, the Company shall make reasonable efforts to promote the election of
Executive as a director at such annual meeting.

                                    AGREEMENT

        NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:

        1. Term.

               a. Employment Term. The Company hereby employs Executive and
Executive hereby accepts employment with the Company for a period beginning on
the date of this Agreement and ending on December 31, 2002 (the "Initial Term").
This Agreement may be terminated earlier as hereinafter provided in Section 5.

               b. Extension of Employment Term. The Company has the exclusive
option to extend Executive's employment with the Company beyond the Initial Term
for additional one-year terms. Any one-year term of employment after the Initial
Term shall be hereinafter referred to as the "Extended Term."

               c. Requisite Notice. The Company shall give Executive at least
one hundred eighty-three (183) calendar days' notice of its intent not to extend
Executive's employment with the Company beyond the Initial Term, and any
Extended Term, if any, before the expiration of Executive's employment with the
Company ("Requisite Notice"). Subject to Section 5 below, Executive's employment
with the Company shall not terminate until the Company has given

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Requisite Notice to Executive. Upon Executive's receipt of Requisite Notice (the
"Notice Date"), Executive's employment with the Company shall terminate one
hundred eighty-three (183) calendar days from the Notice Date.

        2. Compensation.

               a. Signing Bonus. Upon the parties' execution of this Agreement,
the Company shall issue to Executive a grant of 10,000 shares of the Company's
common stock (the "Common Stock"), subject to the usual tax withholdings
practice of the Company.

               b. Salary. As compensation for the services to be performed
hereunder, Executive shall receive a salary at the rate of $205,000.00 per
annum, payable in such installments and pay periods as shall comport with the
Company's regular business practices, during the Employment Term. Executive may
also receive such annual increases in his salary as may be determined by the
Board in its sole discretion at its annual Board meeting or at such time as the
Board may so determine.

               c. Incentive Bonus Plan. Executive shall be entitled to receive a
bonus from the Company in the form as set forth below in subsections (1) and
(2):

                      (1) Year 1. Following the Company's Fiscal Year Ending
December 31, 2001, Executive shall be entitled to a year-end bonus of 2.5% of
each dollar of improvement in the Company's net losses (i.e., dollar decreases
in the Company's net losses) in Fiscal Year Ending December 31, 2001, as
compared to the Company's Fiscal Year Ending December 31, 2000, which shall be
paid immediately after the final determination of the Company's 2001 financial
results.

                      (2) Year 2 and Beyond. Following the Company's Fiscal Year
Ending December 31, 2002, Executive shall be entitled to a year-end bonus of
2.5% of the Company's yearly EBT (earnings before tax), which shall be paid
immediately after the final determination of the Company's financial results for
the Company's previous fiscal year.

               d. Stock Options.

                      (1) Granting of Stock Options. Executive shall receive
stock options to purchase up to 160,000 shares of the Common Stock (the "Stock
Options") under the Company's 2000 Stock Incentive Plan (the "2000 Plan"). The
strike price of the Stock Options shall be the price of the Common Stock on the
date of this Agreement. The Stock Options shall be subject to a vesting schedule
as follows:

                             (a) Starting January 1, 2001, 10,000 shares of the
Common Stock issuable under the Stock Options shall fully vest after the
completion of each fiscal quarter of the Company, not to exceed 40,000 shares in
the aggregate in any one fiscal year of the Company, until all of the Stock
Options have fully vested.

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                             (b) If Executive's employment term is terminated
any time before the completion of a fiscal quarter, subject to this Agreement
and to the 2000 Plan, Executive shall be entitled to receive a pro-rated amount
of Stock Options, pro-rated on a daily basis, for the fiscal quarter in which
employment is terminated.

               e. Moving Expenses. Executive shall be entitled to $13,000 for
moving expenses, and reimbursement of interim living expenses of up to $3,000
per month until January 31, 2001, to cover hotels, meals, mileage, etc., upon
Executive's furnishing of appropriate receipts to the Company.

               f. Benefits.

                      (1) Fringe Benefits. Executive may be entitled to normal
executive fringe benefits which the Company may otherwise provide to its other
employees, such as medical, dental and vision care, life insurance, long term
disability group insurance, as well as any other benefits currently offered or
proposed to be offered by the Company to its employees.

                      (2) Vacation Time. Executive shall be entitled to vacation
time of 1.66 days per month of employment, up to twenty (20) days each year,
without loss of compensation. In the event that Executive is unable for any
reason to take the total amount of vacation time authorized herein during any
year, he shall be allowed to rollover the remainder of any unused vacation time
to the following year, not to exceed an aggregate of thirty (30) days of
vacation time for any single year.

                      (3) Airline Clubs. Executive is entitled to be enrolled in
up to two (2) annual memberships in any available airline/frequent flyer club.

               g. Taxes.

                      (1) The Company shall have the right to deduct or withhold
from the compensation due Executive hereunder any and all sums required for
federal income and social security taxes and all state or local taxes now
applicable or that may be enacted and become applicable in the future.

                      (2) Executive agrees to be governed by existing or new tax
code decisions regarding restrictions to executive salary. In the event that any
portion of the compensation paid by the Company to Executive is disallowed as an
income tax deduction, under applicable Internal Revenue Code sections and the
regulations promulgated thereunder, on an income tax return of the Company,
Executive agrees to immediately repay to the Company the full amount of any such
portion.

        3. Scope of Duties and Obligations of Executive.

               a. Duties. Executive shall serve as the President and Chief
Executive Officer of the Company (and Director, if elected). In his capacity as
President and Chief Executive

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Officer (and Director, if elected), Executive shall do and perform all services,
acts, or things necessary or advisable to manage and conduct the business of the
Company and shall be specifically responsible for the strategic direction and
product management of the Company. Such duties shall be exercised subject to the
control and supervision of the Board of Directors of the Company.

               b. Consent of Board. Executive shall not, without specific
approval of the Company's Board of Directors, do or contract to do any of the
following above the Board approved applicable business plan budget item for the
current fiscal year:

                      (1) Borrow on behalf of the Company during any one fiscal
year an amount in excess of $10,000.

                      (2) Permit any customer of the Company to become indebted
to the Company in an amount in excess of $100,000.

                      (3) Purchase capital equipment for the Company in excess
of $20,000.

                      (4) Sell any single capital asset of the Company having a
market value in excess of $10,000 or a total of capital assets during a fiscal
year having a market value in excess of $20,000.

                      (5) Terminate the services of any other officer of the
Company or hire any replacement of any officer whose services have been
terminated.

                      (6) Commit the Company to the expenditure of more than
$20,000 in the development and sale of new products or services.

               c. Scope of Duties. Executive hereby agrees to devote his full
time, abilities and energy to the faithful performance of duties assigned to him
and to the promotion and forwarding of the business affairs of the Company, and
not to divert any business opportunities from the Company to himself or to any
other person or business entity.

               d. Corporate Opportunities. Executive shall not, during the term
of this Agreement, be engaged in any other business activity without the prior
consent of the Board of Directors of the Company; provided, however, that this
restriction shall not be construed as preventing Executive from investing his
personal assets in passive investments in business entities which are not in
competition with the Company or its affiliate.

               e. Non-solicitation. For a period of two (2) years after
termination of Executive's employment by the Company, Executive agrees not to
utilize confidential information to solicit, or cause to be solicited, any
customers of the Company for purposes of promoting or selling any products or
services competitive with those of the Company. In addition, for a period of two
(2) years after termination of Executive's employment with the Company,
Executive hereby agrees not to solicit, or cause to be solicited, away from the

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Company any managerial level employees of the Company for purposes of having
such employees engage or participate in any business enterprise, or become
employed by anyone, in competition with the Company.

               f. Inevitable Disclosure. Furthermore, in order to protect the
Confidential Information of the Company, Executive hereby agrees not to accept
any employment or engage in any activities competitive with the Company for a
period of two (2) years after termination of employment by the Company, if the
Board of Directors reasonably determine that the loyal and complete fulfillment
of the duties of the competitive employment or activities would inherently call
upon Executive to reveal any of the Confidential Information of the Company to
which Executive had access during the Employment Term.

               g. Use of Name. The Company shall have the right to use the name
of Executive as part of the trade name or trademark of the Company if it shall
be deemed advisable to do so at any time, in the Company's sole discretion. Any
trade name or trademark in which the name of Executive is a part, which is
adopted by the Company during the employment of Executive, may be used
thereafter by the Company for as long as the Company deems advisable, in its
sole discretion.

                      (1) Executive shall not, either during the term of this
Agreement or at any time thereafter, use or permit the use of his name in the
trade name or trademark of any other enterprise if that other enterprise is
engaged in a business similar in any respect to that conducted by the Company,
unless that trade name or trademark clearly indicates that the other enterprise
is a separate entity entirely distinct from and not to be confused with the
Company and unless that trade name or trademark excludes any words or symbol
stating or suggesting a prior or current affiliation or connection by that other
enterprise or its employees with the Company.

               h. Competing Business. During the term of this Agreement,
Executive shall not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder, corporate officer, director,
or in any other individual or representative capacity, engage or participate in
any business that is in competition in any manner whatsoever with the business
of the Company.

               i. Indemnification. Executive shall indemnify and hold the
Company harmless from all liability for loss, damage, or injury to persons or
property resulting from the negligence or misconduct of Executive, not otherwise
covered under the Company's general liability and/or directors' and officers'
liability insurance policies.

        4. Intellectual Property.

               a. Confidentiality. Other than in the performance of his duties
hereunder, Executive agrees not to disclose or otherwise cause to be
communicated any Confidential Information to any person, firm or corporation,
either during the term of his employment by the Company or at any time
thereafter.

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               b. Definition. For the purposes of this Agreement, the term
"Confidential Information" shall mean information, material and trade secrets
proprietary to the Company or to any related or affiliated entity or designated
as confidential by the Company, whether or not owned or developed by the
Company, which Executive develops, or which Executive may obtain knowledge of or
access to, through or as a result of, Executive's relationship with the Company
or with any related or affiliated entity (including information conceived,
originated, discovered or developed in whole or in part by Executive). Without
limiting the generality of the foregoing, Confidential Information shall
include, but is not limited to, the following types of information and other
information of a similar nature (whether or not reduced to writing or still in
development): discoveries, ideas, inventions, concepts, software in various
states of development, designs, drawings, specifications, techniques, models,
data, source code, object code, documentation, diagrams, flow charts, research,
economic and financial analyses, developments, processes, procedures,
"know-how," marketing techniques and materials, marketing and development plans,
customer names and other information related to customers, price lists, pricing
policies, financial information and employee files. Confidential Information
shall include information constituting a "trade secret" as defined in California
Civil Code Section 3426.1. Confidential Information shall also include any
information described above which the Company obtains from another party and
which the Company treats as proprietary or designates as Confidential
Information, whether or not owned or developed by the Company. INFORMATION
PUBLICLY KNOWN THAT IS GENERALLY EMPLOYED BY THE TRADE AT OR AFTER THE TIME
EXECUTIVE FIRST LEARNS OF SUCH INFORMATION, OR GENERIC INFORMATION OR KNOWLEDGE
WHICH EXECUTIVE WOULD HAVE LEARNED IN THE COURSE OF SIMILAR EMPLOYMENT OR WORK
ELSEWHERE IN THE TRADE, SHALL NOT BE DEEMED PART OF THE CONFIDENTIAL
INFORMATION.

               c. Ownership. Executive hereby agrees that all copyrights,
trademarks, trade names, patents, patent applications, know-how, documents,
reports, plans, proposals, marketing and sales plans, client lists, client files
and books, videos, writings and other materials made by him or by the Company
are the property of the Company and shall not be used by him in any way adverse
to the Company's interests. Executive shall not deliver, reproduce or in any way
allow such documents or things to be delivered or used by any third party
without specific direction or consent of the Board of Directors of the Company.
Executive hereby assigns to the Company any rights which he may have in any such
trade secret or proprietary information; provided, however, that such assignment
does not apply to any right which qualifies fully under California Labor Code
Section 2870.

               d. Right of First Refusal. Should Executive discover, prepare,
formulate or develop anything that otherwise would be considered a trade secret
or proprietary information owned by the Company pursuant to this Sections 4,
except that:

                      (1) it was developed entirely on Executive's own time;

                      (2) no equipment, supplies, facility or trade secret of
the Company was used in its development; and

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                      (3) it does not relate to the then current business or
actual or demonstrably anticipated research or development of the Company in
said business; and

                      (4) it does not result from any work performed by
Executive for the Company,

then the Executive shall own such items ("Executive's Invention"). Executive
hereby grants to the Company a right of first refusal to negotiate with
Executive for the commercial exploitation of Executive's Invention and hereby
agrees to negotiate with the Company in good faith. Should the Company not
exercise its right to negotiate, or should the parties not reach agreement
within three (3) months, then Executive may exploit Executive's Invention in
such manner as determined by Executive.

               e. Unfair Competition.

                      (1) Executive specifically agrees that he shall not
misuse, misappropriate, or disclose or otherwise cause to be communicated, any
trade secrets to any other person or use them in any way, either during the term
of this Agreement or at any other time thereafter, subject to this Section 4,
except as is required in the course of his employment hereunder.

                      (2) Executive acknowledges and agrees that the sale or
unauthorized use or disclosure of any of the Company's trade secrets obtained by
Executive in the course of his employment under this Agreement, including
information concerning the Company's current or any future and proposed work,
services, or products, the facts that any such work, services or products are
planned, under consideration, or in production, as well as any descriptions
thereof, constitute unfair competition. Executive promises and agrees not to
engage in any unfair competition with the Company, during the term of this
Agreement or at any time thereafter.

                      (3) Executive further agrees that all files, records,
documents, writings, drawings, specifications, equipment and similar items
relating to the Company's business, whether prepared by Executive or others, are
and shall remain exclusively the property of the Company and that they shall be
removed from the premises of the Company only with the express prior written
consent of the Company's Board of Directors.

        5. Termination. The Company's employment of Executive may be terminated
at any time during or after the Initial Term or any Extended Term (sometimes
collectively or individually referred to as the "Employment Term") "for cause"
or "without cause." For termination for cause, all of the compensation and
benefits to which Executive was entitled, including, without limitation, the
vesting of the Stock Options, shall cease upon the effective date of such
termination.

               a. Termination for Cause. The Company may immediately and
unilaterally, terminate the Employment Term and this Agreement "with cause" at
any time during or after the Employment Term upon written notice to Executive
setting forth the reason(s) for such

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immediate termination. Notwithstanding the foregoing, if the Company elects to
terminate the Employment Term due to a material breach by Executive of this
Agreement, the Company shall first provide Executive with written notice stating
the nature of the breach by Executive and giving Executive fifteen (15) days in
which to cure such breach, provided that such breach is curable. For purposes of
this Agreement, the term "cause" shall mean any and all of the foregoing:

                      (1) Executive's willful and repeated failure to comply
with the lawful written directions of the Company's Board of Directors;

                      (2) Executive's gross negligence or willful misconduct in
the performance of duties to the Company;

                      (3) Executive's commission of any act of fraud with
respect to the Company or the Company's business;

                      (4) Executive's conviction of or being formally charged
with the commission of any felony;

                      (5) any misappropriation and/or intentional and
unauthorized disclosure of the Company's confidential and/or proprietary
information;

                      (6) Executive's use of drugs or any illegal substance, or
his use of alcohol in any manner that interferes with the performance of his
duties under this Agreement.

                      (7) Executive's chronic absence from work for reasons
other than illness.

               b. Termination Without Cause.

                      (1) This Agreement shall be terminated upon the death of
Executive.

                      (2) This Agreement shall be terminated at the will of the
Company.

                      (3) The Company reserves the right to terminate this
Agreement within three (3) months after Executive suffers any physical or mental
disability that would otherwise prevent the performance of his duties under this
Agreement. Such a termination shall be effective by giving ten (10) days written
notice of termination to Executive.

                      (4) Termination under this section shall not be considered
"for cause" for purposes of this Agreement. The effective date of termination
under this subsection b. of Section 5 shall be sometimes referred to as the
"Termination Date".

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               c. Effective Merger, Transfer of Assets, or Dissolution.

                      (1) This Agreement shall be terminated by any voluntary or
involuntary dissolution of the Company resulting from either a merger or
consolidation in which the Company is not the consolidated or surviving
corporation, or a transfer of all or substantially all of the assets of the
Company.

                      (2) For purposes of this subsection, "merger" or
"consolidation" shall also include the following:

                             (a) Any reverse merger in which the Company is the
surviving entity, but in which fifty percent (50%) or more of the Company's
outstanding voting stock is transferred to holders different from those who held
the securities immediately prior to the merger; and

                             (b) An acquisition by any person or related group
of persons (other than the Company or a person that directly or indirectly
controls, is controlled by or is under common control with, the Company) of
ownership of more than fifty percent (50%) of the Company's outstanding Common
Stock, pursuant to a tender or exchange offer (other than a tender or exchange
offer approved by the Board of Directors of the Company and the Board of
Directors determines in its sole discretion that such offer shall not be
considered a "merger" or "consolidation").

                      (3) Termination under this section shall not be considered
"for cause" for the purposes of this Agreement.

        6.  Consulting Agreement.

               a. In the event that Executive's employment is terminated during
the term of this Agreement by the Company without cause pursuant to Section 5b
hereof, it is mutually agreed by the parties hereto that they shall execute and
enter into a written Consulting Agreement, the key terms of which are as
follows:

                      (1) Duration. The Consulting Agreement between the Company
and Executive shall be for the shorter of (i) a term of twenty-four (24) months
from the Termination Date or (ii) the number of months remaining in the
Employment Term (the "Consulting Term").

                      (2) Consulting Services. During the Consulting Term,
Executive agrees that he shall provide consulting services and input to the
Company as the Company may request. Executive shall provide such consulting
services as an independent contractor and shall not be considered an employee of
the Company. The parties understand and agree that Executive's provision of
consulting services to the Company during the Consulting Term may require that
he be provided with or be privy to confidential and/or proprietary information
of the Company.

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                      (3) Compensation. During the Consulting Term, the Company
shall pay to Executive a monthly consulting fee equal to what Executive was
receiving as salary, excluding bonuses and incentives, at the time of the
termination of his employment.

                      (4) Vesting of Stock Options. During the Consulting Term,
Executive's Stock Options shall continue to vest as provided for in the
Agreement.

                      (5) Benefits. As additional consideration for the
execution of the Consulting Agreement, Executive shall be entitled to
reimbursement of monies expended during the Consulting Term to continue
receiving benefits previously received from the Company during the Employment
Term.

                      (6) Outside Activities. During the Consulting Term,
Executive may accept other employment and/or consulting work (the "Outside
Activities"), so long as the Outside Activities do not involve Executive
performing work for or in conjunction with any person or entity that competes
with the business or the proposed business of the Company in any capacity
similar to the capacity in which Executive performed work for the Company. The
parties to the Agreement and to the Consulting Agreement agree that the
aforementioned restriction is necessary to protect the Company's confidential
and/or proprietary information, particularly given the fact that the consulting
services to be rendered by Executive may require that Executive receive or be
privy to confidential and/or proprietary information of the Company. Executive
agrees that during the Consulting Term, he shall notify the Company in writing
if he is considering participating in the Outside Activities, in advance of
doing so, in order that the Company may ascertain whether Executive's
participation in the Outside Activities would involve Executive's performance of
work for a competitor in any capacity similar to that in which Executive
performed work for the Company.

                      (7) Release. Executive agrees to release the Company from
any and all claims which Executive may have had against the Company and which
had arisen as of the Termination Date.

                      (8) Confidentiality. In addition to the applicable
provisions of the Agreement, Executive agrees not to disclose or otherwise cause
to be communicated any confidential information and/or proprietary information
of the Company to any person, firm or corporation, either during the Consulting
Term or at any time thereafter.

        7. Injunctive Relief. The Company and Executive hereby acknowledge and
agree that (i) the services to be performed under this Agreement are of a
special, unique, extraordinary and intellectual character that gives them
peculiar value, the loss of which cannot be reasonably or adequately compensated
in damages in an action at law and (ii) any default under Section 4 above will
cause damage to the Company in an amount difficult to ascertain. Accordingly, in
addition to any other relief to which the Company may be entitled, the Company
shall be entitled to such injunctive relief as may be ordered by any court of
competent jurisdiction including, but not limited to, an injunction restraining
any violation of Section 4 above and without the proof of actual damage.

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        8. Benefit and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors. The
rights of the Company and Executive hereunder may not be assigned.

        9. Severability. Should any provision of this Agreement or application
thereof be declared invalid, void or unenforceable for any reason, the validity
and binding effect of the remaining portions shall not be affected and the
remaining portions of this Agreement shall remain in full force and effect as if
this Agreement had been executed with the invalid, void or unenforceable
provision eliminated. To this end, the provisions of this Agreement are
severable.

        10. Governing Law. This Agreement is to be governed and construed in
accordance with the laws of the State of California. Venue shall be proper for
all purposes in San Diego County, California.

        11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be the same documents. Such counterparts may be executed and delivered in
person or via facsimile.

        12. Entire Agreement. This Agreement constitutes the entire agreement
and understanding of the parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or be liable for any alleged
representation, promise, inducement, or statement not so set forth herein.

        13. Modification. This Agreement may be modified, amended, superseded,
or cancelled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
party or parties to be bound by any such modification, amendment, supersession,
cancellation, or waiver.

        14. Arbitration; Attorneys' Fees and Costs.

               (1) Except as otherwise provided by law, any controversy or claim
arising out of or relating to this Agreement, the relationship created hereby,
the breach or termination thereof, or otherwise, shall be settled by arbitration
in accordance with the Rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. By agreeing to arbitration under this
paragraph, both Executive and the Company understand that they are agreeing to
have any dispute relating to Executive's employment decided by a neutral
arbitrator, and as to those disputes decided by the neutral arbitrator,
Executive and the Company are giving up their right to a jury or court trial
and, in addition, Executive and the Company waive any right to seek punitive
damages.

               (2) In any arbitration, the prevailing party shall be entitled to
recover from the losing party its reasonable costs and actual attorneys' fees.
The "prevailing party" means the

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party determined by the arbitrator to have most nearly prevailed, even if such
party did not prevail in all matters, not necessarily the one in whose favor a
judgment is rendered.

        15. Waivers; Remedies. The failure of any party to exercise any of its
rights hereunder or to enforce any of the terms or conditions of this Agreement
on any occasion shall not constitute or be deemed a waiver of that party's
rights thereafter to exercise any rights hereunder or to enforce any and every
term and condition of this Agreement. Any remedies provided for herein are
cumulative, and not in substitution for any other remedy any party may have at
law or in equity. No delay on the part of any party in exercising any right,
power or privilege granted hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof.

        16. Representation. The parties hereto acknowledge that each has read
this Agreement, that each fully understands its rights, privileges and duties
under this Agreement, and that each enters into this Agreement fully and
voluntarily. Executive further acknowledges he has had the opportunity to
consult with an attorney of his choice who is completely independent of and in
no way connected with the Company, to explain the terms of this Agreement and
the consequences of signing it.

        17. Headings. All paragraph headings herein are inserted for convenience
only and shall not modify or affect the construction or interpretation of any
provision of this Agreement.

        18. Further Assurances. The parties agree that, from time to time
hereafter, and upon request, each of them will execute, acknowledge and deliver
such documents and other instruments and shall perform such acts and deeds as
may be reasonably required or desirable to effectuate the transactions
contemplated by this Agreement or to otherwise carry out the terms and
conditions of this Agreement.

        IN WITNESS WHEREOF, the parties hereto have caused this Executive
Agreement to be executed as of the date first set forth above.

"EXECUTIVE"                            "COMPANY"

/s/ RICHARD C. BERNIER                 Planet Polymer Technologies, Inc.,
-----------------------------          a California corporation
    Richard C. Bernier

                                       By: /s/ THOMAS A. LANDSHOF
                                           -------------------------------------
                                           Thomas A. Landshof, Director
                                           and Chairman of the
                                           Compensation Committee

                                       12

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