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                              AMENDED AND RESTATED

                   RECEIVABLES SALE AND CONTRIBUTION AGREEMENT

                            Dated as of July 1, 1999

                                     Between

                           FEDERAL-MOGUL CORPORATION,

                                    as Parent

                                       and

                       FEDERAL-MOGUL FUNDING CORPORATION,
                                    as Buyer

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                               TABLE OF CONTENTS

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                                                                            ----

ARTICLE I. AMOUNTS AND TERMS OF THE PURCHASES..................................2

Section 1.1       Purchases of Receivables.....................................2
Section 1.2       Payment for the Purchases....................................3
Section 1.3       Purchase Price Credit Adjustments............................5
Section 1.4       Payments and Computations, Etc...............................5
Section 1.5       Transfer of Records..........................................5
Section 1.6       Characterization.............................................6

ARTICLE II. REPRESENTATIONS AND WARRANTIES.....................................6

Section 2.1       Parent's Representations and Warranties......................6

ARTICLE III. CONDITIONS OF PURCHASES..........................................10

Section 3.1       Conditions Precedent to Initial Purchase....................10
Section 3.2       Conditions Precedent to All Purchases.......................10

ARTICLE IV. COVENANTS 11

Section 4.1       Affirmative Covenants of Parent.............................10
Section 4.2       Negative Covenants of Parent................................15

ARTICLE V. ADMINISTRATION AND COLLECTION......................................16

Section 5.1       Designation of Sub-Servicer.................................16

ARTICLE VI. EVENTS OF PURCHASE AND SALE TERMINATION...........................17

Section 6.1       Events of Purchase and Sale Termination.....................17
Section 6.2       Remedies....................................................18

ARTICLE VII. INDEMNIFICATION..................................................19

Section 7.1       Indemnities by the Parent...................................19
Section 7.2       Other Costs and Expenses....................................20

ARTICLE VIII. MISCELLANEOUS...................................................20

Section 8.1       Waivers and Amendments......................................20
Section 8.2       Notices.....................................................21
Section 8.3       Protection of Buyer's Interests.............................21
Section 8.4       Confidentiality.............................................22
Section 8.5       Bankruptcy Petition.........................................22
Section 8.6       Limitation of Liability.....................................23
Section 8.7       CHOICE OF LAW...............................................23
Section 8.8       CONSENT TO JURISDICTION.....................................23
Section 8.9       WAIVER OF JURY TRIAL........................................23

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Section 8.10      Binding Effect; Assignability...............................24
Section 8.11      Subordination...............................................24
Section 8.12      Integration; Survival of Terms..............................24
Section 8.13      Counterparts; Severability..................................24
exhibit I  DEFINITIONS........................................................26
exhibit ii  CHIEF EXECUTIVE OFFICE OF THE PARENT; LOCATIONS OF RECORDS;
                     TRADE NAMES; FEDERAL EMPLOYER IDENTIFICATION NUMBER......35
EXHIBIT III  COLLECTION ACCOUNTS..............................................36
EXHIBIT IV  [RESERVED]........................................................38
EXHIBIT V  FORM OF COLLECTION ACCOUNT AGREEMENT...............................39
EXHIBIT VI  CREDIT POLICIES...................................................40
EXHIBIT VII  [RESERVED].......................................................48
EXHIBIT VIII  FORM OF SETTLEMENT DATE STATEMENT...............................49
EXHIBIT IX  FORM OF SUBSCRIPTION AGREEMENT....................................50
EXHIBIT X  FORM OF SUBORDINATED NOTE..........................................56
SCHEDULE A ...................................................................61

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     THIS  AMENDED AND RESTATED  RECEIVABLES  SALE AND  CONTRIBUTION  AGREEMENT,
dated  as of  July 1,  1999,  is by and  between  FEDERAL-MOGUL  CORPORATION,  a
Michigan corporation (the "Parent" or "Federal-Mogul") and FEDERAL-MOGUL FUNDING
CORPORATION, a Michigan corporation (the "Buyer"), which amends and restates the
Amended and Restated  Receivables Sale and Contribution  Agreement,  dated as of
April 19, 1999, by and among Federal-Mogul,  CARTER AUTOMOTIVE COMPANY,  INC., a
Delaware  corporation  ("Carter"),  FEDERAL-MOGUL  CANADA  LIMITED,  a  Canadian
corporation ("Federal-Mogul Canada"), FEDERAL-MOGUL IGNITION COMPANY, a Delaware
corporation,  and the Buyer, which amended and restated the Receivables Sale and
Contribution   Agreement,   dated  as  of  November  20,  1998,   by  and  among
Federal-Mogul,  Carter,  Federal-Mogul  Canada  and the  Buyer.  Unless  defined
elsewhere  herein,  capitalized  terms  used in this  Agreement  shall  have the
meanings assigned to such terms in Exhibit I hereto.

                             PRELIMINARY STATEMENTS

          The  Parent  now  owns,  and from  time to time  hereafter  will  own,
     Receivables.  The Parent  wishes to sell and  assign to the Buyer,  and the
     Buyer wishes to purchase from the Parent,  all of the Parent's right, title
     and interest in and to its Receivables now owned and existing and hereafter
     arising.

          The  Parent  and the Buyer  believe  that it is in their  mutual  best
     interests for the Parent to sell its  Receivables  to the Buyer and for the
     Buyer to purchase such Receivables.

          The Buyer shall, on each applicable Purchase Date, purchase all of the
     Parent's right,  title and interest in and to its  Receivables  existing on
     such date and all Related Security and Collections associated therewith.

          The Parent and the Buyer intend the transactions  contemplated  hereby
     to be true sales of its Receivables from the Parent to the Buyer, providing
     the Buyer with the full benefits of ownership of such Receivables,  and the
     Parent and the Buyer do not  intend  these  transactions  to be, or for any
     purpose to be characterized as, loans from the Buyer to the Parent.

          Upon each purchase of Receivables from the Parent, the Buyer will sell
     undivided  interests  therein and in the  associated  Related  Security and
     Collections  pursuant  to that  certain  Amended  and  Restated  Receivable
     Interest Purchase  Agreement dated as of July 1, 1999 (as the same may from
     time to time  hereafter  be amended,  supplemented,  restated or  otherwise
     modified,   the  "Purchase   Agreement")   among  the  Buyer,   as  seller,
     Federal-Mogul,   as  Servicer,  Falcon  Asset  Securitization   Corporation
     ("Falcon")  and  International   Securitization   Corporation  ("ISC"),  as
     Conduits,  the  financial  institutions  from time to time party thereto as
     "Investors"  and The First National Bank of Chicago or any successor  agent
     appointed under Article X of the Purchase  Agreement,  as agent for Falcon,
     ISC and such Investors (in such capacity, the "Agent").
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                                   ARTICLE I.
                       AMOUNTS AND TERMS OF THE PURCHASES

     Section 1.1 Purchases of Receivables.

     (a)  Effective  on  the  date  of  the  initial  Purchase   hereunder,   in
consideration  for the  Purchase  Price and upon the terms  and  subject  to the
conditions  set forth  herein,  the Parent does hereby sell,  assign,  transfer,
set-over and  otherwise  convey to the Buyer,  without  recourse  (except to the
extent expressly  provided herein),  and the Buyer does hereby purchase from the
Parent,  all of the Parent's right, title and interest in and to all Receivables
existing as of the date of such initial Purchase and all Receivables  thereafter
arising,  together, in each case, with all Related Security relating thereto and
all Collections and other proceeds thereof; provided,  however, that in no event
shall the Buyer be obligated  to  purchase,  or the Parent be obligated to sell,
any Receivable arising after the Termination Date; provided, further, that in no
event shall the Buyer be obligated  to  purchase,  or the Parent be obligated to
sell,  any Receivable  arising on or after the date that the related  Originator
ceases to be a  wholly-owned  subsidiary  of  Federal-Mogul.  On the date of the
initial Purchase,  the Buyer shall acquire all of the Parent's right,  title and
interest in and to all  Receivables  existing as of the close of business on the
Business  Day  immediately  prior to such  Purchase,  together  with all Related
Security  relating  thereto and all Collections and other proceeds  thereof.  On
each Business Day  thereafter  through and including the  Termination  Date, the
Buyer shall acquire all of the Parent's right,  title and interest in and to all
Receivables which were not previously  purchased by the Buyer hereunder upon the
creation  of such  Receivables  (together  with all  Related  Security  relating
thereto and all  Collections  and other  proceeds  thereof),  provided  that the
acquisition  by the Buyer of such  right,  title and  interest  of the Parent in
connection with each Purchase  hereunder is conditioned  upon and subject to the
Parent's  receipt of the Purchase Price therefor in accordance  with Section 1.2
below. In connection with consummation of any Purchase hereunder,  the Buyer may
request that the Parent deliver,  and the Parent shall deliver,  such approvals,
opinions,  information,  reports or  documents as the Buyer and/or the Agent (as
the Buyer's assignee) may reasonably request.

     (b) It is the  intention  of the  parties  hereto  that  each  Purchase  of
Receivables  made hereunder shall  constitute a "sale of accounts" (as such term
is used in Article 9 of the UCC) (for  non-tax  purposes),  which sales are (for
non-tax  purposes)  absolute and irrevocable and provide the Buyer with the full
benefits of ownership of the Receivables.  Except for the Purchase Price Credits
owed pursuant to Section 1.3 hereof, each sale of Receivables  hereunder is made
without recourse to the Parent; provided,  however, that (i) the Parent shall be
liable to the Buyer for all  representations,  warranties  and covenants made by
the  Parent  individually  and as  Sub-Servicer,  pursuant  to the  terms of the
Transaction  Documents to which the Parent and the  Sub-Servicer is a party, and
(ii) such sale (for non-tax purposes) does not constitute and is not intended to
result in an assumption by the Buyer or any assignee  thereof of any  obligation
of the Parent,  any other  Originator or any other Person  arising in connection
with the Receivables, the related Contracts and/or other Related Security or any
other  obligations  of the  Parent  or any  other  Originator.  In  view  of the
intention of the parties hereto that the Purchases of Receivables made hereunder
shall  constitute sales (for non-tax  purposes) of such Receivables  rather than
loans secured thereby, on or prior to the date hereof the Parent agrees to mark,
and shall  cause each other  Originator  to mark,  its  master  data  processing
records relating to the Receivables with a legend acceptable to the Buyer and to
the Agent (as the Buyer's  assignee),  evidencing  that the

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Buyer has purchased  such  Receivables as provided in this Agreement and to note
in its  financial  statements  that its  Receivables  have been  assigned to the
Buyer. Upon the request of the Buyer or the Agent (as the Buyer's assignee), the
Parent shall execute and file, and shall cause each other  Originator to execute
and file, such financing or continuation  statements,  or amendments  thereto or
assignments  thereof, and such other instruments or notices, as may be necessary
or appropriate  to perfect and maintain the perfection of the Buyer's  ownership
interest in the Purchased  Assets,  or as the Buyer or the Agent (as the Buyer's
assignee) may reasonably request.

     Section 1.2 Payment for the Purchases.

     (a) The Purchase  Price for the initial  Purchase of  Receivables  shall be
payable in full by the Buyer to the Parent on the date of such initial Purchase,
and shall be paid to the Parent in the following manner:

          (i) by delivery of immediately available funds, to the extent of funds
     made available to the Buyer in connection  with its  subsequent  sale of an
     interest  in  such   Receivables  to  the  Purchasers  under  the  Purchase
     Agreement;  provided  that,  a  portion  of such  funds  shall be offset by
     amounts  owed by the  Parent to the Buyer on  account  of the  issuance  of
     equity in the manner contemplated in the Subscription  Agreement and having
     a total value of not less than $14,250,000, and

          (ii) the balance with the proceeds of a Subordinated Loan.

The Purchase Price for each Purchase after the initial Purchase shall become due
and owing in full by the Buyer to the Parent or its designee on the date of such
Purchase  (except that the Buyer may, with respect to any such Purchase,  offset
against  such  Purchase  Price  any  amounts  owed by the  Parent  to the  Buyer
hereunder and which have become due but remain  unpaid) and shall be paid to the
Parent in the manner provided in the following paragraphs (b), (c) and (d).

     (b) With respect to any Purchase after the initial Purchase  hereunder,  on
each Settlement  Date, the Buyer shall pay to the  Sub-Servicer the Sub-Servicer
Fee and to the Parent the Purchase Price for each Purchase  during the preceding
Collection Period as follows:

          first,  by delivery of immediately  available  funds, to the extent of
     funds  available  to the Buyer from its  subsequent  sale of an interest in
     such  Receivables to the Agent for the benefit of the Purchasers  under the
     Purchase  Agreement  or  otherwise;  provided  that  Buyer  shall make such
     payments  of such  Sub-Servicer  Fee and  Purchase  Price  by  delivery  of
     immediately available funds to the Parent;

          second,  by borrowing  from the Parent a  subordinated  revolving loan
     (each,  a  "Subordinated  Loan") from the Parent in an amount not to exceed
     the lesser of (i) the remaining  unpaid  portion of such Purchase Price and
     (ii) the maximum Subordinated Loan that could be borrowed without rendering
     the Buyer's Net Worth less than the Required Capital Amount; and

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          third,  unless the Parent has  declared the  Termination  Date to have
     occurred,  by  accepting  a  contribution  to its  capital  pursuant to the
     Subscription  Agreement in an amount equal to the remaining  unpaid balance
     of its Purchase Price.

Subject to the limitations set forth in the preceding clause second,  the Parent
irrevocably  agrees to advance each  Subordinated Loan requested by the Buyer on
or prior to the Termination Date. The Subordinated  Loans shall be evidenced by,
and  shall be  payable  in  accordance  with the terms and  provisions  of,  the
Subordinated Notes and shall be payable solely from funds which the Buyer is not
required  under the  Purchase  Agreement  to set aside  for the  benefit  of, or
otherwise pay over to, the Purchasers.

     (c) From and after the Termination  Date, the Parent shall not be obligated
to (but  may,  at its  option):  (i)  sell  Receivables  to the  Buyer,  or (ii)
contribute  Receivables  to the  Buyer's  capital  pursuant  to clause  third in
Section 1.2(b) unless the Parent  reasonably  determines that the Purchase Price
therefor  shall be  satisfied  with funds  available  to the Buyer from sales of
interests in the Receivables  pursuant to the Purchase  Agreement,  Collections,
proceeds of Subordinated Loans or otherwise.

     (d) On each  Business Day during a Collection  Period after the date of the
initial  Purchase,  all  Collections  received shall be applied by the Parent as
payments  toward the  Purchase  Price of  Receivables  sold or to be sold by the
Parent to the Buyer during such  Collection  Period.  Although  amounts shall be
paid  directly  to the  Parent  on a daily  basis in  accordance  with the first
sentence of this  paragraph,  settlement of the Purchase Price between the Buyer
and the Parent  shall be effected on a monthly  basis on  Settlement  Dates with
respect  to all  Purchases  within the same  Collection  Period and based on the
information contained in the Settlement Date Statement for the Collection Period
then most  recently  ended.  In  addition  to such other  information  as may be
included  therein,  each Settlement Date Statement shall set forth the following
with respect to the related  Collection  Period:  (i) the aggregate  Outstanding
Balance of Receivables  created and conveyed in Purchases during such Collection
Period,  as well as the Net  Receivables  Balance  (as  defined in the  Purchase
Agreement)  included therein,  (ii) the aggregate  Purchase Price payable to the
Parent in respect of such  Purchases,  specifying the Discount  Factor in effect
for such Collection Period and the aggregate  Purchase Price Credits deducted in
calculating such aggregate  Purchase Price,  (iii) the aggregate amount of funds
received by the Parent  during such  Collection  Period  which are to be applied
toward the aggregate Purchase Price owing for such Collection Period pursuant to
the first  sentence  of this  paragraph,  (iv) the  increase  or decrease in the
amount outstanding under the applicable  Subordinated Note as of the end of such
Collection  Period after giving  effect to the  application  of funds toward the
aggregate Purchase Price and the restrictions on Subordinated Loans set forth in
paragraph (b) above, and (v) the amount of any capital  contribution made by the
Parent  to the  Buyer  as of the  end of  such  Collection  Period  pursuant  to
paragraph (c) above.  Although settlement shall be effected on Settlement Dates,
increases  or decreases  in the amount  owing under any  Subordinated  Note made
pursuant to paragraph (b) above and any contribution of capital by the Parent to
the Buyer made  pursuant to paragraph (c) above shall be deemed to have occurred
and shall be effective as of the last Business Day of the  Collection  Period to
which such settlement relates.

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     Section  1.3  Purchase  Price  Credit  Adjustments.   If  on  any  day  the
Outstanding Balance of a Receivable is:

          (a) reduced as a result of any defective or damaged goods or services,
     any cash discount or any adjustment by the applicable  Originator  (whether
     individually  or, in the case of  Federal-Mogul,  in its performance of its
     duties as Sub-Servicer),

          (b)  reduced  or  canceled  as a result of a setoff in  respect of any
     claim by any Person (whether such claim arises out of the same or a related
     transaction or an unrelated  transaction  and whether such claim relates to
     an Originator or any Affiliate thereof), or

          (c) is  otherwise  reduced as a result of any of the factors set forth
     in the definition of "Dilutions,"

then, in such event,  the Buyer shall be entitled to a credit (each, a "Purchase
Price Credit") against the Purchase Price otherwise  payable  hereunder equal to
the full amount of such reduction or cancellation. If such Purchase Price Credit
exceeds the  Original  Balance of the  Receivables  to be sold  hereunder on any
Purchase Date,  then the Parent shall pay the remaining  amount of such Purchase
Price Credit in cash within 5 Business  Days  thereafter;  provided  that if the
Termination  Date has not  occurred,  the Parent  shall be allowed to deduct the
remaining amount of such Purchase Price Credit from any indebtedness  owed to it
under the applicable Subordinated Note.

     Section  1.4  Payments  and  Computations,  Etc.  All amounts to be paid or
deposited by the Buyer  hereunder  shall be paid or deposited in accordance with
the  terms  hereof  on the day when due in  immediately  available  funds to the
account of the Parent designated from time to time by the Parent or as otherwise
directed  by the  Parent.  In the  event  that any  payment  owed by any  Person
hereunder  becomes due on a day which is not a Business  Day,  then such payment
shall be made on the next  succeeding  Business  Day.  Any amount due  hereunder
which is not paid when due hereunder  shall bear interest at the Base Rate as in
effect  from  time to time  until  paid in full;  provided,  however,  that such
interest  rate  shall not at any time  exceed  the  maximum  rate  permitted  by
applicable law. All computations of interest payable  hereunder shall be made on
the basis of a year of 360 days for the  actual  number of days  (including  the
first but excluding the last day) elapsed.

     Section 1.5 Transfer of Records.

     (a) In connection with the Purchases of Receivables  hereunder,  the Parent
hereby sells,  transfers,  assigns and otherwise conveys to the Buyer all of its
right  and  title  to  and  interest  in  the  Records  relating  to  all of its
Receivables  sold hereunder,  without the need for any further  documentation in
connection  with any Purchase.  In  connection  with such  transfer,  the Parent
hereby grants to each of the Buyer,  the Agent and the Servicer an  irrevocable,
non-exclusive  license to use,  without  royalty  or  payment  of any kind,  all
software  used by the  Parent to  account  for its  Receivables,  to the  extent
necessary to administer its  Receivables,  whether such software is owned by the
Parent or is owned by others and used by the  Parent  under  license  agreements
with respect  thereto,  provided  that should the consent of any licensor of the
Parent to such grant of the license  described  herein be  required,  the Parent
hereby  agrees  that upon the

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request of the Buyer (or the Agent as the Buyer's assignee), the Parent will use
its reasonable efforts to obtain the consent of such third-party  licensor.  The
license  granted hereby shall be  irrevocable,  and shall  terminate on the date
this Agreement terminates in accordance with its terms.

     (b) The Parent (i) shall take such action requested by the Buyer and/or the
Agent  (as the  Buyer's  assignee),  from  time to time  hereafter,  that may be
necessary  or  appropriate  to ensure that the Buyer and its  assigns  under the
Purchase  Agreement  have  an  enforceable  ownership  interest  in the  Records
relating to the Receivables purchased from the Parent hereunder,  and (ii) shall
use its reasonable  efforts to ensure that the Buyer, the Agent and the Servicer
each has an enforceable right (whether by license or sublicense or otherwise) to
use all of the computer  software used to account for the Receivables  and/or to
recreate such Records.

     Section 1.6  Characterization.  If,  notwithstanding  the  intention of the
parties  expressed in Section 1.1(b),  any sale or contribution by the Parent to
the Buyer of Receivables  hereunder shall be characterized as a secured loan and
not a sale  (for  non-tax  purposes),  then  this  Agreement  shall be deemed to
constitute a security  agreement under the UCC and other applicable law. Without
being in  derogation  of the parties'  intention  that each sale of  Receivables
hereunder  shall  constitute a true sale (for  non-tax  purposes)  thereof,  the
Parent hereby grants to the Buyer a duly perfected  security  interest in all of
the Parent's  right,  title and interest in, to and under the Purchased  Assets,
which  security  interest  shall be prior to all other Adverse  Claims  thereto.
After an Event of Purchase  and Sale  Termination,  the Buyer and its  assignees
shall have,  in addition  to the rights and  remedies  which they may have under
this  Agreement,  all other rights and remedies  provided to a secured  creditor
after default under the UCC and other  applicable law, which rights and remedies
shall be cumulative.

                                  ARTICLE II.
                         REPRESENTATIONS AND WARRANTIES

     Section 2.1 Parent's  Representations  and  Warranties.  The Parent  hereby
represents and warrants,  individually and in its capacity as the  Sub-Servicer,
to the Buyer and its assigns that:

     (a) Corporate  Existence and Power. The Parent and each other Originator is
a corporation or limited  liability company duly organized or formed and validly
existing and in good standing  under the laws of the State of its  incorporation
or  formation  and has, in all  material  respects,  full  corporate  or limited
liability  company  power,  authority and legal right to own its  properties and
conduct its business as such properties are presently owned and such business is
presently conducted,  and to execute,  deliver and perform its obligations under
the Transaction Documents to which it is a party.

     (b) Due  Qualification.  The  Parent  and  each  other  Originator  is duly
qualified to do business and, where necessary,  is in good standing as a foreign
corporation (or is exempt from such  requirement) and has obtained all necessary
licenses and approvals in each jurisdiction in which the conduct of its business
requires such qualification  except where the failure to so qualify,  be in good
standing  or obtain  licenses  or  approvals  would not have a Material  Adverse
Effect.

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     (c) Due  Authorization;  No  Conflict.  The  execution  and delivery of the
Transaction  Documents to which the Parent and each other Originator is a party,
the performance of the transactions  contemplated thereby and the fulfillment of
the terms thereof,  will not conflict  with,  result in any breach of any of the
material terms and provisions of, or constitute (with or without notice or lapse
of time or both) a material default under, any indenture,  contract,  agreement,
mortgage,  deed of  trust,  or other  instrument  to which  the  Parent  or such
Originator is a party or by which it or its properties are bound.  The execution
and  delivery  of the  Transaction  Documents  to which the Parent or each other
Originator is a party, the performance of the transactions  contemplated thereby
and the  fulfillment  of the terms thereof which are applicable to the Parent or
such Originator,  will not conflict with or violate any material Requirements of
Law applicable to the Parent or such Originator.

     (d) No Consents. Other than the filing of the financing statements required
hereunder,  no authorization or approval or other action by, and no notice to or
filing with, any  Governmental  Authority or regulatory body is required for the
due execution,  delivery and performance by the Parent and each other Originator
of the Transaction  Documents to which it is a party, other than authorizations,
approvals,  actions,  notices or filings the failure to obtain or perform  would
not reasonably be expected to have a Material Adverse Effect.

     (e) Binding Effect. The Transaction  Documents to which the Parent and each
other  Originator is a party have been duly executed and delivered by the Parent
and such Originator and constitute the legal,  valid and binding  obligations of
the  Parent  and  such  Originator  enforceable  against  the  Parent  and  such
Originator in accordance with their respective terms, except as such enforcement
may be limited by applicable  bankruptcy,  insolvency,  reorganization  or other
similar laws relating to or limiting  creditors' rights in general and except as
such  enforceability  may be limited by general  principles  of equity  (whether
considered in a suit at law or in equity).

     (f) No Proceedings.  There are no actions, suits or proceedings pending, or
to the best of the Parent's  knowledge,  threatened,  against or  affecting  the
Buyer, the Parent or any other Originator,  or any of the respective  properties
of the  Buyer,  the  Parent or any other  Originator,  in or before  any  court,
arbitrator or other body, which are reasonably likely to have a Material Adverse
Effect.  The Parent and each other  Originator is not in default with respect to
any order of any court, arbitrator or Governmental Authority.

     (g) Accuracy of Information.  All information  heretofore  furnished by the
Parent, any other Originator or any of its Affiliates to the Buyer, the Agent or
the Purchasers for purposes of or in connection with this Agreement,  any of the
other Transaction  Documents or any transaction  contemplated  hereby or thereby
is,  and all such  information  hereafter  furnished  by the  Parent,  any other
Originator  or  any  of its  Affiliates  to the  Buyer,  the  Agent  and/or  the
Purchasers  will be, true and accurate in every  material  respect,  on the date
such  information  is stated or certified  and does not and will not contain any
material  misstatement  of fact or omit to  state a  material  fact or any  fact
necessary to make the statements contained therein not misleading.

     (h) Use of Proceeds. No proceeds of any Purchase hereunder will be used for
"purchasing" or "carrying" any "margin stock" within the respective  meanings of
each of the

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quoted terms under  Regulation U of the Board of Governors of the United  States
Federal  Reserve  System as now and from time to time hereafter in effect or for
any purpose which  violates the  provisions of the  Regulations of such Board of
Governors  (including  but not limited to the  provisions  of  Regulation  U and
Regulation X) or any similar rule of any other Governmental Authority.

     (i) Good Title;  Perfection.  Immediately prior to each Purchase hereunder,
the  Parent  shall be the  legal and  beneficial  owner of the  Receivables  and
Related  Security  with respect  thereto,  free and clear of any Adverse  Claim,
except as created by the Transaction Documents.  This Agreement is effective to,
and shall, upon each Purchase hereunder,  irrevocably  transfer to the Buyer all
legal and equitable  title to, with the legal right to sell and  encumber,  such
Receivable,  its  Collections  and the Related  Security,  free and clear of any
Adverse Claim, except as created by the Transaction Documents.  Without limiting
the  foregoing,  there has been duly  filed all  financing  statements  or other
similar  instruments  or documents  necessary  under the UCC of all  appropriate
jurisdictions (or any comparable law) to provide the Buyer with a first priority
perfected ownership interest in such Receivables and the other Purchased Assets.

     (j)  Places  of  Business.  The  principal  places  of  business  and chief
executive  office of the Parent and the offices  where the Parent  keeps all its
Records  are  located  at the  address(es)  listed on  Exhibit  II or such other
locations  notified  to the Buyer and the Agent  (as the  Buyer's  assignee)  in
accordance  with Section 4.2(a) in  jurisdictions  where all action  required by
Section  4.2(a) has been taken and  completed.  The  Parent's  Federal  Employer
Identification Number is correctly set forth on Exhibit II.

     (k) Collection  Banks;  etc. Except as otherwise  notified to the Buyer and
the Agent (as the Buyer's assignee) in accordance with Section 4.2(b):

          (i) the Parent and each other  Originator  has instructed all Obligors
     to pay all  Collections  directly to a segregated  lock-box  identified  on
     Exhibit III hereto,

          (ii) in the case of all proceeds  remitted to any such lock-box  which
     is now or hereafter  established,  such proceeds will be deposited directly
     by the  applicable  Collection  Bank  into  a  concentration  account  or a
     depository account listed on Exhibit III,

          (iii) the names and addresses of all Collection  Banks,  together with
     the account numbers of the Collection Accounts of the Parent and each other
     Originator at each Collection Bank, are listed on Exhibit III, and

          (iv) each lock-box and  Collection  Account to which  Collections  are
     remitted shall be subject to a Collection Account Agreement that is then in
     full force and effect.

In the case of lock-boxes  and  Collection  Accounts  identified on Exhibit III,
exclusive  dominion and control thereof has been  transferred to the Buyer.  The
Parent and each other  Originator  has not granted  any  Person,  other than the
Buyer as contemplated by this Agreement, dominion and control of any lock-box or
Collection Account, or the right to take dominion and control of any lock-box or
Collection Account at a future time or upon the occurrence of a future event.

                                       8
<PAGE>

     (l) Names.  In the past five years,  the Parent has not used any  corporate
names,  trade  names or assumed  names other than the name or names set forth on
Exhibit II.

     (m) Credit  Policies.  With respect to each  Receivable,  the Parent,  each
other Originator and the Sub-Servicer has complied in all material respects with
the Credit Policies.

     (n) Payments to Parent.  With respect to each  Receivable sold to the Buyer
under this Agreement,  the Buyer has given  reasonably  equivalent  value to the
Parent in  consideration  for the  transfer of such  Receivable  and the Related
Security  with respect  thereto  under this  Agreement and such transfer was not
made for or on account of an antecedent debt. No sale by the Parent to the Buyer
of any  Receivable  is or may be  voidable  under  any  section  of the  Federal
Bankruptcy Reform Act of 1978 (11 U.S.C. ss.ss. 101 et seq.), as amended.

     (o) Ownership of the Buyer. The Parent directly owns 100% of the issued and
outstanding  capital stock of the Buyer.  Such capital stock is validly  issued,
fully paid and nonassessable and there are no options,  warrants or other rights
to acquire securities of the Buyer.

     (p) Not an Investment Company.  Neither the Parent nor any other Originator
is an "investment  company" within the meaning of the Investment  Company Act of
1940, as amended from time to time, or any successor statute.

     (q) Purpose. The Parent has determined that, from a business viewpoint, the
sale of Receivables to the Buyer contemplated  hereby is in the best interest of
the Parent.

     (r)  Financial  Statements;   Material  Adverse  Effect.  The  consolidated
financial statements of the Parent and its consolidated Subsidiaries dated March
31, 1999  furnished  by the Parent to the Buyer and the Agent are  complete  and
correct  in all  material  respects,  and such  financial  statements  have been
prepared  in  accordance   with   generally   accepted   accounting   principles
consistently applied and fairly present the consolidated financial condition and
results of operations of the Parent and its consolidated Subsidiaries as of such
date and for the period ended on such date.  Since March 31, 1999,  no event has
occurred which would have a Material Adverse Effect.

     (s)  ERISA.  No fact or  circumstance,  including  but not  limited  to any
Reportable  Event,  exists in  connection  with any Plan which would  constitute
grounds for the  termination  of any Plan by the PBGC or for the  appointment by
the appropriate United States District Court of a trustee to administer any such
Plan and which would result in the  termination  of a Plan and the incurrence of
material  liability by the Parent or any other Originator or any ERISA Affiliate
to the Plan, the PBGC, participants,  beneficiaries or a trustee. No Plan has an
accumulated  funding  deficiency  as defined  in  Section  412(a) of the Code or
Section 302(a) of ERISA, and no lien exists with respect to any Plan for failure
to make required  contributions as described under 412(n) of the Code or Section
302(f) of ERISA.  For the  purposes of this  representation  and  warranty,  the
Parent and each other  Originator shall be deemed to have knowledge of all facts
attributable to the Plan administrator designated pursuant to ERISA.

     (t) Year 2000  Problem.  The Parent has  reviewed its  operations,  and has
caused each other  Originator to review its operations  with a view to assessing
whether its

                                       9
<PAGE>

business  and the  business  of each  other  Originator  will,  in the  receipt,
transmission,  processing,  manipulation, storage, retrieval, retransmission, or
other  utilization  of data be  vulnerable  to a Year 2000  Problem  that  could
reasonably be expected to have a Material Adverse Effect.  Based on such review,
the Parent has no reason to believe  that a Material  Adverse  Effect will occur
with respect to its business or  operations  or the business and  operations  of
each other Originator resulting from a Year 2000 Problem.

                                  ARTICLE III.
                             CONDITIONS OF PURCHASES

     Section 3.1 Conditions Precedent to Initial Purchase.  The initial Purchase
under this Agreement is subject to the  conditions  precedent that (i) the Buyer
shall have  received  on or before  the date of such  Purchase  those  documents
listed on  Schedule A hereto and (ii) all  conditions  precedent  to the initial
purchase under the Purchase Agreement shall have been satisfied and/or waived.

     Section 3.2 Conditions  Precedent to All Purchases.  Each Purchase shall be
subject to the further  conditions  precedent  that (a) on the date of each such
Purchase,  the following  statements  shall be true both before and after giving
effect to such Purchase (and  acceptance of the proceeds of such Purchase  shall
be deemed a  representation  and warranty by the Parent that such statements are
then true):

          (i) the  representations  and  warranties  set forth in Article II are
     correct on and as of the date of such  Purchase as though made on and as of
     such date;

          (ii) no event has occurred,  or would result from such Purchase,  that
     will constitute an Event of Purchase and Sale Termination, and no event has
     occurred and is continuing,  or would result from such Purchase, that would
     constitute a Potential Event of Purchase and Sale Termination; and

          (iii) the Termination Date shall not have occurred;

and (b) the Buyer and/or the Agent (as the Buyer's assignee) shall have received
such other approvals, opinions or documents as it may reasonably request.

     Notwithstanding  the foregoing  conditions  precedent,  upon payment of the
Purchase Price for any Purchase (whether by payment of cash, through an increase
in the amounts  outstanding  under the Subordinated  Notes, by offset of amounts
owed to the Buyer and/or by offset of capital contributions to be made under the
Subscription Agreement), title to the Receivables and related assets included in
such Purchase shall vest in the Buyer,  whether or not the conditions  precedent
to such Purchase were in fact satisfied.

                                  ARTICLE IV.
                                    COVENANTS

     Section 4.1 Affirmative  Covenants of Parent. Until the date this Agreement
shall  terminate in  accordance  with its terms,  the Parent  hereby  covenants,
individually and in its capacity as Sub-Servicer, that:

                                       10
<PAGE>

     (a) Financial  Reporting and other Information.  The Parent shall maintain,
and shall  cause each  other  Originator  to  maintain,  a system of  accounting
established and  administered in accordance with generally  accepted  accounting
principles, and furnish to the Buyer and the Agent (as assignee of the Buyer):

          (i) Annual  Reporting.  As soon as available,  but in any event within
     120 days after the close of each fiscal year of the Parent, an audit report
     not  qualified for anything  under the control of the Parent,  certified by
     independent  public  accountants  acceptable  to the Buyer and Agent (which
     until the Buyer  and/or the Agent (as the Buyer's  assignee)  notifies  the
     Parent  in  writing  to the  contrary  may be  Ernst  & Young  LLP,  public
     accountants),  prepared in accordance  with generally  accepted  accounting
     principles  on a  consolidated  basis for the Parent  and its  Subsidiaries
     including  consolidated  balance  sheets as of the end of such period,  and
     related profit and loss and reconciliation of the surplus statements;

          (ii)  Quarterly  Reporting.  As soon as  available,  but in any  event
     within 60 days after the close of the first three quarterly periods of each
     fiscal  year  of  the  Parent,   for  the  Parent  and  its   Subsidiaries,
     consolidated  unaudited  balance sheets as at the close of each such period
     and consolidated  profit and loss and  reconciliation of surplus statements
     for the period  beginning from the beginning of such fiscal year to the end
     of such quarter; and

          (iii)  Securities and Exchange  Commission  Filings.  The Parent shall
     provide the Buyer and the Agent (as the Buyer's  Assignee),  promptly after
     the  same  are  available,  copies  of  all  proxy  statements,   financial
     statements and reports as the Parent shall send or make available generally
     to any of its public security holders, and copies of all regular and period
     reports and of all  registration  statements which the Parent may file with
     the Securities and Exchange Commission or with any securities exchange.

          (iv) Notices under Transaction  Documents.  Forthwith upon its receipt
     of any notice,  request for consent,  financial statements,  certification,
     report or other  communication  under or in connection with any Transaction
     Document from any Person other than the Buyer,  the Agent or any Purchaser,
     copies of the same.

          (v)  Change  in  Credit  Policies.  At  least  30  days  prior  to the
     effectiveness  of  any  material  change  in or  amendment  to  the  Credit
     Policies,  a copy of the  Collection  Policies  then in effect and a notice
     indicating such change or amendment.

          (vi)   Other   Information.    Such   other   information   (including
     non-financial  information) as the Buyer (or any of its assignees) may from
     time to time reasonably request.

(b)  Notices.  The Parent shall notify the Buyer and the Agent in writing of any
of the following immediately upon learning of the occurrence thereof, describing
the same and, if applicable, the steps being taken with respect thereto:

                                       11
<PAGE>

          (i) Actual and Potential Events of Purchase and Sale Termination.  The
     occurrence  of each Event of Purchase  and Sale  Termination  or  Potential
     Event of Purchase and Sale Termination of which the Parent becomes aware.

          (ii)  Litigation.  The  institution  of  any  litigation,  arbitration
     proceeding  or  governmental  proceeding  against  the Parent or any of its
     Subsidiaries,  or to which the  Parent or any of its  Subsidiaries  becomes
     party,  in either case which (A) remains  unsettled for a period of 90 days
     from the commencement  thereof and involves claims for damages or relief in
     an amount  which could  reasonably  be expected to have a Material  Adverse
     Effect,  or (B) has  resulted  in a final  judgment  or  judgments  for the
     payment of money in an amount which has a Material Adverse Effect.

          (iii) ERISA.  The  occurrence  of any  Reportable  Event under Section
     4043(c)(5),  (6) or (9) of ERISA with respect to any Plan,  any decision to
     terminate or withdraw from a Plan,  any finding made with respect to a Plan
     under Section 4041(c) or (e) of ERISA,  the  commencement of any proceeding
     with respect to a Plan under Section 4042 of ERISA, the failure to make any
     required  installment  or other  required  payment under Section 412 of the
     Code or Section 302 of ERISA on or before the date for such  installment or
     payment,  or any  material  increase  in the  actuarial  present  value  of
     unfunded vested benefits under all Plans over the preceding year.

          (iv)  Downgrade.  Any downgrade in the rating of any  Indebtedness  of
     Federal-Mogul  by  Standard & Poor's  Ratings  Services,  a division of The
     McGraw Hill Companies, Inc., or by Moody's Investors Service, Inc., setting
     forth the Indebtedness affected and the nature of such change.

          (v) Labor Strike,  Walkout,  Lockout or Slowdown.  The commencement or
     threat of any labor strike,  walkout,  lockout or concerted  labor slowdown
     with  respect  to  the  Parent  or any of  its  Subsidiaries,  which  could
     reasonably  be expected to have a Material  Adverse  Effect  (collectively,
     "Labor Actions").

     (c)  Compliance  with Laws.  The Parent shall comply,  and shall cause each
other Originator to comply,  in all material  respects with all applicable laws,
rules, regulations, orders, writs, judgments,  injunctions, decrees or awards to
which it may be subject.

     (d) Audits. The Parent shall furnish, and shall cause each other Originator
to furnish,  to the Buyer (and/or the Agent on behalf of the Buyer) from time to
time such information with respect to it and the Receivables as the Buyer or the
Agent may  reasonably  request.  The Parent  shall,  and shall  cause each other
Originator,  from time to time during  regular  business  hours as  requested by
Buyer (or the Agent on its behalf) upon reasonable  notice,  permit the Buyer or
the Agent, or their  respective  agents or  representatives,  (i) to examine and
make copies of and  abstracts  from all Records in the  possession  or under the
control of the Parent or such Originator relating to Receivables and the Related
Security,  including,  without  limitation,  the related Contracts,  and (ii) to
visit the  offices  and  properties  of the  Parent or such  Originator  for the
purpose of  examining  such  materials  described  in clause  (i) above,  and to
discuss  matters  relating  to  the  Parent's  or  such  Originator's  financial
condition or the  Receivables  and the Related  Security or the Parent's or such
Originator's  performance  hereunder or under any other

                                       12
<PAGE>

Transaction Document to which it is a party or the Parent's or such Originator's
performance  under the  Contracts  with any of the  officers or employees of the
Parent or such Originator having knowledge of such matters.

     (e) Keeping and Marking of Records and Books.

          (i) The Parent  shall  maintain  and  implement,  and shall cause each
     other  Originator to maintain and implement,  administrative  and operating
     procedures (including,  without limitation,  an ability to recreate records
     evidencing  Receivables  in the event of the  destruction  of the originals
     thereof),  and keep and maintain all  documents,  books,  records and other
     information  reasonably  necessary or advisable  for the  collection of all
     Receivables (including,  without limitation, records adequate to permit the
     immediate  identification of each new Receivable and all Collections of and
     adjustments to each existing Receivable).  The Parent shall give, and shall
     cause  each  other  Originator  to give,  the  Buyer  and the Agent (as the
     Buyer's assignee) notice of any material change in the  administrative  and
     operating procedures referred to in the previous sentence.

          (ii) The Parent shall,  and shall cause each other  Originator to, (a)
     on or prior to the date hereof, mark its master data processing records and
     other  books  and  records  relating  to the  Receivables  with  a  legend,
     acceptable  to the  Buyer  and to the  Agent  (as  the  Buyer's  assignee),
     describing  the  ownership  interest  of  the  Buyer  therein  and  further
     describing  the  Receivable  Interests  sold by the Buyer to the Purchasers
     pursuant to the Purchase Agreement and (b) upon the request of the Buyer or
     the Agent (as the Buyer's assignee) following the occurrence of an Event of
     Purchase  and  Sale  Termination:  (x)  mark  each  Contract  with a legend
     describing  Buyer's interest therein and further  describing the Receivable
     Interests  of the  Purchasers  and (y) deliver to the Buyer or its designee
     all Contracts (including, without limitation, all multiple originals of any
     such Contract).

     (f) Compliance with Contracts and Credit  Policies.  The Parent shall,  and
shall cause each other  Originator to, timely and fully,  (i) perform and comply
with all provisions,  covenants and other promises required to be observed by it
under the Contracts related to the Receivables,  and (ii) comply in all material
respects with the Credit Policies.  The Parent shall, and shall cause each other
Originator  to,  pay  when  due  any  taxes  payable  in  connection   with  the
Receivables.

     (g)  Ownership  Interest.  The Parent  shall take all  necessary  action to
establish  and  maintain  in  favor of the  Buyer a valid  and  perfected  first
priority  ownership  interest  in the  Purchased  Assets to the  fullest  extent
contemplated  herein,  including,  without  limitation,  taking  such  action to
perfect,  protect or more fully evidence the interest of the Buyer  hereunder as
the Buyer or its assignees may reasonably request.

     (h) Purchasers'  Reliance.  The Parent  acknowledges that the Agent and the
Purchasers  are  entering  into the  transactions  contemplated  by the Purchase
Agreement in reliance upon the Buyer's  identity as a separate legal entity from
the  Parent  and each other  Originator.  Therefore,  from and after the date of
execution and delivery of this Agreement, the Parent shall take, and shall cause
each  other  Originator  to  take,  all  reasonable  steps,  including,  without

                                       13
<PAGE>

limitation,  all steps that the Buyer or any assignee of the Buyer may from time
to time reasonably request, to maintain the Buyer's identity as a separate legal
entity and to make it manifest to third parties that the Buyer is an entity with
assets and liabilities  distinct from those of the Parent, each other Originator
and any  Affiliates  thereof  and not just a division of the Parent or any other
Originator.  Without limiting the generality of the foregoing and in addition to
the other covenants set forth herein,  the Parent (i) shall not, and shall cause
each other Originator not to, hold itself out to third parties as liable for the
debts of the Buyer nor purport to own the  Receivables and other assets acquired
by the Buyer,  (ii) shall take all other actions necessary on its part to ensure
that the Buyer is at all times in compliance with the  "separateness"  covenants
set forth in Section 6.01(j) of the Purchase Agreement and (iii) shall cause all
tax liabilities arising in connection with the transactions  contemplated herein
or otherwise to be allocated between the Parent and the Buyer on an arm's-length
basis and in a manner  consistent with the procedures set forth in U.S. Treasury
Regulations ss.ss. 1.1502-33(d) and 1.1552-1.

     (i)  Collections.  The Parent  shall  instruct,  and shall cause each other
Originator  to  instruct,  all  Obligors  to pay all  Collections  directly to a
segregated  lock-box or other Collection  Account listed on Exhibit III, each of
which is subject to a  Collection  Account  Agreement.  In the case of  payments
remitted to any such  lock-box,  the Parent  shall  cause,  and shall cause each
other  Originator  to cause,  all  proceeds  from such  lock-box to be deposited
directly by a Collection Bank into a Collection Account on Exhibit III. Pursuant
to Section  5.3 hereof and the  Collection  Account  Agreements,  the Parent has
transferred  and  assigned to the Buyer all of its right,  title and interest in
and to, and exclusive  ownership,  dominion and control (subject to the terms of
this  Agreement) to each such  lock-box,  concentration  account and  depositary
account.  In the case of any  Collections  received  by the  Parent or any other
Originator,  the Parent shall remit,  and shall cause each other  Originator  to
remit, such Collections to a Collection  Account not later than the Business Day
immediately following the date of receipt of such Collections, and, at all times
prior to such  remittance,  the Parent shall  itself hold,  and shall cause each
other Originator to hold, such  Collections in trust, for the exclusive  benefit
of the Buyer and its  assigns.  In the case of any  remittances  received by the
Parent or any other  Originator in any such  Collection  Account that shall have
been  identified,  to the  satisfaction  of  the  Servicer,  to  not  constitute
Collections or other proceeds of the  Receivables or the Related  Security,  the
Parent shall promptly  remit such items to the Person  identified to it as being
the owner of such remittances. From and after the date the Agent delivers to any
of the  Collection  Banks a  Collection  Notice  pursuant to Section 7.03 of the
Purchase  Agreement,  the Agent, as assignee of the Buyer,  may request that the
Parent or any other Originator,  and the Parent thereupon promptly shall direct,
or shall  cause any other  applicable  Originator  to direct,  all  Obligors  on
Receivables to remit all payments thereon to a new depositary  account (the "New
Concentration Account") specified by the Agent and, at all times thereafter, the
Parent  shall not  deposit  or  otherwise  credit,  and shall  cause  each other
Originator not to deposit or credit, to the New  Concentration  Account any cash
or payment  item other than  Collections.  Alternatively,  the Agent may request
that the Parent or any other Originator, and the Parent thereupon promptly shall
direct,  or shall cause any other applicable  Originator to direct,  all Persons
then making  remittances to any account listed on Exhibit III which  remittances
are not payments on Receivables to deliver such  remittances to a location other
than an account listed on Exhibit III.

                                       14
<PAGE>

     (j) ERISA.  The Parent shall make, and shall cause each other Originator to
make, all required  installments or other required payments under Section 412 of
the Code or Section 302 of ERISA on or before the due date for such  installment
or other payment.

     (k) Year 2000 Problems.  The Parent shall take all reasonable actions,  and
shall cause each other Originator to take all reasonable actions, to ensure that
its computer-based  system are able to effectively process data, including dates
on and after  January  1,  2000,  without  any Year  2000  Problem  which  could
reasonably  be expected  to have a Material  Adverse  Effect.  At the request of
Agent, as the assignee of the Buyer,  the Parent shall provide,  and shall cause
each  other  Originator  to  provide,   Agent  with  substantiation   reasonably
acceptable  to Agent  as to the  Parent's  or such  Originator's  capability  to
process data on and after,  or otherwise  with respect to dates  occurring on or
after, January 1, 2000 without any Year 2000 Problem.

     Section 4.2  Negative  Covenants of Parent.  Until the date this  Agreement
shall  terminate in  accordance  with its terms,  the Parent  hereby  covenants,
individually and in its capacity as Sub-Servicer, that:

     (a) Name Change,  Offices,  Records and Books of Accounts. The Parent shall
not,  and shall  cause each  Originator  not to,  change its name,  identity  or
corporate  structure  (within the meaning of Section  9-402(7) of any applicable
enactment of the UCC) or relocate its chief executive office or any office where
Records  are kept  unless  it shall  have:  (i) given the Buyer and the Agent at
least 45 days prior notice thereof and (ii) delivered to the Buyer all financing
statements, instruments and other documents requested by the Buyer (or the Agent
on behalf of the Buyer) in connection with such change or relocation.

     (b) Change in Payment Instructions to Obligors. The Parent shall not add or
terminate  any bank as a  Collection  Bank from those  listed in Exhibit III, or
make any change in its instructions to Obligors regarding payments to be made to
the  Parent  or  payments  to be made to any  lock-box,  Collection  Account  or
Collection  Bank,  unless the Buyer and the Agent shall have received,  at least
fifteen (15) Business Days before the proposed effective date therefor:

          (i) written notice of such addition, termination or change, and

          (ii) with respect to the addition of a lock-box, Collection Account or
     Collection Bank, an executed account  agreement and an executed  Collection
     Account Agreement from such Collection Bank relating thereto;

provided,  however, that the Parent may make changes in instructions to Obligors
regarding  payments  if such  new  instructions  require  such  Obligor  to make
payments  to another  existing  lock-box  or other  Collection  Account  that is
subject to a Collection Agreement then in effect.

     (c)  Modifications to Contracts and Credit Policies.  The Parent shall not,
and shall cause each other  Originator  not to, make any material  change in the
character  of its business or any change to the Credit  Policies  which would be
reasonably likely to, in either case, adversely affect the collectibility of any
material  portion of the Receivables or decrease the credit quality of any newly
created Receivables. Except as provided in Section 5.2(c), the Parent, acting as
Sub-Servicer or otherwise,  will not extend, amend or otherwise modify the terms
of any Receivable or any Contract  related thereto other than in accordance with
the Credit Policies.

                                       15
<PAGE>

     (d)  Sales,  Liens,  Etc.  The  Parent  shall  not,  and shall  cause  each
Originator not to, sell,  assign (by operation of law or otherwise) or otherwise
dispose  of, or grant any option  with  respect to, or create or suffer to exist
any  Adverse  Claim  upon  (including,  without  limitation,  the  filing of any
financing  statement) or with respect to, any of the Purchased  Assets or assign
any right to receive  income in respect  thereof  (other than, in each case, the
creation of the interests  therein in favor of the Buyer provided for herein and
the Agent and the Purchasers  provided for in the Purchase  Agreement),  and the
Parent shall defend, and shall cause each other Originator to defend, the right,
title and interest of the Buyer in, to and under any of the foregoing  property,
against all claims of third parties claiming through or under the Parent or such
Originator.

     (e) Accounting  for  Purchases.  The Parent shall not, and shall not permit
any  Affiliate  to,  account for or treat  (whether in financial  statements  or
otherwise)  the  transactions  contemplated  hereby in any manner other than the
sale of the  Receivables  and Related  Security by the Parent to the Buyer or in
any other respect account for or treat the transactions  contemplated  hereby in
any manner other than as a sale of the Receivables  and Related  Security by the
Parent  to the  Buyer  except  to the  extent  that  such  transactions  are not
recognized on account of  consolidated  financial  reporting in accordance  with
generally accepted accounting principles.

     (f) Restricted Junior Payments. The Parent shall not request or require the
Buyer  to make any  Restricted  Junior  Payment  if an  Amortization  Event or a
Potential Amortization Event exists or would result therefrom.

     (g) Amendments and Waivers.  The Parent shall not, and shall not permit any
other Originator to, amend, modify, supplement,  restate, or waive any provision
of, the Receivables  Purchase Agreement without the written consent of the Buyer
or the Agent (as the assignee of the Borrower).

                                   ARTICLE V.
                          ADMINISTRATION AND COLLECTION

     Section 5.1 Designation of Sub-Servicer.

     (a) The servicing,  administration  and collection of the Receivables shall
be conducted by the Servicer so designated  from time to time in accordance with
Section 7.01 of the Purchase  Agreement.  Federal-Mogul is hereby designated as,
and hereby agrees to act as, sub-servicer (the "Sub-Servicer") for the Servicer.
The  Sub-Servicer  covenants and agrees to service the Receivables in accordance
with the terms of the Purchase Agreement.

     (b) On or prior to the Report  Date,  the  Sub-Servicer  shall  prepare and
forward to the Buyer and the Agent (as the Buyer's  assignee) a Settlement  Date
Statement for the related Collection Period.

                                       16
<PAGE>

                                  ARTICLE VI.
                     EVENTS OF PURCHASE AND SALE TERMINATION

     Section 6.1 Events of Purchase and Sale Termination.  The occurrence of any
one or more of the following  events shall  constitute an "Event of Purchase and
Sale Termination":

     (a) An  Insolvency  Event  shall  occur  with  respect to the  Parent,  the
Sub-Servicer  or any  other  Originator,  and,  in the  case  of an  Involuntary
Insolvency Event concerning the Parent, the Sub-Servicer or any other Originator
shall have continued undischarged or unstayed for a period of 60 days;

     (b)  Failure  on the part of the  Parent,  the  Sub-Servicer  or any  other
Originator,  as applicable, to make any payment or deposit required by the terms
of any of the Transaction Documents;

     (c) Failure on the part of the  Sub-Servicer  to deliver a Settlement  Date
Statement  within five Business Days of the day such item is due to be delivered
under any of the Transaction Documents;

     (d)  Failure  on the part of the  Parent,  the  Sub-Servicer  or any  other
Originator,  as applicable,  to duly observe or perform in any material  respect
any  of  their  other  respective  covenants  or  agreements  set  forth  in the
Transaction  Documents,  which failure continues  unremedied for a period of ten
days after the earlier of (i) the date on which the Parent,  the Sub-Servicer or
such Originator, as applicable,  becomes aware of such failure and (ii) the date
on which  written  notice of such  failure,  requiring  the same to be remedied,
shall have been  received by the Parent,  Sub-Servicer,  or such  Originator  as
applicable;

     (e) Any  representation or warranty made by the Parent, the Sub-Servicer or
any other  Originator in any  Transaction  Document to which it is a party:  (i)
shall prove to have been incorrect in any material  respect when made, and shall
continue to be incorrect  in any material  respect for a period of 10 days after
the earlier to occur of (A) the date on which  written  notice of such  failure,
requiring  the same to be  remedied,  shall have been given to the  Parent,  the
Sub-Servicer  or such  Originator by the Buyer or the Agent,  or (B) the date on
which the Parent,  the  Sub-Servicer  or such  Originator  becomes aware of such
failure,  and (ii) as a result of such incorrectness,  a Material Adverse Effect
occurs;

     (f) One or more final judgments  shall be entered  against the Parent,  any
other  Originator or any of their  Subsidiaries  for the payment of money in the
aggregate amount of $30,000,000,  or the equivalent thereof in another currency,
or more on claims not covered by insurance or as to which the insurance  carrier
has denied its responsibility,  and such judgment shall continue unsatisfied and
in effect for thirty (30) consecutive days without a stay of execution;

     (g)  Any  Plan  of the  Parent,  any  other  Originator  or  any  of  their
Subsidiaries  shall be terminated within the meaning of Title IV of ERISA except
as permitted by Section 4044(d) of ERISA, or a trustee shall be appointed by the
appropriate U.S. District Court to administer any Plan of the Parent,  any other
Originator or any of their Subsidiaries, or the PBGC

                                       17
<PAGE>

shall  institute  proceedings  to  terminate  any Plan of the Parent,  any other
Originator  or any of their  Subsidiaries  or to appoint a trustee to administer
any such Plan and each  such  event,  individually  or in the  aggregate,  could
reasonably be expected to have a Material Adverse Effect;

     (h) A Change of Control shall occur; and/or

     (i)  Failure  of  the  Parent,   any  other  Originator  or  any  of  their
Subsidiaries  taken as a whole to pay any  Indebtedness in excess of $10,000,000
in aggregate  principal amount ("Material Debt") when due; or the default by the
Parent,  any other Originator or any of their Subsidiaries in the performance of
any term,  provision or condition  contained  in any  agreement  under which any
Material Debt was created or is governed, the effect of which is to cause, or to
permit the holder or holders of such Material Debt to cause,  such Material Debt
to become due prior to its stated maturity;  or any Material Debt of the Parent,
any other  Originator or any of their  Subsidiaries  shall be declared to be due
and  payable or required  to be prepaid  (other  than by a  regularly  scheduled
payment) prior to the date of maturity thereof.

     Section 6.2 Remedies. Upon the occurrence and during the continuation of an
Event  of  Purchase  and  Sale  Termination,   the  Buyer  may  (i)  remove  any
Sub-Servicer  as  Sub-Servicer  (to the extent such Event of  Purchase  and Sale
Termination  was  caused  by, or arose as a result of the  activities  of,  such
Sub-Servicer),  and/or  (ii)  declare  the  Termination  Date to have  occurred,
whereupon the Termination Date shall forthwith occur, without demand, protest or
further  notice of any kind,  all of which are  hereby  expressly  waived by the
Parent; provided,  however, that upon the occurrence of an Event of Purchase and
Sale  Termination  described  in Section  6.1(a) above or of an actual or deemed
entry of an order for relief with respect to the Parent or any other  Originator
under the Federal  Bankruptcy  Code, the  Termination  Date shall  automatically
occur,  without  demand,  protest  or any  notice of any kind,  all of which are
hereby expressly waived by the Parent; provided, further, that the provisions of
this  Section  6.2 shall not be  applicable  if any Event of  Purchase  and Sale
Termination occurs with respect to any Originator (other than  Federal-Mogul) or
a group of Originators  (other than  Federal-Mogul)  that  individually  or as a
group have Receivables with aggregate Outstanding Balances (determined as of the
date of the applicable Event of Purchase and Sale Termination) of less than 5.0%
of the  Outstanding  Balances of all the  Receivables  as of such date,  and the
Buyer and the Agent receive written notice from  Federal-Mogul  within 3 days of
the date of the occurrence of such Event of Purchase and Sale  Termination  that
Federal-Mogul  shall promptly terminate the Receivables  Purchase Agreement with
respect to such  Originator or such group of  Originators  and such  termination
promptly occurs. For purposes of the immediately preceding sentence, an Event of
Purchase and Sale Termination shall be deemed to have occurred with respect to a
"group of Originators" if any Event of Purchase and Sale Termination occurs with
respect  to two or  more  Originators  within  any  period  of  time.  Upon  the
occurrence of the Termination Date for any reason whatsoever,  the Buyer and its
assigns  shall have,  in addition to all other  rights and  remedies  under this
Agreement or otherwise,  all other rights and remedies  provided  under the UCC,
which rights shall be cumulative.

                                       18
<PAGE>

                                  ARTICLE VII.
                                 INDEMNIFICATION

     Section 7.1  Indemnities by the Parent.  Without  limiting any other rights
which the Buyer may have hereunder or under  applicable law, the Parent and each
Sub-Servicer  hereby agrees to indemnify the Buyer and its assignees  (including
the Agent and each Purchaser) and their respective officers,  directors,  agents
and  employees  (each  an  "Indemnified  Party")  from and  against  any and all
damages,  losses,  claims,  taxes,  liabilities,  costs and expenses and for all
other amounts payable, including reasonable attorneys' fees (which attorneys may
be employees of the Buyer, the Agent or such Purchaser) and  disbursements  (all
of the  foregoing  being  collectively  referred to as  "Indemnified  Amounts"),
awarded against or incurred by any of them arising out of any of the following:

          (i)  any   representation  or  warranty  made  by  the  Parent,   such
     Sub-Servicer or any other  Originator (or any officers of the Parent,  such
     Sub-Servicer  or any other  Originator)  under or in  connection  with this
     Agreement, any other Transaction Document, any Settlement Date Statement or
     any other information or report delivered by the Parent,  such Sub-Servicer
     or any other Originator  pursuant hereto or thereto,  which shall have been
     false or incorrect when made or deemed made;

          (ii)  the  failure  by the  Parent,  such  Sub-Servicer  or any  other
     Originator  to comply with any  applicable  law,  rule or  regulation  with
     respect to any  Receivable  or Contract sold to the Buyer or serviced by it
     hereunder,  as  applicable,  or the  nonconformity  of such  Receivable  or
     Contract with any such applicable law, rule or regulation;

          (iii)  any  failure  of the  Parent,  such  Sub-Servicer  or any other
     Originator  to perform its duties or  obligations  in  accordance  with the
     provisions of this Agreement or any other Transaction Document;

          (iv) RESERVED;

          (v) any dispute,  claim,  offset or defense  (other than  discharge in
     bankruptcy of the Obligor) of any Obligor to the payment of any  Receivable
     (including,  without limitation,  a defense based on such Receivable or the
     related  Contract not being a legal,  valid and binding  obligation of such
     Obligor  enforceable against it in accordance with its terms), or any other
     claim  resulting from the sale of the merchandise or service giving rise to
     such Receivable or the furnishing or failure to furnish such merchandise or
     services;

          (vi) the commingling by the Parent or such Sub-Servicer of Collections
     of  Receivables  sold by it to the Buyer or  serviced by it  hereunder,  as
     applicable, at any time with other funds;

          (vii)  any  investigation,  litigation  or  proceeding  related  to or
     arising  from  this  Agreement  or  any  other  Transaction  Document,  the
     transactions  contemplated hereby or thereby,  the use of the proceeds of a
     Purchase,  the  ownership of the  Receivables  or any other  investigation,
     litigation or proceeding  relating to the Parent or any other Originator

                                       19
<PAGE>

     in which any Indemnified  Party becomes  involved as a result of any of the
     transactions contemplated hereby or thereby;

          (viii) any  inability  to  litigate  any claim  against any Obligor in
     respect  of any  Receivable  sold to the Buyer as a result of such  Obligor
     being  immune  from  civil and  commercial  law and suit on the  grounds of
     sovereignty or otherwise from any legal action, suit or proceeding; or

          (ix) the reference in any Settlement  Date Statement to any Receivable
     sold to the Buyer or serviced by the Sub-Servicer hereunder, as applicable,
     as an Eligible  Receivable,  which Receivable as of the date it was sold to
     the Buyer and as of the date of the  Settlement  Date  Statement  is not an
     Eligible Receivable and such Eligible Receivable is used in determining (x)
     the Net Receivables  Balance and (y) whether the Net Receivables Balance as
     of any date of  determination  equals or exceeds the sum of (A) (x) Capital
     divided  by (y) 1  minus  the  Aggregate  Reserve  Percentage  and  (B) the
     Contractual Dilution Balance.

excluding, however, the following:

     (b)  Indemnified  Amounts  to the  extent  final  judgment  of a  court  of
competent  jurisdiction  holds  such  Indemnified  Amounts  resulted  from gross
negligence or willful  misconduct on the part of the  Indemnified  Party seeking
indemnification;

     (c)  Indemnified  Amounts to the extent the same includes losses in respect
of  Receivables  that prove to be  uncollectible  on account of the  insolvency,
bankruptcy or lack of creditworthiness of the related Obligor; or

     (d) taxes imposed by the  jurisdiction  in which such  Indemnified  Party's
principal  executive office is located, on or measured by the overall net income
of such  Indemnified  Party to the extent that the  computation of such taxes is
consistent with (i) the characterization of the Purchases as true sales and (ii)
the  characterization  of the  transactions  under  the  Purchase  Agreement  as
creating indebtedness of the Buyer for purposes of taxation.

     Section 7.2 Other Costs and Expenses.  The Parent shall pay to the Buyer on
demand any and all costs and expenses of the Buyer, if any, including reasonable
counsel fees and expenses in connection  with the  enforcement of this Agreement
and  the  other  documents  delivered  hereunder  and  in  connection  with  any
restructuring   or  workout  of  this  Agreement  or  such  documents,   or  the
administration  of this  Agreement  following  an  Event  of  Purchase  and Sale
Termination.

                                 ARTICLE VIII.
                                  MISCELLANEOUS

     Section 8.1 Waivers and Amendments.

     (a) No failure or delay on the part of the Buyer (or any of its  assignees)
or the Parent in  exercising  any power,  right or remedy  under this  Agreement
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such power,  right or remedy preclude any

                                       20
<PAGE>

other  further  exercise  thereof or the exercise of any other  power,  right or
remedy.  The  rights  and  remedies  herein  provided  shall be  cumulative  and
nonexclusive  of any  rights or  remedies  provided  by law.  Any waiver of this
Agreement shall be effective only in the specific  instance and for the specific
purpose for which given.

     (b) No provision of this Agreement may be amended,  supplemented,  modified
or waived  except in writing  signed by the  Parent  and the Buyer  and,  to the
extent  required  under the  Purchase  Agreement,  the  Agent  and the  Required
Investors.

     Section 8.2 Notices.  Except as otherwise  expressly  provided herein,  all
communications and notices provided for hereunder shall be in writing (including
bank wire, telecopy or electronic facsimile transmission or similar writing) and
shall be given to the other party hereto at its  respective  address or telecopy
number set forth on the signature  pages  hereof.  All such  communications  and
notices  shall,  when mailed,  telecopied,  telegraphed,  telexed or cabled,  be
effective when received through the mails, transmitted by telecopy, delivered to
the telegraph  company,  confirmed by telex answerback or delivered to the cable
company, respectively.

     Section 8.3 Protection of Buyer's Interests.

     (a) The Parent agrees, and shall cause each other Originator to agree, that
from time to time,  at its  expense,  it will  promptly  execute and deliver all
instruments  and  documents,  and take all  actions,  that may be  necessary  or
desirable,  or that the Buyer (or its  assignees)  may  reasonably  request,  to
perfect,   protect  or  more  fully  evidence  the  Buyer's   ownership  of  the
Receivables,  or to enable the Buyer (or its  assignees) to exercise and enforce
their rights and remedies  hereunder.  The Buyer (or its assignees)  may, or the
Buyer (or its  assignees,)  may direct the Parent and each other  Originator to,
notify the Obligors of Receivables, at any time following the replacement of the
Parent as  Sub-Servicer  and at the  Parent's  expense,  of the  Buyer's (or its
assignees')  ownership of the  Receivables  and may also direct that payments of
all amounts due or that become due under any or all Receivables be made directly
to the Buyer or its designee.

     (b) If the Parent or a Sub-Servicer fails to perform any of its obligations
hereunder,  the Buyer (or any of its  assignees)  may (but shall not be required
to) perform, or cause the performance of, such obligation;  and the Buyer's (and
any of its assignee's) costs and expenses incurred in connection therewith shall
be payable by the Parent or such  Sub-Servicer,  as applicable,  on demand.  The
Parent and each  Sub-Servicer  irrevocably  authorizes the Buyer at any time and
from time to time in the sole discretion of the Buyer, and appoints the Buyer as
its  attorney-in-fact,  to act on behalf of the Parent and such Sub-Servicer (i)
to  execute  on behalf  of the  Parent as  seller/debtor  and to file  financing
statements  necessary or desirable in the Buyer's sole discretion to perfect and
to maintain the perfection and priority of the Buyer's ownership interest in the
Purchased Assets and (ii) to file a carbon,  photographic or other  reproduction
of this Agreement or any financing  statement with respect to the Receivables as
a financing  statement in such offices as the Buyer in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the Buyer's  ownership  interest in the Purchased  Assets.  This  appointment is
coupled with an interest and is irrevocable.

                                       21
<PAGE>

     Section 8.4 Confidentiality.

     (a) The Parent and each Sub-Servicer shall, and the Parent shall cause each
other Originator to, maintain and shall cause each of its employees and officers
to maintain the confidentiality of this Agreement and the Purchase Agreement and
the other confidential proprietary information with respect to the Agent, Falcon
and ISC and their  respective  businesses  obtained by it or them in  connection
with the structuring, negotiating and execution of the transactions contemplated
herein  and  therein,  except  that the  Parent,  each  Sub-Servicer  and  their
respective  officers and employees may disclose such  information  to each other
Originator,  the  Parent's,  such  Sub-Servicer's  or  such  other  Originator's
external  accountants  and  attorneys and as required by any  applicable  law or
order of any judicial or administrative proceeding. In addition, the Parent, the
Sub-Servicer  and each  Originator may disclose any such  nonpublic  information
pursuant  to any  law,  rule,  regulation,  direction,  request  or order of any
judicial,  administrative or regulatory authority or proceedings (whether or not
having the force or effect of law).

     (b) Anything  herein to the contrary  notwithstanding,  the Parent and each
Sub-Servicer  hereby consents,  and the Parent shall cause each other Originator
to consent,  to the disclosure of any nonpublic  information  with respect to it
(i) to the Buyer, the Agent, the Investors, Falcon or ISC by each other, (ii) by
the Buyer,  the Agent or the Purchasers to any prospective or actual assignee or
participant  of any  of  them  or  (iii)  by the  Agent  to any  rating  agency,
commercial paper dealer or provider of a surety, guaranty or credit or liquidity
enhancement  to  Falcon  or ISC or any  entity  organized  for  the  purpose  of
purchasing, or making loans secured by, financial assets for which First Chicago
acts as the  administrative  agent and to any  officers,  directors,  employees,
outside  accountants  and attorneys of any of the foregoing,  provided each such
Person is informed of the  confidential  nature of such  information in a manner
consistent  with the  practice  of the Agent for the making of such  disclosures
generally to Persons of such types. In addition,  the Buyer,  the Purchasers and
the Agent may disclose any such nonpublic information pursuant to any law, rule,
regulation,  direction,  request  or order of any  judicial,  administrative  or
regulatory  authority or proceedings  (whether or not having the force or effect
of law).

     Section 8.5 Bankruptcy Petition.

     (a) The Parent and each  Sub-Servicer  hereby  covenants  and agrees  that,
prior to the date which is one year and one day after the payment in full of all
outstanding senior indebtedness of Falcon and/or ISC, it shall not institute, or
join any other Person in instituting, against Falcon and/or ISC, any bankruptcy,
reorganization,  arrangement,  insolvency or  liquidation  proceedings  or other
similar  proceeding  under  the laws of the  United  States  or any state of the
United States.

     (b) The Parent and each  Sub-Servicer  hereby  covenants  and agrees  that,
prior to the date  which is one year and one day  after  all  Aggregate  Unpaids
(under and as defined in the Purchase  Agreement)  have been paid,  it shall not
institute against,  or join any other Person in instituting  against,  the Buyer
any   bankruptcy,   reorganization,   arrangement,   insolvency  or  liquidation
proceedings or other similar  proceeding  under the laws of the United States or
any state of the United States.

                                       22
<PAGE>

     Section 8.6  Limitation  of  Liability.  Except  with  respect to any claim
arising out of the willful  misconduct or gross  negligence of Falcon,  ISC, the
Agent or any Investor,  no claim may be made by the Parent,  the Sub-Servicer or
any  other  Person  against  Falcon,  ISC,  the Agent or any  Investor  or their
respective Affiliates,  directors,  officers, employees, attorneys or agents for
any special, indirect, consequential or punitive damages in respect of any claim
for  breach of  contract  or any other  theory of  liability  arising  out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event  occurring  in  connection  therewith;  and the Parent  hereby  waives,
releases, and agrees not to sue upon any claim for any such damages,  whether or
not accrued and whether or not known or suspected to exist in its favor.

     Section 8.7 CHOICE OF LAW. THIS AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW YORK.

     Section 8.8 CONSENT TO JURISDICTION.  THE PARENT HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE
COURT SITTING IN NEW YORK,  NEW YORK IN ANY ACTION OR PROCEEDING  ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE PARENT PURSUANT TO
THIS  AGREEMENT  AND THE PARENT  HEREBY  IRREVOCABLY  AGREES  THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR  PROCEEDING  MAY BE HEARD AND  DETERMINED  IN ANY SUCH
COURT AND  IRREVOCABLY  WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER  HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
BUYER (OR THE RIGHTS OF THE AGENT OR ANY PURCHASER AS THE BUYER'S  ASSIGNEES) TO
BRING  PROCEEDINGS  AGAINST  THE PARENT IN THE COURTS OF ANY OTHER  JURISDICTION
WHEREIN ANY ASSETS OF THE PARENT MAY BE LOCATED.  ANY JUDICIAL PROCEEDING BY THE
PARENT AGAINST THE BUYER, THE AGENT OR ANY PURCHASER, ANY AFFILIATE OF THE AGENT
OR A PURCHASER,  OR ANY OTHER OF THE BUYER'S  ASSIGNEES  INVOLVING,  DIRECTLY OR
INDIRECTLY,  ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE PARENT PURSUANT TO THIS AGREEMENT
SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

     Section 8.9 WAIVER OF JURY TRIAL.  THE PARENT AND THE BUYER  HEREBY  WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,  DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT,  CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT,  ANY DOCUMENT  EXECUTED BY THE
PARENT PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP  ESTABLISHED  HEREUNDER OR
THEREUNDER.

                                       23
<PAGE>

     Section 8.10 Binding Effect; Assignability. This Agreement shall be binding
upon and inure to the  benefit  of the  Parent,  the Buyer and their  respective
successors  and permitted  assigns  (including any trustee in  bankruptcy).  The
Parent  may not  assign  any of its  rights  and  obligations  hereunder  or any
interest  herein without the prior written  consent of the Buyer.  The Buyer may
assign at any time its rights and obligations  hereunder and interests herein to
any other  Person  without  the  consent of the  Parent.  Without  limiting  the
foregoing,  the Parent  acknowledges  that the Buyer,  pursuant to the  Purchase
Agreement,  shall assign to the Agent,  for the benefit of the  Purchasers,  its
rights, remedies, powers and privileges hereunder and that the Agent may further
assign such rights,  remedies,  powers and privileges to the extent permitted in
the Purchase Agreement. The Parent agrees that the Agent, as the assignee of the
Buyer, shall, subject to the terms of the Purchase Agreement,  have the right to
enforce this  Agreement and to exercise  directly all of the Buyer's  rights and
remedies under this Agreement (including,  without limitation, the right to give
or  withhold  any  consents  or  approvals  of the Buyer to be given or withheld
hereunder)  and the  Parent  agrees to  cooperate  fully  with the Agent and the
Servicer in the exercise of such rights and remedies.  The Parent further agrees
to give to the Agent  copies of all  notices it is required to give to the Buyer
hereunder. This Agreement shall create and constitute the continuing obligations
of the  parties  hereto in  accordance  with its terms and shall  remain in full
force and effect until such time,  after the Termination  Date, as the Aggregate
Unpaids shall be equal to zero; provided,  however, that the rights and remedies
with respect to (i) any breach of any  representation  and warranty  made by the
Parent pursuant to Article II, (ii) the  indemnification  and payment provisions
of Article VII,  (iii) Section 8.4, and (iv) Section 8.5 shall be continuing and
shall survive any termination of this Agreement.

     Section  8.11  Subordination.  The  Parent  agrees  that any  indebtedness,
obligation or claim it may from time to time hold or otherwise  have (other than
any  obligation  or claim with  respect to the fees  payable by the Buyer  under
Section 5.6) against the Buyer or any assets or properties of the Buyer, whether
arising  hereunder  or  otherwise  existing,  shall be  subordinate  in right of
payment to the prior  payment in full of any  indebtedness  or obligation of the
Buyer owing to the Agent or any  Purchaser  under the  Purchase  Agreement.  The
subordination  provision  contained herein is for the direct benefit of, and may
be enforced by, the Agent and the Purchasers and/or any of their assignees under
the Purchase Agreement.

     Section  8.12  Integration;   Survival  of  Terms.   This  Agreement,   the
Subordinated  Notes,  the  Subscription  Agreement  and the  Collection  Account
Agreements  contain the final and complete  integration of all prior expressions
by the  parties  hereto  with  respect to the  subject  matter  hereof and shall
constitute  the entire  agreement  among the parties  hereto with respect to the
subject matter hereof superseding all prior oral or written understandings.

     Section 8.13 Counterparts;  Severability. This Agreement may be executed in
any number of  counterparts  and by each party hereto in separate  counterparts,
each of which  when so  executed  shall be deemed to be an  original  and all of
which when taken  together  shall  constitute  one and the same  Agreement.  Any
provisions  of this  Agreement  which are  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.

                                       24
<PAGE>

                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement to be executed and delivered by their duly  authorized  officers as of
the date hereof.

Parent and Sub-Servicer:

                                     FEDERAL-MOGUL CORPORATION,
                                       as Parent and Sub-Servicer

                                     By: _______________________________________
                                          Name:
                                          Title:

                                     Address for Notices:

                                     Federal-Mogul Corporation
                                     26555 Northwestern Highway
                                     Southfield, Ml 48034

                                     Attention:  Treasury Department

                                     Phone: (248) 354-7700
                                     Fax: (248) 354-6746

Buyer:

                                     FEDERAL-MOGUL FUNDING CORPORATION,
                                       as Buyer

                                     By: _______________________________________
                                          Name:
                                          Title:

                                     Address for Notices:

                                     Federal-Mogul Funding Corporation
                                     26555 Northwestern Highway
                                     Southfield, Ml 48034

                                     Attention:  Treasury Department

                                     Phone: (248) 354-7700
                                     Fax: (248) 354-6746

                           Receivables Sale Agreement

                                       25
<PAGE>

                                    EXHIBIT I

                                   DEFINITIONS

     As used in this  Agreement,  the  following  terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):

     "Adverse Claim" means a lien, security interest, charge or encumbrance,  or
other right or claim in, of or on any Person's  assets or properties in favor of
any other Person.

     "Affiliate" means, with respect to any Person, any other Person directly or
indirectly  controlling (including but not limited to all directors and officers
of such Person),  controlled by, or under direct or indirect common control with
such  Person.  A  Person  shall be  deemed  to  control  another  Person  if the
controlling  Person  owns 10% or more of any class of voting  securities  of the
controlled Person or possesses,  directly or indirectly,  the power to direct or
cause the direction of the  management or policies of the other Person,  whether
through ownership of voting securities, by contract or otherwise.

     "Agent"  means First  Chicago in its capacity as "Agent" under the Purchase
Agreement,  and any successor  Agent  appointed  under Article X of the Purchase
Agreement.

     "Aggregate  Reserve  Percentage"  shall have the meaning  specified  in the
Purchase Agreement.

     "Aggregate Unpaids" has the meaning set forth in the Purchase Agreement.

     "Agreement"   means  this  Amended  and  Restated   Receivables   Sale  and
Contribution Agreement, as it may be amended, restated or otherwise modified and
in effect from time to time.

     "Amortization  Event"  shall have the  meaning  specified  in the  Purchase
Agreement.

     "Base Rate" means a rate per annum equal to the corporate base rate,  prime
rate or base rate of interest,  as  applicable,  announced by the Reference Bank
from time to time,  changing when and as such rate changes;  provided,  however,
that from and after the occurrence of an Event of Purchase and Sale Termination,
and during the continuation  thereof, the "Base Rate" shall equal the sum of the
corporate  base  rate,  prime  rate or base  rate of  interest,  as  applicable,
announced by the Reference Bank from time to time,  plus 2% per annum,  changing
when and as such rate changes.

     "Business  Day" means any day on which banks are not authorized or required
to close in New York, New York, Detroit,  Michigan or Chicago,  Illinois and The
Depository Trust Company of New York is open for business.

     "Capital" shall have the meaning set forth in the Purchase Agreement.

                           Receivables Sale Agreement

                                       26
<PAGE>

     "Change  of  Control"  shall  have the  meaning  set forth in the  Purchase
Agreement.

     "Code"  means the Internal  Revenue  Code of 1986,  as amended from time to
time.

     "Collection Account" means each concentration account,  depositary account,
lock-box  account or similar  account in which any  Collections are collected or
deposited.

     "Collection Account Agreement" means, in the case of any actual or proposed
Collection Account, an agreement in substantially the form of Exhibit V hereto.

     "Collection  Bank" means,  at any time, any of the banks or other financial
institutions holding one or more Collection Accounts.

     "Collection  Date" means that date following the Termination  Date which is
one year and one day after the date  which (i) the  Outstanding  Balance  of all
Receivables sold hereunder has been reduced to zero and (ii) the Parent has paid
to the Buyer all  indemnities,  adjustments  and other amounts which may be owed
hereunder in connection with the Purchases.

     "Collection  Period"  shall  have the  meaning  set  forth in the  Purchase
Agreement.

     "Collections"  means, with respect to any Receivable,  all cash collections
and other  cash  proceeds  in  respect of such  Receivable,  including,  without
limitation,  all  cash  proceeds  of  Related  Security  with  respect  to  such
Receivable.

     "Contract" means, with respect to any Receivable,  any and all Invoices and
other  agreements  pursuant  to which  goods or  services  are  ordered  from or
provided by an Originator.

     "Contractual  Dilution  Balance"  shall have the meaning  specified  in the
Purchase Agreement.

     "Credit Policies" means an Originator's  credit and collection policies and
practices  relating to Contracts and Receivables  existing on the date hereof, a
copy of which is attached hereto as in Exhibit VI hereto,  as modified from time
to time in accordance  with this  Agreement,  provided that each  Originator may
have Credit  Policies  with certain  immaterial  variations  from the credit and
collection policies attached hereto in Exhibit VI.

     "Defaulted Receivable" means a Receivable:  (i) as to which any payment, or
part thereof,  remains unpaid for 90 days or more from the original due date for
such payment;  (ii) an Insolvency Event has occurred with respect to the Obligor
thereof;  (iii) as to  which  the  Obligor  thereof,  if a  natural  person,  is
deceased; or (iv) which has been identified by an Originator as uncollectible.

     "Dilutions"  means, at any time, the aggregate  amount of reductions in the
Outstanding  Balances of the  Receivables  as a result of any setoff,  discount,
adjustment  or  otherwise,  other  than (i) cash  Collections  on account of the
Receivables, and (ii) charge-offs.

                                       27
<PAGE>

     "Discount Factor" means a percentage calculated to provide the Buyer with a
reasonable  return on its investment in the Receivables  after taking account of
(i) the time value of money based upon the  anticipated  dates of  collection of
the  Receivables  and the cost to the Buyer of financing  its  investment in the
Receivables during such period, (ii) the risk of nonpayment by the Obligors, and
(iii) the costs of sub-servicing performed by an Originator.  The Parent and the
Buyer may agree from time to time to change the Discount Factor based on changes
in one or more of the items affecting the calculation thereof, provided that any
change to the  Discount  Factor  shall take effect as of the  commencement  of a
Collection  Period,  shall  apply  only  prospectively  and shall not affect the
Purchase  Price  payment in  respect  of  Purchases  which  occurred  during any
Collection  Period ending prior to the Collection Period during which the Parent
and the Buyer agree to make such change.

     "Eligible  Receivable"  shall have the meaning  specified  in the  Purchase
Agreement.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time.

     "ERISA Affiliate" means any trade or business (whether or not incorporated)
that is treated as a single employer with an Originator under Section 414 of the
Code.

     "Event of Purchase and Sale  Termination"  has the meaning assigned to that
term in Section 6.1.

     "Facility  Termination  Date" has the  meaning  set  forth in the  Purchase
Agreement.

     "Falcon"  shall have the meaning  assigned to that term in the  preliminary
statements to this  Agreement and includes such entity's  successors and assigns
(but does not include the Falcon  Investors as assignees  under  Section 3.06 of
the Purchase Agreement).

     "Federal-Mogul"  means Federal-Mogul  Corporation,  a Michigan corporation,
and its successors and permitted assigns.

     "Finance Charges" means, with respect to a Contract, any finance, interest,
late payment  charges or similar  charges  owing by an Obligor  pursuant to such
Contract.

     "First  Chicago" means The First National Bank of Chicago in its individual
capacity and its successors.

     "Governmental  Authority" shall have the meaning  specified in the Purchase
Agreement.

     "Indebtedness" shall have the meaning specified in the Purchase Agreement.

     "Independent  Director" means, with respect to  Federal-Mogul,  any Person:
(i) who is not an officer,  an  employee,  a pensioner,  or a beneficial  owner,
directly or indirectly,  of 10% or more of any equity interest in  Federal-Mogul
or any Affiliate thereof, and who is not

                                       28
<PAGE>

related by blood, marriage or adoption to any of the foregoing Persons; (ii) who
has not been an  employee of  Federal-Mogul  or any  Affiliate  in the last five
years;  (iii) who is not affiliated  with, or employed by, any Person  providing
services to, any of Federal-Mogul's significant customers or suppliers; (iv) who
is not  affiliated  with any tax  exempt  or other  organization  that  receives
significant  contributions from Federal-Mogul or any of its Affiliates;  and (v)
who has not provided and is not providing directly or indirectly, whether or not
through any related corporation, partnership, limited liability company, limited
liability partnership or other Person,  legal,  accounting or investment banking
services for  Federal-Mogul or any Affiliate.  In the case of an accountant,  an
accountant  will only be  Independent  for purposes  hereof only where he or she
also meets the criteria of  independence  described in SEC Regulation  S-X, Rule
2-01(B) and does not otherwise  provide any  professional  services  directly or
indirectly  to   Federal-Mogul  or  its  Affiliates  and  none  of  his  or  her
professional  affiliates having managerial  responsibilities  participate in any
such services.

     "Insolvency  Event"  shall  have  the  meaning  specified  in the  Purchase
Agreement.

     "Investors" has the meaning set forth in the Preliminary  Statement of this
Agreement.

     "Invoice" means, collectively,  with respect to any Receivable, any and all
instruments,  bills of lading,  invoices or other  writings  which evidence such
Receivable or the goods underlying such Receivable.

     "Involuntary  Insolvency  Event"  shall have the meaning  specified  in the
Purchase Agreement.

     "ISC"  shall  have the  meaning  assigned  to that term in the  preliminary
statements to this  Agreement and includes such entity's  successors and assigns
(but does not include the ISC  Investors as assignees  under Section 3.11 of the
Purchase Agreement).

     "Labor Actions" has the meaning set forth in Section 4.1(b)(v).

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
financial condition,  business or operations of an Originator,  (ii) the ability
of an  Originator to perform its  obligations  under any  Transaction  Document,
(iii)  the  legality,   validity  or  enforceability  of  this  Agreement,   any
Transaction   Document  or  any  Collection  Account  Agreement  relating  to  a
Collection  Account into which a material  portion of Collections are deposited,
(iv) the Originator's,  the Buyer's,  the Agent's or any Purchaser's interest in
the Receivables generally or in any significant portion of the Receivables,  the
Related  Security  or  the  Collections   with  respect  thereto,   or  (v)  the
collectibility  of the Receivables  generally or of any material  portion of the
Receivables.

     "Net Receivables  Balance" shall have the meaning specified in the Purchase
Agreement.

     "Net Worth" means,  as of the last Business Day of each  Collection  Period
preceding any date of  determination,  the excess,  if any, of (a) the aggregate
Outstanding Balance of the Receivables owned by the Buyer at such time, over (b)
the sum of (i) the aggregate

                                       29
<PAGE>

Capital outstanding at such time, plus (ii) the aggregate  outstanding principal
balance of the Subordinated  Loans (including any Subordinated  Loan proposed to
be made on the date of determination).

     "Obligor" means a Person obligated to make payments pursuant to a Contract.

     "Original  Balance" means, with respect to any Receivable,  the Outstanding
Balance of such Receivable on the date it was purchased by the Buyer.

     "Originator"  means each of (a)  Federal-Mogul;  (b)  Federal-Mogul  Canada
Limited; (c) Federal-Mogul Piston Rings, Inc.; (d) Federal-Mogul Flowery Branch,
LLC; (e) Federal-Mogul Powertain, Inc.; (f) Federal-Mogul Sealing Systems, Inc.;
(g)  Federal-Mogul  Carolina,  Inc.;  (h)  Federal-Mogul  South Bend,  Inc., (i)
Federal-Mogul  LaGrange,  Inc.; (j) Federal-Mogul  Sintered Products,  Inc.; (k)
Federal-Mogul  Sintered  Products-Waupun,  Inc.;  (l)  Federal-Mogul  Engineered
Bearings, Inc.; (m) Federal-Mogul  Camshafts,  Inc.; (n) Federal-Mogul Aviation,
Inc.; (o) Federal-Mogul Ignition Company; (p) Federal-Mogul Products,  Inc.; (q)
Federal-Mogul  System  Protection  Group,  Inc.;  and  shall  include  any other
wholly-owned  subsidiary  of  Federal-Mogul  which the Buyer,  the Agent and the
Purchasers unanimously approve.

     "Outstanding  Balance"  of  any  Receivable  at any  time  means  the  then
outstanding principal balance thereof, and shall exclude any interest or finance
charges  thereon,  without  regard to  whether  any of the same  shall have been
capitalized.

     "Parent" means Federal-Mogul Corporation,  a Michigan corporation,  and its
successors and assigns.

     "PBGC" means the Pension Benefit Guaranty Corporation created under Section
4002(a) of ERISA or any successor thereto.

     "Person" means an individual,  partnership,  corporation, limited liability
company, joint venture, association, trust, or any other entity or organization,
including a Governmental  Authority or other government or political subdivision
or agent or instrumentality thereof.

     "Plan" means any defined  benefit plan  maintained or contributed to by the
Originator  or any  Subsidiary  of the  Originator  or by any trade or  business
(whether or not  incorporated)  under common  control with the Originator or any
Subsidiary of the Originator as defined in Section  4001(b) of ERISA and insured
by the PBGC under Title IV of ERISA.

     "Potential  Amortization  Event"  shall have the meaning  specified  in the
Purchase Agreement.

     "Potential  Event of Purchase and Sale  Termination"  means an event which,
with the passage of time or the giving of notice,  or both,  would constitute an
Event of Purchase and Sale Termination.

                                       30
<PAGE>

     "Purchase" means a purchase by the Buyer of the Receivables and the Related
Security and all Collections and other proceeds thereof from the Parent pursuant
to Section 1.1 of this Agreement.

     "Purchase Agreement" has the meaning set forth in the Preliminary Statement
of this Agreement.

     "Purchase Date" means the date on which each Purchase occurs hereunder.

     "Purchase  Price"  means,  with  respect to any  Purchase on any date,  the
aggregate  price to be paid to the Parent for such Purchase in  accordance  with
Section 1.2 of this  Agreement for the  Receivables  and Related  Security being
sold to the Buyer on such date,  which  price shall equal (i) the product of (x)
the Original Balance of such Receivables times (y) one minus the Discount Factor
then in effect, minus (ii) any Purchase Price Credits to be credited against the
purchase price otherwise payable in accordance with Section 1.3 hereof.

     "Purchase Price Credit" has the meaning set forth in Section 1.3.

     "Purchased  Assets" means,  collectively,  all Receivables  existing on the
date of the initial Purchase  hereunder,  and all Receivables arising thereafter
through and including the Termination Date, all Collections and Related Security
associated  therewith,  the Receivables Purchase Agreement,  all proceeds of the
foregoing,  and all Collection Accounts and all balances,  checks,  money orders
and other instruments from time to time therein.

     "Purchaser" has the meaning set forth in the Purchase Agreement.

     "Receivable"  means all the U.S.  dollar  denominated  and all the Canadian
dollar-denominated  accounts receivable shown on the records of an Originator or
any  subsidiary,  and from  time to time  thereafter,  arising  from the sale of
merchandise  rendered by an Originator or any subsidiary in the ordinary  course
of business;  provided,  however,  that  "Receivable" that includes a Stock Lift
shall be sold to Buyer net of any  adjustment  with  respect to such Stock Lift.
Receivables  which  become  Defaulted  Receivables  will cease to be included as
Receivables on the day on which they become Defaulted Receivables.

     "Receivable Interests" has the meaning set forth in the Purchase Agreement.

     "Receivables  Purchase Agreement" means the Receivables Purchase Agreement,
dated as of July 1,  1999,  between  the  Parent,  as  purchaser,  and the other
Originators, as Sellers, as amended, modified or supplemented from time to time.

     "Records"  means,  with respect to any Receivable,  all Contracts and other
documents, books, records and other information (including,  without limitation,
computer  programs,  tapes,  disks,  punch cards,  data processing  software and
related property and rights)  relating to such Receivable,  any Related Security
therefor and the related Obligor.

     "Reference  Bank" means Bank One,  Michigan or such other bank as the Agent
shall designate with the consent of the Buyer.

                                       31
<PAGE>

     "Related Security" means, with respect to any Receivable:

          (i) all of the  Parent's  interest,  if any,  in any goods the sale of
     which gave rise to such Receivable,

          (ii) all  other  security  interests  or liens  and  property  subject
     thereto from time to time,  if any,  purporting  to secure  payment of such
     Receivable,  whether pursuant to the Contract related to such Receivable or
     otherwise,  together with all financing  statements and security agreements
     describing any collateral securing such Receivable,

          (iii) all guaranties,  insurance and other  agreements or arrangements
     of whatever  character from time to time supporting or securing  payment of
     such Receivable whether pursuant to the Contract related to such Receivable
     or otherwise,

          (iv) all Records related to such Receivables,

          (v) all of the  Parent's  right,  title and  interest in, to and under
     each Contract executed in connection therewith in favor of or otherwise for
     the benefit of the Parent; and

          (vi) all proceeds of any of the foregoing.

     "Report Date" shall have the meaning specified in the Purchase Agreement.

     "Reportable Event" has the meaning set forth in Section 4043 of ERISA.

     "Required Capital Amount" means $14,250,000.

     "Required  Investors"  shall have the  meaning  specified  in the  Purchase
Agreement.

     "Requirement  of Law"  shall have the  meaning  specified  in the  Purchase
Agreement.

     "Restricted  Junior  Payment"  shall  have  the  meaning  specified  in the
Purchase Agreement.

     "Section"  means a  numbered  section  of this  Agreement,  unless  another
document is specifically referenced.

     "Servicer" means at any time the Person then authorized pursuant to Article
VII of the Purchase Agreement to service, administer and collect Receivables.

     "Settlement  Date" means, (a) prior to the earlier to occur of (i) an Event
of Purchase and Sale  Termination  or (ii) the Facility  Termination  Date,  the
twentieth  (20th) day of each month or, if such day is not a Business  Day,  the
next succeeding Business Day, and (b) from and after the earlier to occur of (i)
an Event of Purchase and Sale Termination or (ii) the Facility Termination Date,
the  twentieth  (20th) day of each month or, if such day is not a

                                       32
<PAGE>

Business  Day, the next  succeeding  Business  Day,  and any other  Business Day
designated by the Agent.

     "Settlement  Date Statement"  means a report  substantially  in the form of
Exhibit VIII hereto (appropriately completed) furnished by a Sub-Servicer to the
Buyer and the Agent (as the Buyer's Assignee) pursuant to Section 5.1(b).

     "Stock Lift" shall mean an account  receivable,  or portion thereof,  as to
which any Originator or one of its subsidiaries has issued a credit in an amount
equal to the balance of such account receivable or portion thereof.

     "Subordinated Loan" has the meaning set forth in Section 1.2(b).

     "Subordinated  Note" means a promissory note in  substantially  the form of
Exhibit X hereto as more  fully  described  in Section  1.2,  as the same may be
amended, restated, supplemented or otherwise modified from time to time.

     "Subscription  Agreement" means the Stockholder and Subscription  Agreement
in  substantially  the form of Exhibit IX  hereto,  as the same may be  amended,
restated, supplemented or otherwise modified from time to time.

     "Sub-Servicer" means  Federal-Mogul,  in its capacity as a sub-servicer for
the Servicer as described in Section 5.1 hereof.

     "Sub-Servicer Fee" means the fee described in Section 5.6 hereof.

     "Subsidiary"  of a Person  means (i) any  corporation  more than 50% of the
outstanding  securities  having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its  Subsidiaries or by such Person and one or more of its  Subsidiaries,  or
(ii) any partnership,  association,  limited liability company, joint venture or
similar business  organization  more than 50% of the ownership  interests having
ordinary  voting  power  of which  shall at the time be so owned or  controlled.
Unless otherwise  expressly  provided,  all references  herein to a "Subsidiary"
shall mean a Subsidiary of the Parent.

     "Termination Date" means the earliest of (i) the Facility Termination Date,
(ii) the date of the declaration or automatic occurrence of the Termination Date
pursuant  to Section  6.2,  and (iii) the date  designated  by the Parent as the
Termination  Date in a written  notice  delivered to the Buyer not less than ten
days prior to such designated date.

     "Transaction  Documents" means collectively,  this Agreement,  the Purchase
Agreement,  the Subordinated Notes, the Subscription Agreement,  each Collection
Agreement,  the  Receivables  Purchase  Agreement  and  all  other  instruments,
documents  and  agreements  executed and  delivered by the Parent and each other
Originator in connection herewith.

     "UCC" means the Uniform  Commercial  Code as from time to time in effect in
the specified jurisdiction.

                                       33
<PAGE>

     "Year 2000 Problem" means any  significant  risk that computer  hardware or
software used in the business or operations of any  Originator  will not, in the
case of dates or time periods  occurring  after  December 31, 1999,  function at
least as  effectively  and  reliably  as in the  case of  dates or time  periods
occurring before January 1, 2000.

     All accounting terms not specifically  defined herein shall be construed in
accordance  with generally  accepted  accounting  principles.  All terms used in
Article  9 of the UCC in the  State of New York,  and not  specifically  defined
herein, are used herein as defined in such Article 9.

                                       34
<PAGE>

                                   EXHIBIT II

           CHIEF EXECUTIVE OFFICE OF THE PARENT; LOCATIONS OF RECORDS;
               TRADE NAMES; FEDERAL EMPLOYER IDENTIFICATION NUMBER

                            FEDERAL-MOGUL CORPORATION

Chief Executive Office and                   26555 Northwestern Highway
  Location of Records                        Southfield, MI  48034

Trade Names, Assumed Names and               Federal-Mogul Corporation
  Former Names                               Federal-Mogul Ignition Company
                                             Champion Spark Plug Co.
                                             Federal-Mogul Chesterfield Inc.
                                             Cooper Automotive Products, Inc.
                                             Federal-Mogul Automotive Company
                                             Cooper Automotive Company
                                             Federal-Mogul A&S Company
                                             Cooper A&S Company
                                             Federal-Mogul Interamericana, Ltd.
                                             Champion Interamericana, Ltd.

Federal Employer Identification Number       38-0533580

                           Receivables Sale Agreement

                                       35
<PAGE>

                                   EXHIBIT III

                               COLLECTION ACCOUNTS

Bank/Lox Box Location                       Account #          Box #
---------------------                       ---------          -----
Comerica Bank                               1000013027         148901 and 30401
P.O. Box
Detroit, MI 48275-3265

BANK ONE CORPORATION                        200011003677       771327
Dept. 771327
A E Goetze Inc.
P.O. Box 77000
Detroit, MI 48277-1327

BANK ONE CORPORATION                        182953             771128
Dept. 771128
Supermet Inc.
P.O. Box 77000
Detroit, MI 48277-1128

First National Bank of Chicago              59-36047           730113
PO Box 730113
Dallas, TX 75373-0113

First National Bank of Chicago              55-56872           73696
P.O. Box 73696
Chicago, IL 60673-7696

First Maryland National Bank                171-8376-9         N/A
25 S Charles
Baltimore, MD 21201

First Maryland National Bank                184-8841-1         64899
AE Goetze LaGrange
P.O. Box 64899
Baltimore, MD 21264-4899

First Maryland National Bank                179-8459-5         64011
Deva Engineered Bearings
P.O. Box 64011
Baltimore, MD 21264-4011

                           Receivables Sale Agreement

                                       36
<PAGE>

Bank/Lox Box Location                       Account #          Box #
---------------------                       ---------          -----
Comerica Bank
Bank of America                             7304749           96347
Comtech Manufacturing Co.
96347 Collection Center Dr.
Chicago, IL 60693

Bank of America                             7311095           99543
Glacier Clevite Heavywall Bearings
99543 Collections Center Drive
Chicago IL 60693

Comerica                                    185068964         108901
Glacier Clevite Heavywall Bearings
P. O. Box 6700
Detroit, MI 48267-1089
Bank of America                             7710925           98966

Weyburn Bartel Inc.
98966 Collections Center Dr.
Chicago IL 60693

Comerica                                    185068964         109001
Department 109001
Weyburn Bartel Inc.
P. O. Box 6700
Detroit, MI 48267-1090

Nations BankUS                              3750324114        100220
P.O. Box 100220
Atlanta, GA 30384-0220

Nations BankUS                              3750324114        277964
P.O. Box 277964
Atlanta, GA 30384-7964

Nations BankUS                              3750324114        277969
P.O. Box 277969
Atlanta, GA 30384-7969

Royal Bank of Canada                       to be provided     to be provided
to be provided

                                       37
<PAGE>

                                   EXHIBIT IV

                                   [RESERVED]

                           Receivables Sale Agreement

                                       38
<PAGE>

                                    EXHIBIT V

                      FORM OF COLLECTION ACCOUNT AGREEMENT

           [See Exhibit B to Receivables Interest Purchase Agreement]

                           Receivables Sale Agreement

                                       39
<PAGE>

                                   EXHIBIT VI

                                 CREDIT POLICIES

CUSTOMER CREDIT

Purpose

This policy outlines requirements for creation and monitoring customer credit.

Customer Credit Limits

The  establishment and monitoring of a limit or maximum level of credit sales to
each individual  customer serves to reduce the risk of a significant loss due to
uncollectible  accounts.  A credit  limit  represents  the level of credit sales
(including  previous  outstanding  accounts  receivable)  above which additional
credit will not be extended.

Credit limits should be established after  consideration is given to the payment
history  of  each  customer  and  an  assessment  of  the  customer's  financial
condition. Independent outside sources of credit history available locally (e.g.
Dun &  Bradstreet  in the U.S.),  credit  references  and or customer  financial
statements  should be  evaluated  to establish  customer  credit  limits and for
updating credit limits on a periodic basis.

Credit Hold Routines

Routines  should be established to preclude  shipping  product to customers that
exceeds  the  customer   credit  limit.   Specific   approval  by  a  designated
finance/customer  credit  individual  of  any  deviation  from  the  established
routines.

                           Receivables Sale Agreement

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<PAGE>

INTRODUCTION

CENTRALIZED SOUTHFIELD ENVIRONMENT

o    Supporting the Following
     o    OEM--United States
     o    Aftermarket--United States
     o    Aftermarket--Canada

o    Specific Responsibilities
     o    Credit approval
     o    Collection
     o    Receivable management
     o    Billing--NAA only
     o    Dispute resolution

o    Department Organization Chart
     o    85 total employees
     o    5 part-time/associate
     o    80 full-time company employees (74% 4-year degrees)

o    Software Utilized
     o    CARMS--receivable management
     o    Lotus Notes--communication and dispute management
     o    Maxretriever--document management
     o    UPS--proof of deliveries
     o    PRC--scanner utilization
     o    Internally developed--AMS, MAPS, STRAP

o    Aggressive Reengineering Initiative
     o    Relentless pursuit of superior customer service
     o    Eliminate deductions
     o    Continuous investigation of electronic options in our daily operations
     o    Review of document delivery options for invoices and statements
     o    Resolve customer inquiries with one call methodology
     o    Investigation of order to cash possibilities at manufacturing plants

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CREDIT POLICY AND PROCEDURE

o    Determination of Credit Limits
     o    Credit limits are set at approximately 2.5 times estimated month sales
          for new accounts.
     o    Existing  account  credit  limits are  adjusted  according  to payment
          habits and  financial  stability.  An account  that shows a pattern of
          paying their  account  past due will have their credit limit  adjusted
          downward to 1 - 1 1/2 times monthly sales.

o    New Account Procedure
     o    The following information is requested for new open accounts:
          -    3-trade credit references
          -    1 bank credit reference
          -    Credit reporting agency report (optional)
          -    Verbal  credit  references  from  industry  credit group  members
               (optional)
     o    Requests for  additional  credit are  evaluated  by reviewing  payment
          history (prompt  %/discount % vs. late %), review of current financial
          statements and amount of additional  credit requested  compared to the
          current year high credit.

o    Levels of Credit Granting Approval
     o    Two step process for new credit  approval,  after Sales has  requested
          the account be given open account status.  Review and  approval/reject
          is given first by the Credit Analyst, then by the Area Credit Manager.
     o    Increases in credit for current  customers  are reviewed by the Credit
          Analyst.

o    Use of Security Documents and Personal Guarantees
     o    Personal guarantees are included in the customer's Credit Application.
          While a personal guarantee is not required for all new accounts, it is
          required in cases of higher than usual financial risk.
     o    UCC-1's, UCC-3's, and Purchase Money Security Agreements are taken (or
          continued) on customers with large  projected or current sales volumes
          (>$150,000) or when a customer's financial condition is deteriorating.

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o    Training of Credit Granting Personnel
     o    Each Credit Analyst undergoes a 5 day training  schedule,  reviewing a
          formal training agenda with each of the Credit Analysts. Items covered
          include:
          -    A/R management software and systems (CARMS, MAPS & STRAP)
          -    New account/account maintenance procedures
          -    Special payment terms request approval and rejection
          -    Security documents
          -    Credit and collection procedures

o    Credit Files
     o    A file is kept for each customer account. An example of information in
          this file is:
          -    Original credit application
          -    Notes from phone conversations and meeting with customers
          -    Copies of written correspondence
          -    Information from creditor discussion groups
          -    Personal guarantee (optional)
     o    These files are kept in a central  location in the Customer  Financial
          Services Department
     o    Additionally,  notes are kept  concerning  Credit Analyst  discussions
          with the customer on CARMS. Examples of this information are:
          -    Customer commitments to send checks
          -    Date customers are put on hold
          -    Miscellaneous comments noted by the Credit Analyst that may be of
               value in future credit decisions

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<PAGE>

o    Payment Terms
     o    Standard terms for OEM customers are either net 10th and net 25th prox
          or net 30 days on the  date in the  month  in  which  the  product  is
          shipped.  For net 10th and net 25th prox, if the product is shipped in
          the first 15 days of the month,  payment is due by the 10th day of the
          following month. If shipped later in the month,  payment is due by the
          25th day of the following  month.  Customers are sent an invoice or an
          ASN for each shipment.
     o    Standard  terms  for the FM  Aftermarket  and  Retail  are  based on a
          shipping  month of the 26th to the 25th and  qualify  for a 2%  prompt
          payment  discount if the invoice is paid by the 10th of the  following
          month, otherwise,  full payment for the Aftermarket is due by the 25th
          of the following month and for Retail, full payment is due the 25th of
          the 2nd month following.  Gasket, ignition, chassis and brake terms in
          general  are 2% 2nd  10th  net  25th  prox.  In  addition,  there  are
          negotiated  terms for Retailers  and selected  buying groups which can
          range from 2% 2nd 10th to net 90 days.

o    Determinants of Price
     o    Prices for the Aftermarket are published on product line price sheets.
     o    Prices for Retail and OEM accounts are  negotiated  and specified on a
          pricing  agreement  for a given period of time and are  supported by a
          purchase order or vendor agreement.

o    Cash In Advance/Cash On Account
     o    Used at the Credit Analyst's discretion in the following situations:
          -    Account  consistently  pays past due and is judged to be a credit
               risk
          -    Bankruptcy
          -    New account with credit references judged unsatisfactory

o    Notes Receivable
     o    Used at the Credit  Analyst's  discretion  and  reviewed  monthly  for
          payment. As of May, 1999 month end, there were 4 open Notes Receivable
          for a total of $463,604.45.

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CREDIT AND COLLECTION

o    Account Maintenance
     o    The Credit and Accounts Receivable  Management System (CARMS) produces
          an action list on a daily  basis,  which lists  accounts  that require
          attention  due to a change  in  status  (account  over  credit  limit,
          account past due, etc).
     o    Action lists are reviewed by credit analysts for resolution.
     o    Summary  past due reports  are  generated  on a monthly  basis and are
          reviewed by the  analysts  for credit  restriction.  oCredit  analysts
          continue follow up by making timely  collection  calls to customers on
          past due invoices until payment is received.
     o    Sales is contacted to assist with collection of past due items and the
          resolution of customer disputes.
     o    If payment is not received or a mutual payment  arrangement  cannot be
          made,  the customer is sent a final demand  notice,  which details the
          debt and allows  the  customer  ten  working  days to make  acceptable
          payment arrangements.
     o    If payment is still not  received  and no payment  agreement  has been
          made,  the account is referred to the Area Credit  Manager for further
          disposition.

o    Collection Agencies / Bankruptcies
     o    Accounts  which are  seriously  past due may be referred to FM's legal
          counsel  for  action  or placed  with an  outside  collection  agency.
          Accounts are moved to a separate credit manager code for follow-up.
     o    Accounts that have filed for bankruptcy are moved to a separate credit
          manager code for follow-up and are written off quarterly.

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AFTERMARKET - CUSTOMER BASE OVERVIEW

o    Number of Aftermarket and Retail Accounts
     o    5,548 active Aftermarket accounts
     o    187 active Retail accounts

o    Product Portfolio
     o    Powertrain Systems - power cylinder systems, engine bearings, pistons,
          piston rings, piston pins, piston liners,  connecting rods,  bushings,
          washers,  spark plugs, ignition wires and cables,  ignition coils, and
          ceramic insulators.
     o    Sealing Systems - total engine sealing,  total  transmission  sealing,
          total axle sealing, cylinder head gaskets,  ancillary gaskets, dynamic
          seals,  bonded  pistons,  wiper  products,  heat  shields,  noise  and
          vibration sealing systems.
     o    General  Products - camshafts,  brake and friction  products,  chassis
          products,  driveline  products,  fuel  pumps,  carburetors,   emission
          control products,  strobes,  marker lights,  reflective tape, sintered
          products, and systems protection products.

o    Method of Order Placement and Shipment
     o    Orders can be placed electronically via EDI or through Federal-Mogul's
          Customer Service/Order Entry via phone or fax.
     o    Aftermarket orders are usually shipped from one of our Service Centers
          located in the U.S. and Canada.  Larger orders may be shipped from one
          of three  main  Distribution  Centers  located  in  Jacksonville,  AL,
          Maysville, KY and Skokie, IL.

o    Customer Operations
     o    Aftermarket  customers  consist mainly of warehouse  distributors that
          buy product for downstream  sales to  independent  or warehouse  owned
          auto parts stores. Examples are NAPA, MAWDI and Pittsburgh Crankshaft.
     o    Retail  customers  buy product  for resale in their own company  owned
          store. Examples are CSK Automotive, Advance and AutoZone.

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ORIGINAL EQUIPMENT MARKET AND EXPORT OVERVIEW

o    OE Export Customer Base
     o    1,344 active OEM accounts
     o    208 active Export accounts

o    Customer Operations
     o    OE & Export  customers  consist  primarily of  automotive,  heavy duty
          vehicle, farm equipment and industrial equipment manufacturers.
     o    Major customers include Ford, General Motors and Chrysler.

o    Product Portfolio
     o    Powertrain Systems - power cylinder systems, engine bearings, pistons,
          piston rings, piston pins, piston liners,  connecting rods,  bushings,
          washers,  spark plugs, ignition wires and cables,  ignition coils, and
          ceramic insulators.
     o    Sealing Systems - total engine sealing,  total  transmission  sealing,
          total axle sealing, cylinder head gaskets,  ancillary gaskets, dynamic
          seals,  bonded  pistons,  wiper  products,  heat  shields,  noise  and
          vibration sealing systems.
     o    General  Products - camshafts,  brake and friction  products,  chassis
          products,  driveline  products,  fuel  pumps,  carburetors,   emission
          control products,  strobes,  marker lights,  reflective tape, sintered
          products, and system protection products.

o    Order Process
     o    Decentralized customer service - one at each of our plant locations.
     o    Orders are scheduled in advance by large OEM Customers  (such as Ford,
          GM,  Chrysler)  and the  accum's  are  adjusted as product is shipped,
          material release forecasts updated weekly.
     o    Smaller  OEM's send  purchase  orders in advance  with date  required.
          Purchase orders reviewed at plant before orders are scheduled.

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<PAGE>

ACCOUNTS RECEIVABLE DILUTIONS

o    Cash Discount
     o    1.8% of NAA Sales Doubtful Accounts
     o    Written off quarterly as approved by the department manager
     o    Continual follow up until financial conclusion

o    Credit Memos
     o    Stocklift returns
     o    Obsolescence returns
     o    30 day returns
     o    Warranty
     o    Price
     o    Policy allowance

o    Checks Issued
     o    Rebates for volume incentives

o    Invoices/Statements
     o    The  invoices  generated  from a  plant  sale  can be  mailed  or sent
          electronically through EDI
     o    The Aftermarket invoices that are not sent via EDI are mailed at least
          weekly.
     o    Monthly  statements  are  sent  to  customers  based  on the  25th  or
          month-end cutoff based on the customer.

o    Reconciliations
     o    A monthly  reconciliation  is completed of CARMS to the General Ledger
          balance.
     o    Typical  reconciliation items can be cash or billings due to different
          closing schedules.

                                   EXHIBIT VII

                                   [RESERVED]

                           Receivables Sale Agreement

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<PAGE>

                                  EXHIBIT VIII

                        FORM OF SETTLEMENT DATE STATEMENT

          [See Exhibit C to the Receivable Interest Purchase Agreement]

                           Receivables Sale Agreement

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<PAGE>

                                   EXHIBIT IX

                         FORM OF SUBSCRIPTION AGREEMENT

                                    ---------

                     STOCKHOLDER AND SUBSCRIPTION AGREEMENT

     THIS STOCKHOLDER AND SUBSCRIPTION AGREEMENT (this "Agreement"), dated as of
July 1, 1999, is entered into by and between  Federal-Mogul Funding Corporation,
a  Michigan  corporation  ("SPC"),  and  Federal-Mogul  Corporation,  a Michigan
corporation  ("Parent").  This Agreement  supercedes any and all stockholder and
subscription  agreements  previously  entered  into by and  between  SPC and the
Parent. Except as otherwise specifically provided herein, capitalized terms used
in this Agreement have the meanings ascribed thereto in the Amended and Restated
Receivables  Sale and  Contribution  Agreement  dated as of even  date  herewith
between the Parent and SPC (as  amended,  restated,  supplemented  or  otherwise
modified from time to time, the "Sale Agreement").

                                    RECITALS

          A. SPC has been organized  under the laws of the State of Michigan for
     the  purpose  of,  among  other  things,  purchasing,  holding,  financing,
     receiving  and   transferring   accounts   receivable  and  related  assets
     originated or otherwise held by Parent.

          B.   Contemporaneously   with  the  execution  and  delivery  of  this
     Agreement: (i) Parent and SPC have entered into the Sale Agreement pursuant
     to which Parent has, from and after the initial  purchase  date  thereunder
     and  prior  to the  termination  date  specified  therein,  sold all of its
     Receivables, Collections and Related Security to SPC; and (ii) SPC, Parent,
     Falcon  Asset  Securitization  Corporation,   International  Securitization
     Corporation,  certain financial  institutions party thereto as "Investors,"
     and The First  National Bank of Chicago,  as the "Agent," have entered into
     an  Amended  and  Restated  Receivables  Interest  Purchase  Agreement  (as
     amended,  restated,  supplemented or otherwise  modified from time to time,
     the  "Purchase  Agreement")  pursuant  to which SPC will  sell  "Receivable
     Interests" to the Agent for the benefit of the Purchasers.

          C. SPC  desires to sell  shares of its  capital  stock to Parent,  and
     Parent  desires to  purchase  such  shares,  on the terms set forth in this
     Agreement.

     NOW, THEREFORE, SPC and Parent agree as follows:

     1. Purchase and Sale of Capital  Stock.  Parent hereby  purchases from SPC,
and SPC hereby sells to Parent,  100 shares of common stock, par value $1.00 per
share,  of SPC (the "Common  Stock") for the Stock  Purchase  Price set forth in
Section 2.1. The shares of Common Stock being purchased under this Agreement are
referred to herein as the "Shares." Within three (3) Business Days from the date
hereof,  SPC shall deliver to Parent a  certificate  registered in Parent's name
representing the Shares.

                           Receivables Sale Agreement

                                       50
<PAGE>

     2. Consideration for Shares and Capital Contributions.

     2.1  Consideration  for  Shares.  To  induce  SPC to  enter  into  the Sale
Agreement and to enable SPC to fund its  obligations  thereunder by consummating
the transactions  contemplated by the Purchase  Agreement,  and in reliance upon
the representations  and warranties set forth herein,  Parent hereby pays to SPC
on the date  hereof  the sum of  $14,250,000  (the  "Stock  Purchase  Price") in
consideration of the purchase of the Shares. The Stock Purchase Price shall take
the form of a transfer of cash,  except that Parent may, in lieu of cash payment
of the Stock  Purchase  Price,  offset  the amount of the Stock  Purchase  Price
against the  purchase  price  otherwise  payable by SPC to Parent on the initial
purchase date pursuant to the Sale Agreement.

     2.2 Contributions  After Initial Closing Date. From time to time Parent may
make additional capital  contributions to SPC. All such contributions shall take
the form of a cash transfer,  except that SPC agrees to, in lieu of cash payment
thereof,  offset the amount of such contributions against the purchase price for
Receivables  otherwise  payable  by SPC to  Parent  on the date of such  capital
contributions.  All of the  Receivables  so paid for through  such offset  shall
constitute  purchased  Receivables  within the meaning of the Sale Agreement and
shall be  subject  to all of the  representations,  warranties  and  indemnities
otherwise made thereunder. It is expressly understood and agreed that Parent has
no   obligations   under  this  Agreement  or  otherwise  to  make  any  capital
contributions from and after payment of the Stock Purchase Price.

     3.  Representations  and  Warranties of SPC. SPC represents and warrants to
Parent as follows:

          (a) SPC is a corporation  duly  incorporated,  validly existing and in
     good  standing  under  the  laws  of the  State  of  Michigan,  and has all
     requisite  corporate  power  and  authority  to  carry on its  business  as
     proposed to be conducted on the date hereof.

          (b) SPC has all requisite legal and corporate power to enter into this
     Agreement,  to issue the Shares and to perform its other  obligations under
     this Agreement.

          (c) Upon receipt by SPC of the Stock  Purchase  Price and the issuance
     of the  Shares to  Parent,  the  Shares  will be duly  authorized,  validly
     issued, fully paid and nonassessable.

          (d)  SPC  has   taken  all   corporate   action   necessary   for  its
     authorization,  execution and delivery of, and, its performance under, this
     Agreement.

          (e) This Agreement  constitutes a legally valid and binding obligation
     of SPC,  enforceable  against SPC in accordance with its terms, except that
     enforceability may be limited by bankruptcy, insolvency,  reorganization or
     other similar laws affecting the enforcement of creditors' rights generally
     and  by  general   principles   of  equity,   regardless  of  whether  such
     enforceability is considered in a proceeding in equity or at law.

          (f) The issuance of the Shares by SPC  hereunder is legally  permitted
     by all laws and regulations to which SPC is subject.

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<PAGE>

     4. Representations and Warranties of Parent. Parent represents and warrants
to SPC as follows:

          (a) Parent is a corporation duly incorporated, validly existing and in
     good  standing  under  the  laws  of the  State  of  Michigan,  and has all
     requisite  corporate  power  and  authority  to  carry on its  business  as
     conducted on the date hereof.

          (b) Parent has all requisite  legal and corporate  power to enter into
     this Agreement, to purchase the Shares and to perform its other obligations
     under this Agreement.

          (c)  Parent  has  taken  all  corporate   action   necessary  for  its
     authorization,  execution and delivery of, and its performance  under, this
     Agreement.

          (d) This Agreement  constitutes a legally valid and binding obligation
     of Parent,  enforceable against Parent in accordance with its terms, except
     that   enforceability   may   be   limited   by   bankruptcy,   insolvency,
     reorganization   or  other  similar  laws  affecting  the   enforcement  of
     creditors' rights generally and by general principles of equity, regardless
     of whether such  enforceability  is considered in a proceeding in equity or
     at law.

          (e)  Parent  is  purchasing  the  Shares  for  investment  for its own
     account, not as a nominee or agent, and not with a view to any distribution
     of any part thereof; Parent has no current intention of selling, granting a
     participation in, or otherwise distributing, the shares.

          (f) Parent  understands that the Shares have not been registered under
     the Securities Act of 1933, as amended, or under any other Federal or state
     law, and that SPC does not contemplate such a registration.

          (g)  Parent  has such  knowledge,  sophistication  and  experience  in
     financial and business  matters that it is capable of evaluating the merits
     and risks of the transactions  contemplated by this Agreement, and has made
     such investigations in connection herewith as have been deemed necessary or
     desirable to make such evaluation.

          (h) The  purchase of the Shares by Parent is legally  permitted by all
     laws and regulations to which Parent is subject.

     5. Restrictions on Transfer Imposed by the Act; Legend.

     5.1 Legend. Each certificate representing any Shares shall be endorsed with
the following legend:

     THE SECURITIES  REPRESENTED BY THIS CERTIFICATE ARE NOT REGISTERED PURSUANT
     TO THE SECURITIES  ACT OF 1933, AS AMENDED,  OR ANY STATE  SECURITIES  ACT.
     SUCH  SECURITIES  SHALL  NOT BE SOLD,  PLEDGED,  HYPOTHECATED,  DONATED  OR
     OTHERWISE  TRANSFERRED OR DISPOSED OF ABSENT SUCH REGISTRATION,  UNLESS, IN
     THE  OPINION  OF  THE  CORPORATION'S  COUNSEL,  SUCH

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<PAGE>

     REGISTRATION  IS NOT  REQUIRED.  IN ADDITION,  THESE  SECURITIES  HAVE BEEN
     ISSUED OR SOLD IN RELIANCE ON SECTION 4(2) OF THE  SECURITIES  ACT OF 1933,
     AS  AMENDED,  AND MAY NOT BE SOLD OR  TRANSFERRED  EXCEPT IN A  TRANSACTION
     WHICH IS EXEMPT  UNDER SUCH ACT OR  PURSUANT TO AN  EFFECTIVE  REGISTRATION
     UNDER SUCH ACT.

     5.2  Registration  of  Transfers.  SPC need not  register a transfer of any
Shares  unless the  conditions  specified in the legend set forth in Section 5.1
hereof are  satisfied.  SPC may also  instruct its transfer  agent (which may be
SPC) not to register the transfer of any Shares unless the conditions  specified
in the legend set forth in Section 5.1 hereof are satisfied.

     6. Agreement to Vote. Parent hereby agrees and covenants to vote all of the
shares of Common Stock now or hereafter  owned by it,  whether  beneficially  or
otherwise,  as is necessary at a meeting of  stockholders  of SPC, or by written
consent in lieu of any such meeting,  to cause to be elected to, and  maintained
on, SPC's board of directors at least one (1) person meeting the  qualifications
of an Independent Director and selected in accordance with the provisions of the
Certificate of Incorporation and By-Laws of SPC.

     7. Successors and Assigns. Each party agrees that it will not assign, sell,
transfer,   delegate,   or  otherwise   dispose  of,   whether   voluntarily  or
involuntarily,  or by  operation  of law,  any right or  obligation  under  this
Agreement  except in connection with a transfer of Shares in compliance with the
terms and conditions  hereof, as contemplated by Section 5.2 above, or otherwise
in accordance  with the terms  hereof.  Any  purported  assignment,  transfer or
delegation  in  violation  of this  Section 7 shall be null and void ab  initio.
Subject to the  foregoing  limits on  assignment  and  delegation  and except as
otherwise provided herein, this Agreement shall be binding upon and inure to the
benefit of the parties hereto,  their  respective  heirs,  legatees,  executors,
administrators, assignees and legal successors.

     8.  Amendments  and  Waivers.  Any  term  hereof  may be  amended  and  the
observance of any term hereof may be waived (either generally or in a particular
instance  and  either  retroactively  or  prospectively)  only with the  written
consent of SPC and Parent.  Any amendment or waiver so effected shall be binding
upon SPC and Parent.

     9. Further Acts.  Each party agrees to perform any further acts and execute
and deliver any  document  which may be  reasonably  necessary  to carry out the
provisions of this Agreement.

     10.  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
counterparts,  and  all  of  such  counterparts  together  will  be  deemed  one
instrument.

     11.  Notices.  Any and  all  notices,  acceptances,  statements  and  other
communications to Parent in connection  herewith shall be in writing,  delivered
personally,  by facsimile or certified mail, return receipt requested, and shall
be addressed to the address of Parent  indicated on the stock transfer  register
of SPC or,  if no  address  is so  indicated,  to the

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<PAGE>

address provided to SPC pursuant to the Sale Agreement unless changed by written
notice to SPC or its successor.

     12. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED  BY THE LAWS OF THE STATE OF NEW YORK,  EXCEPT AND TO THE EXTENT THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE IS APPLICABLE.

     13. Entire Agreement. This Agreement,  together with the Sale Agreement and
documents  expressly to be delivered in  connection  therewith,  constitute  the
entire  understanding  and  agreement  between the parties  hereto with  subject
matter  hereof and  thereof.  This  Agreement  supercedes  all  stockholder  and
subscription agreements previously entered into by and between SPC and Parent.

     14. Severability of this Agreement. In case any provision of this Agreement
shall be invalid or unenforceable,  the validity, legality and enforceability of
the remaining shall not in any way be affected or impaired thereby.

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<PAGE>

     IN WITNESS WHEREOF,  the parties have executed and delivered this Agreement
as of the date first above written.

SPC                                                PARENT

FEDERAL-MOGUL FUNDING CORPORATION,                 FEDERAL-MOGUL CORPORATION,
  a Michigan corporation                               a Michigan corporation

By: ___________________________________            By:_________________________
    Name:                                              Name:
    Title:                                             Title:

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<PAGE>

                                    EXHIBIT X

                            FORM OF SUBORDINATED NOTE

                                    ---------

                                SUBORDINATED NOTE

                                                                    July 1, 1999

     1.  Note.  FOR  VALUE  RECEIVED,  the  undersigned,  FEDERAL-MOGUL  FUNDING
CORPORATION,  a Michigan corporation ("SPC"), hereby unconditionally promises to
pay  to  the  order  of  FEDERAL-MOGUL   CORPORATION,   a  Michigan  corporation
("Parent"),  in lawful money of the United States of America and in  immediately
available  funds, on the date following the  Termination  Date which is one year
and one day after the date which (i) the Outstanding  Balance of all Receivables
sold under the "Sale  Agreement"  referred to below has been reduced to zero and
(ii) Parent has paid to the Buyer all indemnities, adjustments and other amounts
which may be owed hereunder in connection  with the Purchases  (the  "Collection
Date"),  the aggregate  unpaid  principal sum  outstanding of all  "Subordinated
Loans"  made from time to time by Parent to SPC  pursuant  to and in  accordance
with  the  terms of that  certain  Amended  and  Restated  Receivables  Sale and
Contribution  Agreement  dated as of July 1,  1999  between  Parent  and SPC (as
amended,  restated,  supplemented  or otherwise  modified from time to time, the
"Sale Agreement"). Reference to Section 1.2 of the Sale Agreement is hereby made
for a statement  of the terms and  conditions  under  which the loans  evidenced
hereby  have been and will be made.  All terms  which are  capitalized  and used
herein and which are not otherwise  specifically  defined  herein shall have the
meanings ascribed to such terms in the Sale Agreement.

     2. Interest. SPC further promises to pay interest on the outstanding unpaid
principal  amount  hereof from the date hereof until payment in full hereof at a
rate equal to the Base Rate; provided, however, that if SPC shall default in the
payment of any principal hereof, SPC promises to, on demand, pay interest at the
rate of the Base Rate plus 2.00% on any such unpaid amounts,  from the date such
payment is due to the date of actual  payment.  Interest shall be payable on the
first  Business Day of each month in arrears;  provided,  however,  that SPC may
elect on the date any  interest  payment is due  hereunder to defer such payment
and upon such  election the amount of interest due but unpaid on such date shall
constitute principal under this Subordinated Note. The outstanding  principal of
any loan made under this Subordinated Note, together with all accrued and unpaid
interest  thereon,  shall be due and payable on the  Collection  Date and may be
repaid or prepaid at any time without premium or penalty.

     3. Principal Payments. Parent is authorized and directed by SPC to enter on
the grid attached hereto, or, at its option, in its books and records,  the date
and amount of each loan made by it which is evidenced by this  Subordinated Note
and the amount of each  payment of principal  made by SPC,  and absent  manifest
error, such entries shall constitute prima facie evidence of the accuracy of the
information so entered;  provided that neither the failure of Parent to make any
such entry or any error therein shall expand, limit or affect the obligations of
SPC hereunder.

                                       56
<PAGE>

     4. Subordination.  The indebtedness  evidenced by this Subordinated Note is
subordinated  to the prior payment in full of all of SPC's recourse  obligations
under that certain Amended and Restated  Receivable  Interest Purchase Agreement
dated as of July 1, 1999 by and among  SPC,  Federal-Mogul  Corporation,  Falcon
Asset Securitization Corporation,  International Securitization Corporation, the
financial institutions from time to time a party thereto, and The First National
Bank of Chicago, as the "Agent" (as amended, restated, supplemented or otherwise
modified  from  time to  time,  the  "Purchase  Agreement").  The  subordination
provisions  contained  herein are for the direct benefit of, and may be enforced
by,  the Agent  and the  Purchasers  and/or  any of their  respective  assignees
(collectively,  the "Senior Claimants") under the Purchase Agreement.  Until the
date on which all "Capital"  outstanding  under the Purchase  Agreement has been
repaid in full and all other  obligations of SPC and/or the Servicer  thereunder
and  under  the  "Fee  Letter"   referenced   therein  (all  such   obligations,
collectively,  the "Senior Claim") have been  indefeasibly paid and satisfied in
full, Parent shall not demand, accelerate, sue for, take, receive or accept from
SPC,  directly  or  indirectly,  in cash or other  property or by set-off or any
other manner (including,  without limitation,  from or by way of collateral) any
payment or security of all or any of the  indebtedness  under this  Subordinated
Note or exercise  any remedies or take any action or  proceeding  to enforce the
same;  provided,  however,  that  (i)  Parent  hereby  agrees  that it will  not
institute  against SPC any Insolvency Event unless and until the Collection Date
has occurred and (ii) nothing in this paragraph  shall restrict SPC from paying,
or Parent from requesting,  any payments under this Subordinated Note so long as
SPC is not required  under the  Purchase  Agreement to set aside for the benefit
of, or  otherwise  pay over to, the funds used for such  payments  to any of the
Senior  Claimants and further provided that the making of such payment would not
otherwise violate the terms and provisions of the Purchase Agreement. Should any
payment,  distribution or security or proceeds  thereof be received by Parent in
violation of the immediately preceding sentence, Parent agrees that such payment
shall be  segregated,  received and held in trust for the benefit of, and deemed
to be the property of, and shall be  immediately  paid over and delivered to the
Agent for the benefit of the Senior Claimants.

     5.  Bankruptcy;  Insolvency.  Upon the occurrence of any  Insolvency  Event
involving SPC as debtor,  then and in any such event the Senior  Claimants shall
receive  payment in full of all amounts due or to become due on or in respect of
Capital and the Senior Claim (including "CP Costs" or "Yield" accruing under the
Purchase Agreement after the commencement of any such proceeding, whether or not
any or all of  such  CP  Costs  or  Yield  is an  allowable  claim  in any  such
proceeding)  before  Parent is  entitled  to receive  payment on account of this
Subordinated  Note,  and, to that end, any payment or  distribution of assets of
SPC of any kind or character,  whether in cash, securities or other property, in
any applicable  insolvency  proceeding,  which would  otherwise be payable to or
deliverable  upon  or  with  respect  to  any  or all  indebtedness  under  this
Subordinated  Note, is hereby  assigned to and shall be paid or delivered by the
Person  making such  payment or  delivery  (whether a trustee in  bankruptcy,  a
receiver,  custodian or liquidating  trustee or otherwise) directly to the Agent
for  application to, or as collateral for the payment of, the Senior Claim until
such Senior Claim shall have been paid in full and satisfied.

     6.  Amendments.  This  Subordinated  Note shall not be amended or  modified
except in accordance  with Section  8.1(b) of the Sale  Agreement.  The terms of
this  Subordinated

                                       57
<PAGE>

Note may not be amended or otherwise  modified without the prior written consent
of the Agent for the benefit of the Purchasers.

     7. Governing Law. This Subordinated Note has been made and delivered at the
offices of Latham & Watkins,  885 Third Avenue,  New York,  New York 10022,  and
shall be  interpreted  and the  rights and  liabilities  of the  parties  hereto
determined in  accordance  with the laws and decisions of the State of New York.
Wherever  possible each provision of this Subordinated Note shall be interpreted
in such manner as to be  effective  and valid under  applicable  law, but if any
provision of this  Subordinated  Note shall be  prohibited  by or invalid  under
applicable  law,  such  provision  shall be  ineffective  to the  extent of such
prohibition or invalidity,  without invalidating the remainder of such provision
or the remaining provisions of this Subordinated Note.

             THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

                                       58
<PAGE>

     8. Waivers. All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
Parent additionally  expressly waives all notice of the acceptance by any Senior
Claimant of the subordination and other provisions of this Subordinated Note and
expressly  waives  reliance by any Senior  Claimant upon the  subordination  and
other provisions herein provided.

     9.  Assignment.  This  Subordinated  Note may not be  assigned,  pledged or
otherwise  transferred  to any party other than Parent without the prior written
consent of the Agent, and any such attempted transfer shall be void.

                                      FEDERAL-MOGUL FUNDING CORPORATION

                                      By: _____________________________
                                           Name:
                                           Title:

                                       59
<PAGE>

                                    Schedule
                                       to
                                SUBORDINATED NOTE

                  SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL

<TABLE>
<CAPTION>
                              Amount of                Amount                 Unpaid
                            Subordinated                 of                  Principal              Notation
       Date                     Loan                 Principal Paid           Balance                made by
-------------------       -------------------    -------------------     -------------------    -------------------
<S>                       <C>                    <C>                     <C>                    <C>

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------

-------------------       -------------------    -------------------     -------------------    -------------------
</TABLE>

                                       60
<PAGE>

                                   SCHEDULE A

                            LIST OF CLOSING DOCUMENTS

                              List of Participants

         Participant                                       Abbreviation
         -----------                                       ------------
Federal-Mogul Corporation                                    FMC
Federal-Mogul Canada Limited                                 FM Canada
Federal-Mogul Piston Rings, Inc.                             FM Piston
Federal-Mogul Flowery Branch, LLC                            FM Flowery
Federal-Mogul Powertrain, Inc.                               FM Powertrain
Federal-Mogul Sealing Systems, Inc.                          FM Sealing
Federal-Mogul Carolina, Inc.                                 FM Carolina
Federal-Mogul South Bend, Inc.                               FM South Bend
Federal-Mogul LaGrange, Inc.                                 FM LaGrange
Federal-Mogul Sintered Products, Inc.                        FM Sintered
Federal-Mogul Sintered Products - Waupun, Inc.               FM Waupun
Federal-Mogul System Protection Group, Inc.                  FM System
Federal-Mogul Engineered Bearings, Inc.                      FM Engineered
Federal-Mogul Camshafts, Inc.                                FM Camshafts
Federal-Mogul Aviation, Inc.                                 FM Aviation
Federal-Mogul Ignition Company "Blazer"                      FM Blazer
Federal-Mogul Products, Inc. "Moog"                          FM Moog
Federal-Mogul Funding Corporation                            FMFC
Falcon Asset Securitization Corporation                      Falcon
International Securitization Corporation                     ISC
Financial Institutions                                       Investors
First National Bank of Chicago                               Agent
Baker & McKenzie                                             B&M
Brown & Wood                                                 B&W
Latham & Watkins                                             L&W

                                       61
<PAGE>

                           Index of Closing Documents

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

                    STEP I - Sale from the Originators to FMC

Receivables Purchase Agreement                            1.1          B&W

Subordinated Note executed by FMC in
favor of each Originator (other than                      2.1          B&W
FMC)

Secretary's Certificate for each                          3.0          B&W
Originator (other than FMC), as to
organizational document certified by,
and good standing certificate issued by,
Secretary of State of the State of
incorporation, By-Laws, resolutions and
specimen signatures:

         FM Canada                                        3.1          B&W

         FM Piston                                        3.2          B&W

         FM Flowery                                       3.3          B&W

         FM Powertrain                                    3.4          B&W

         FM Sealing                                       3.5          B&W

         FM Carolina                                      3.6          B&W

         FM South Bend                                    3.7          B&W

         FM LaGrange                                      3.8          B&W

         FM Sintered                                      3.9          B&W

         FM Waupun                                        3.10         B&W

         FM System                                        3.11         B&W

         FM Engineered                                    3.12         B&W

         FM Camshafts                                     3.13         B&W

         FM Aviation                                      3.14         B&W

         FM Blazer                                        3.15         B&W

                                       62
<PAGE>

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

         FM Moog                                          3.16         B&W

Officer's Certificate of each Originator                  4.0          B&W
(other than FMC), dated as of July 1,
1999 Re: No Event of Purchase and Sale
Termination or Potential Event of
Purchase and Sale Termination, and
absence of Material Adverse Effect since
March 31, 1999.

         FM Canada                                        4.1          B&W

         FM Piston                                        4.2          B&W

         FM Flowery                                       4.3          B&W

         FM Powertrain                                    4.4          B&W

         FM Sealing                                       4.5          B&W

         FM Carolina                                      4.6          B&W

         FM South Bend                                    4.7          B&W

         FM LaGrange                                      4.8          B&W

         FM Sintered                                      4.9          B&W

         FM Waupun                                        4.10         B&W

         FM System                                        4.11         B&W

         FM Engineered                                    4.12         B&W

         FM Camshafts                                     4.13         B&W

         FM Aviation                                      4.14         B&W

         FM Blazer                                        4.15         B&W

         FM Moog                                          4.16         B&W

UCC-1 Financing Statement to be filed in                  5.0          L&W
connection with Receivables Purchase
Agreement, each Originator (other than
FMC) as debtor, FMC as secured party and
FMFC as assignee:

                                       63
<PAGE>

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

         FM Canada                                        5.1          L&W
         - Ontario

         FM Piston                                        5.2          L&W
         - Secretary of State of Michigan
         - Secretary of State of Wisconsin

         FM Flowery                                       5.3          L&W
         - Hall County (Georgia)

         FM Powertrain                                    5.4          L&W
         - Secretary of State of Minnesota
         - Secretary of State of Ohio
         - Morgan County

         FM Sealing                                       5.5          L&W
         - Secretary of State of Alabama

         FM Carolina                                      5.6          L&W
         - Secretary of State of South Carolina

         FM South Bend                                    5.7          L&W
         - Secretary of State of Indiana

         FM LaGrange                                      5.8          L&W
         - Troup County (Georgia)

         FM Sintered                                      5.9          L&W
         - Secretary of State of Ohio
         - Montgomery County

         FM Waupun                                        5.10         L&W
         - Secretary of State of Wisconsin

         FM System                                        5.11         L&W
         - Secretary of State of Pennsylvania
         - Chester County

         FM Engineered                                    5.12         L&W
         - Secretary of State of Ohio
         - Stark County
         - Summit County

         FM Camshafts                                     5.13         L&W
         - Secretary of State of Michigan

                                       64
<PAGE>

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

         FM Aviation                                      5.14         L&W
         - Secretary of State of South Carolina

         FM Blazer                                        5.15         L&W
         - Secretary of State of Illinois

         FM Moog                                          5.16         L&W
         - Secretary of State of Missouri
         - St. Louis City

UCC-3 Financing Statement FMFC as                         6.0          L&W
secured party and Agent as assignee

         FM Canada                                        6.1          L&W
         - Ontario

         FM Piston                                        6.2          L&W
         - Secretary of State of Michigan
         - Secretary of State of Wisconsin

         FM Flowery                                       6.3          L&W
         - Hall County (Georgia)

         FM Powertrain                                    6.4          L&W
         - Secretary of State of Minnesota
         - Secretary of State of Ohio
         - Morgan County

         FM Sealing                                       6.5          L&W
         - Secretary of State of Alabama

         FM Carolina                                      6.6          L&W
         - Secretary of State of South Carolina

         FM South Bend                                    6.7          L&W
         - Secretary of State of Indiana

         FM LaGrange                                      6.8          L&W
         - Troup County (Georgia)

         FM Sintered                                      6.9          L&W
         - Secretary of State of Ohio
         - Montgomery County

                                       65
<PAGE>

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

         FM Waupun                                        6.10         L&W
         - Secretary of State of Wisconsin

         FM System                                        6.11         L&W
         - Secretary of State of Pennsylvania
         - Chester County

         FM Engineered                                    6.12         L&W
         - Secretary of State of Ohio
         - Stark County
         - Summit County

         FM Camshafts                                     6.13         L&W
         - Secretary of State of Michigan

         FM Aviation                                      6.14         L&W
         - Secretary of State of South Carolina

         FM Blazer                                        6.15         L&W
         - Secretary of State of Illinois

         FM Moog                                          6.16         L&W
         - Secretary of State of Missouri
         - St. Louis City

UCC Lien and Related Searches for each                    7.0          B&W
Originator (other than FMC)

         FM Canada                                        7.1          B&W
         - Ontario

         FM Piston                                        7.2          B&W
         - Secretary of State of Michigan
         - Kent County
         - Secretary of State of Wisconsin
         - Marathon County
         - Manitowoc County

         FM Flowery                                       7.3          B&W
         - Secretary of State of Georgia (Central Index)
         - Hall County

                                       66
<PAGE>

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

         FM Powertrain                                    7.4          B&W
         - Secretary of State of Minnesota
         - Wabasha County
         - Goodhue County
         - Secretary of State of Ohio
         - Morgan County

         FM Sealing                                       7.5          B&W
         - Secretary of State of Alabama
         - Limestone County

         FM Carolina                                      7.6          B&W
         - Secretary of State of South Carolina
         - Sumter County

         FM South Bend                                    7.7          B&W
         - Secretary of State of Indiana
         - St. Joseph County

         FM LaGrange                                      7.8          B&W
         - Secretary of State of Georgia (Central Index)
         - Troup County

         FM Sintered                                      7.9          B&W
         - Secretary of State of Ohio
         - Montgomery County

         FM Waupun                                        7.10         B&W
         - Secretary of State of Wisconsin
         - Dodge County
         - Fond du Lac County

         FM System                                        7.11         B&W
         - Secretary of State of Pennsylvania
         - Chester County

         FM Engineered                                    7.12         B&W
         - Secretary of State of Ohio
         - Stark County
         - Summit County

         FM Camshafts                                     7.13         B&W
         - Secretary of State of Michigan
         - Ottawa County

                                       67
<PAGE>

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

         FM Aviation                                      7.14         B&W
         - Secretary of State of South Carolina
         - Pickens County

         FM Blazer                                        7.15         B&W
         - Secretary of State of Illinois
         - Cook County

         FM Moog                                          7.16         B&W
         - Secretary of State of Missouri
         - St. Louis County
         - St. Louis City

                         STEP II - Sale from FMC to FMFC

Amended and Restated Receivables Sale                     8.1          L&W
and Contribution Agreement ("Receivables
Sale Agreement").

Stockholder and Subscription Agreement                    9.1          L&W

Subordinated Note executed by FMC                        10.1          L&W

Secretary's Certificate of FMC, as to                    11.1          B&W
good standing certificate issued by, and
Certificate of Incorporation certified
by, Secretary of State of Michigan,
By-Laws, resolutions and specimen
signatures.

Officer's Certificate of FMC Re: No                      12.1          B&W
Event of Purchase and Sale Termination
or Potential Event of Purchase and Sale
Termination, and absence of Material
Adverse Effect since March 31, 1999.

UCC-3 Financing Statement to be filed in                 13.1          L&W
connection with Receivables Sale
Agreement, FMC as debtor and FMFC as
secured party and Agent, as Assignee:

         - Secretary of State of Michigan

UCC Lien and Related Searches for the FMC                14.1          B&W

         - Secretary of State of Michigan
         - Oakland County

                                       68
<PAGE>

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

           STEP III - Sale from FMFC to Falcon, ISC and the Investors

Amended and Restated Receivables                         15.1          L&W
Interest Purchase Agreement (the
"Receivables Interest Purchase
Agreement")

Fee Letter                                               16.1          L&W

Investor Fee Letter                                      17.1          L&W

Secretary's Certificate of FMFC, as to                   18.1          B&W
good standing certificate issued by, and
Certificate of Incorporation certified
by, Secretary of State of Michigan,
By-Laws, resolutions and specimen
signatures.

Officer's Certificate of FMFC Re: No                     19.1          B&W
Amortization Event or Potential
Amortization Event, and absence of
Material Adverse Effect since March 31,
1999.

Certificate Re: B&W True                                 20.1          B&W
Sale/Nonconsolidation Opinion signed by
each of the Originators (other than FMC)
(Step I)

FMC Certificate Re: B&W True                             22.1          B&W
Sale/Nonconsolidation Opinion (Step II)

FMFC Certificate Re: B&W True                            21.1          B&W
Sale/Nonconsolidation Opinion (Step II)

True Sale/Nonconsolidation Opinion of                    22.1          B&W
B&W (Step I and Step II).

Corporate Opinion of B&W (including                      23.1          B&W
perfection and priority), counsel to
Originators, FMC and FMFC (Step I, Step
II and Step III)

Corporate Opinion of in-house (including                 24.1          B&W
perfection and priority), counsel to
Originators, FMC and FMFC (Step I, Step
II and Step III)

Corporate Opinion of B&M, Canadian                       25.1         B&W/B&M
counsel for FM Canada (Step I)

                                       69
<PAGE>

          Document                                      Tab No.   Responsibility
          --------                                      -------   --------------

UCC-3 Financing Statement to be filed in                 26.1          L&W
connection with Receivables Interest
Purchase Agreement, FMFC as debtor and
Agent as secured party:

         - Secretary of State of Michigan

UCC Lien and Related Searches for FMFC                   27.1          B&W

         - Secretary of State of Michigan
         - Oakland County

Collection Account Agreements:                           28.0

Comerica Bank                                            28.1      L&W/Agent/B&W

Bank One Corporation  Acct.                              28.2      L&W/Agent/B&W

First National Bank of Chicago  Acct.                    28.3      L&W/Agent/B&W

First Maryland National Bank Acct.                       28.4      L&W/Agent/B&W

Bank of America  Acct.                                   28.5      L&W/Agent/B&W

Nations BankUS  Acct.                                    28.6      L&W/Agent/B&W

Royal Bank of Canada                                     28.7      L&W/Agent/B&W

                                       70<PAGE>

                                                                  EXECUTION COPY

                                  $450,000,000

                              AMENDED AND RESTATED
                     RECEIVABLE INTEREST PURCHASE AGREEMENT

                            Dated as of July 1, 1999

                                      Among

                       FEDERAL-MOGUL FUNDING CORPORATION,
                                   as Seller,

                            FEDERAL-MOGUL CORPORATION
                                  as Servicer,

                     FALCON ASSET SECURITIZATION CORPORATION

                                       and

                    INTERNATIONAL SECURITIZATION CORPORATION,
                                 as purchasers,

           THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
                                  as Investors,

                                       and

                       THE FIRST NATIONAL BANK OF CHICAGO,
                                    as Agent
<PAGE>

<TABLE>
<CAPTION>
                                                          TABLE OF CONTENTS

                                                                                                               Page

                                                        ARTICLE I. DEFINITIONS
<S>                                                                                                              <C>
Section 1.01        Defined Terms.................................................................................2
Section 1.02        Other Definitional Provisions................................................................23

                             ARTICLE II. PURCHASE ARRANGEMENTS; PAYMENTS AND COLLECTIONS;
                                             CONDUIT FUNDING

Section 2.01        Purchase Facility............................................................................23
Section 2.02        Increases....................................................................................23
Section 2.03        Decreases....................................................................................24
Section 2.04        Payment Requirements.........................................................................24
Section 2.05        Payments.....................................................................................24
Section 2.06        Collections Prior to Amortization............................................................25
Section 2.07        Collections Following Amortization...........................................................25
Section 2.08        Application of Collections...................................................................26
Section 2.09        Payment Recission............................................................................26
Section 2.10        Clean Up Call................................................................................26
Section 2.11        CP Costs.....................................................................................27
Section 2.12        CP Costs Payments............................................................................27
Section 2.13        Calculation of CP Costs......................................................................27

                                           ARTICLE III. INVESTOR FUNDING LIQUIDITY FACILITY

Section 3.01        Investors' Funding...........................................................................27
Section 3.02        Yield Payments...............................................................................27
Section 3.03        Selection and Continuation of Tranche Periods................................................27
Section 3.04        Investors' Discount Rates....................................................................28
Section 3.05        Suspension of the LIBO Rate..................................................................28
Section 3.06        Transfer to Falcon Investors.................................................................28
Section 3.07        Transfer Price Reduction Yield...............................................................29
Section 3.08        Payments to Falcon...........................................................................29
Section 3.09        Limitation on Commitment to Purchase from Falcon.............................................29
Section 3.10        Defaulting Falcon Investors..................................................................29
Section 3.11        Transfer to ISC Investors....................................................................30
Section 3.12        Transfer Price Reduction Yield...............................................................30
Section 3.13        Payments to ISC..............................................................................30
Section 3.14        Limitation on Commitment to Purchase from ISC................................................31
Section 3.15        Defaulting ISC Investors.....................................................................31
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                                              <C>
                                              ARTICLE IV. REPRESENTATIONS AND WARRANTIES

Section 4.01        Seller Representations and Warranties........................................................31
Section 4.02        Investor Representations and Warranties......................................................35

                                                  ARTICLE V. CONDITIONS OF PURCHASES

Section 5.01        Conditions Precedent to Initial Purchase.....................................................36
Section 5.02        Conditions Precedent to All Purchases and Reinvestments......................................36

                                                  ARTICLE VI. COVENANTS OF THE SELLER

Section 6.01        Affirmative Covenants of Seller..............................................................37
         (a)    Notices..........................................................................................38
         (b)    Compliance with Laws.............................................................................38
         (c)    Audits; Inspection Rights........................................................................38
         (d)    Keeping and Marking of Records and Books.........................................................38
         (a)    Compliance with Invoices and Credit Policies; Taxes..............................................38
         (b)    Purchase of Receivables from the Originators.....................................................39
         (c)    Ownership Interest...............................................................................39
         (d)    Payment to Federal-Mogul.........................................................................39
         (e)    Performance and Enforcement of Sale Agreement....................................................39
         (f)    Purchasers' Reliance.............................................................................39
         (a)    Collections......................................................................................40
         (b)    Minimum Net Worth................................................................................41
         (c)    Year 2000 Problems...............................................................................41
Section 6.02        Negative Covenants of Seller.................................................................41
         (a)    Name Change, Offices, Records and Books of Accounts..............................................41
         (b)    Change in Payment Instructions to Obligors.......................................................42
         (a)    Modifications to Credit Policies.................................................................42
         (b)    Sales, Liens, Etc................................................................................42
         (c)    Nature of Business; Other Agreements; Other Indebtedness.........................................42
         (d)    Amendments to Sale Agreement.....................................................................43
         (e)    Amendments to Corporate Documents................................................................43
         (f)    Merger...........................................................................................43
         (g)    Restricted Junior Payments.......................................................................43

                               ARTICLE VII. SERVICING, ADMINISTRATION AND COLLECTION OF THE RECEIVABLES

Section 7.01        Designation of Servicer......................................................................44
Section 7.02        Duties of Servicer...........................................................................44
Section 7.03        Collection Notices...........................................................................45
Section 7.04        Responsibilities of the Seller...............................................................46
Section 7.05        Settlement Date Statements...................................................................46
Section 7.06        Quarterly Servicer's Certificate.............................................................46
</TABLE>

                                       ii
<PAGE>

<TABLE>
<S>                                                                                                              <C>
Section 7.07        Weekly Report and Distribution...............................................................46
Section 7.08        Reporting Covenants of the Servicer..........................................................47
         (a)    Financial Reporting..............................................................................47
                (i) Annual Reporting.............................................................................47
                (ii)Quarterly Reporting..........................................................................47
                (iii) Securities and Exchange Commission Filings.................................................47
         (b)    Notices..........................................................................................47
Section 7.09        Inspection Rights............................................................................48
Section 7.10        Credit Policies..............................................................................48
Section 7.11        Servicing Compensation.......................................................................48

                                                   ARTICLE VIII. AMORTIZATION EVENTS

Section 8.01        Amortization Events..........................................................................48

                                                      ARTICLE IX. INDEMNIFICATION

Section 9.01        Indemnities by the Seller....................................................................51
Section 9.02        Increased Cost and Reduced Return............................................................53
Section 9.03        Costs and Expenses Relating to this Agreement................................................54
Section 9.04        Taxes........................................................................................54

                                                         ARTICLE X. THE AGENT

Section 10.01       Authorization and Action.....................................................................55
Section 10.02       Delegation of Duties.........................................................................56
Section 10.03       Exculpatory Provisions.......................................................................56
Section 10.04       Reliance by Agent............................................................................56
Section 10.05       Non-Reliance on Agent and Other Purchasers...................................................57
Section 10.06       Reimbursement and Indemnification............................................................57
Section 10.07       Agent in its Individual Capacity.............................................................57
Section 10.08       Successor Agent..............................................................................57

                                                ARTICLE XI. ASSIGNMENTS; PARTICIPATIONS

Section 11.01       Assignments..................................................................................58
Section 11.02       Participations...............................................................................59

                                                      ARTICLE XII. MISCELLANEOUS

Section 12.01       Waivers and Amendments.......................................................................59
Section 12.02       Notices......................................................................................60
Section 12.03       Ratable Payments.............................................................................61
Section 12.04       Protection of Ownership Interests of the Agent on behalf of the Purchasers...................61
Section 12.05       Confidentiality..............................................................................62
Section 12.06       Bankruptcy Petition..........................................................................62
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>                                                                                                             <C>
Section 12.07      Limitation of Liability......................................................................63
Section 12.08      CHOICE OF LAW................................................................................63
Section 12.09      CONSENT TO JURISDICTION......................................................................63
Section 12.10      WAIVER OF JURY TRIAL.........................................................................63
Section 12.11      Integration; Survival of Terms...............................................................64
Section 12.12      Counterparts; Severability...................................................................64
Section 12.13      First Chicago Roles..........................................................................64
Section 12.14      Characterization.............................................................................64
Section 12.15      Acknowledgments..............................................................................65

EXHIBIT A          FORM OF PURCHASE NOTICE
EXHIBIT B          FORM OF COLLECTION ACCOUNT AGREEMENT
EXHIBIT C          FORM OF SETTLEMENT DATE STATEMENT
EXHIBIT D          PRINCIPAL PLACES OF BUSINESS, CHIEF EXECUTIVE OFFICE, OFFICES
                   FOR RECORDS, FEDERAL EMPLOYEE IDENTIFICATION NUMBER
EXHIBIT E          COLLECTION BANKS AND COLLECTION ACOUNTS
EXHIBIT F          FORM OF COMPLIANCE CERTIFICATE
EXHIBIT G          CREDIT POLICIES
EXHIBIT H          FORM OF REDUCTION NOTICE
SCHEDULE A         CONDITIONS PRECEDENT TO INITIAL PURCHASE
</TABLE>

                                       iv
<PAGE>

     THIS AMENDED AND RESTATED RECEIVABLE INTEREST PURCHASE AGREEMENT,  dated as
of July 1, 1999, is by and among FEDERAL-MOGUL  FUNDING CORPORATION,  a Michigan
corporation (the "Seller"),  FEDERAL-MOGUL  CORPORATION,  a Michigan corporation
(initially, the "Servicer"), FALCON ASSET SECURITIZATION CORPORATION, a Delaware
corporation ("Falcon"),  INTERNATIONAL  SECURITIZATION  CORPORATION,  a Delaware
corporation  ("ISC" and, together with Falcon,  each individually the "Conduit,"
and collectively the "Conduits"), THE FINANCIAL INSTITUTIONS LISTED FROM TIME TO
TIME ON THE SIGNATURE  PAGES HERETO AS INVESTORS and THE FIRST  NATIONAL BANK OF
CHICAGO,  as Agent (the  "Agent"),  amends and restates the Amended and Restated
Receivable  Interest  Purchase  Agreement dated as of April 19, 1999,  among the
Seller, the Servicer, Falcon, the Financial Institutions listed on the signature
pages  thereto as  Investors,  and the Agent,  which  amended and  restated  the
Receivable  Interest Purchase Agreement dated as of November 20, 1998, among the
Seller, the Servicer, Falcon, the Financial Institutions listed on the signature
pages thereto as Investors, and the Agent.

                             PRELIMINARY STATEMENTS

     WHEREAS,  the Seller desires to transfer and assign Receivable Interests to
the Agent for the benefit of the Conduits or the Investors  (as defined  herein)
from time to time;

     WHEREAS, on the terms and subject to the conditions  hereinafter set forth,
the Conduits may, in their  absolute and sole  discretion,  purchase  Receivable
Interests  from the Seller from time to time and,  in the event the  Conduits do
not  purchase a  particular  Receivable  Interest,  unless the Seller  otherwise
directs, the Investors shall purchase such Receivable Interest from the Seller;

     WHEREAS,  the Investors have also agreed to provide a liquidity facility to
the Conduits with respect to Receivable Interests purchased by the Conduits;

     WHEREAS,  Federal-Mogul  Corporation  has  been  requested  to act,  and is
willing  to act,  as  Servicer  on behalf of the Seller  and the  Purchasers  in
accordance with the terms hereof; and

     WHEREAS,  The First National Bank of Chicago has been requested to act, and
is willing  to act,  as Agent on behalf of the  Conduits  and the  Investors  in
accordance with the terms hereof.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:
<PAGE>

                                   ARTICLE I.
                                   DEFINITIONS

     Section 1.01. Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:

     "Accrual  Period"  means each  calendar  month,  provided  that the initial
Accrual Period  hereunder means the period from (and including) the Closing Date
to (and including) the last day of the calendar month thereafter.

     "Adjusted  Liquidity Price" means, in determining the Falcon Transfer Price
or the ISC Transfer Price for any Receivable Interest, an amount equal to:

                         RI x [ (i) DC + (ii) NDR/1.045]

     where:

     RI         =   the  undivided   percentage  interest  represented  by  such
                    Receivable Interest.

     DC         =   the Deemed Collections.

     NDR        =   the  Outstanding  Balance  of all  Receivables  that are not
                    Defaulted Receivables.

     Each of the foregoing shall be determined  from the most recent  Settlement
     Date Statement received from the Servicer.

     "Administration Fee" shall have the meaning specified in the Fee Letter.

     "Adverse Claim" means a lien, security interest, charge or encumbrance,  or
other right or claim in, of or on any Person's  assets or properties in favor of
any other Person.

     "Affected Investor" shall have the meaning assigned to such term in Section
11.01(c).

     "Affiliate" means, with respect to any Person, any other Person directly or
indirectly  controlling (including but not limited to all directors and officers
of such Person),  controlled by, or under direct or indirect common control with
such  Person.  A  Person  shall be  deemed  to  control  another  Person  if the
controlling  Person  owns 10% or more of any class of voting  securities  of the
controlled Person or possesses,  directly or indirectly,  the power to direct or
cause the direction of the  management or policies of the other Person,  whether
through ownership of voting securities,  by contract or otherwise.  In addition,
for  purposes  of the  definitions  of  "Obligor  Overconcentration,"  "Eligible
Receivable" and "Net  Receivables

                                       2
<PAGE>

Balance," a Person shall be deemed to control another Person if such Person owns
more than 50% of any class of voting  securities (or  corresponding  interest in
the case of non-corporate entities) of the other Person.

     "Agent"  means First  Chicago in its  capacity as agent for the  Purchasers
pursuant to Article X, and not in its  individual  capacity,  and any  successor
Agent appointed pursuant to Article X.

     "Aggregate  Reduction"  has the  meaning  assigned  to such term in Section
2.03.

     "Aggregate Reserve Percentage" means, as of any Report Date, the sum of (a)
the Loss Reserve Percentage,  (b) the Floating Dilution Reserve Percentage,  and
(c) the Fee Reserve Percentage.

     "Aggregate Reserves" shall equal, as of any Report Date, the product of (a)
the Aggregate Reserve Percentage times (b) the Available Receivables.

     "Aggregate  Unpaids"  means, at any time, an amount equal to the sum of all
accrued  and  unpaid CP Costs or Yield,  as  applicable,  Capital  and all other
amounts owed  (whether due or accrued)  hereunder or under the Fee Letter to the
Agent and the  Purchasers  at such time,  plus all  accrued  and unpaid  Monthly
Servicing Fees owed hereunder to the Servicer.

     "Agreement"  means this Amended and Restated  Receivable  Interest Purchase
Agreement,  as it may be amended,  restated or otherwise  modified and in effect
from time to time.

     "Amortization Event" has the meaning assigned to that term in Section 8.01.

     "Assignment  and  Acceptance"  means an assignment  and  acceptance in form
reasonably  acceptable to the Agent pursuant to which an Investor assigns all or
a portion of its rights and obligations  under this Agreement in accordance with
the terms of Section 11.01(b).

     "Available  Funding  Amount" means,  as of any date of  determination,  the
lesser of (a) the  Available  Receivables  less the  Aggregate  Reserves and (b)
$450,000,000.

     "Available Receivables" means, as of any Report Date, the excess of the Net
Receivables Balance over the Contractual Dilution Balance.

     "Base Rate" means a rate per annum equal to the corporate base rate,  prime
rate or base rate of interest,  as  applicable,  announced by the Reference Bank
from time to time,  changing when and as such rate changes;  provided,  however,
that from and after the  occurrence  of an  Amortization  Event,  and during the
continuation  thereof,  the "Base Rate" shall mean a rate per annum equal to the
sum of 2% per annum plus the  corporate  base  rate,  prime rate or base rate of
interest,  as  applicable,  announced by the  Reference  Bank from time to time,
changing when and as such rate changes.

                                       3
<PAGE>

     "Broken Funding Costs" means for any Receivable Interest which: (i) has its
Capital  reduced without  compliance by the Seller with the notice  requirements
hereunder or (ii) does not become  subject to an Aggregate  Reduction  following
the delivery of any Reduction  Notice or (iii) is assigned  under Article III or
terminated  prior to the date on which it was  originally  scheduled  to end; an
amount equal to the excess, if any, of (A) the CP Costs or Yield (as applicable)
that would have  accrued  during the  remainder  of the  Tranche  Periods or the
tranche periods for Commercial  Paper  determined by the Agent to relate to such
Receivable Interest (as applicable)  subsequent to the date of such reduction or
termination  (or in  respect  of clause  (ii)  above,  the date  such  Aggregate
Reduction  was  designated  to occur  pursuant to the  Reduction  Notice) of the
Capital of such Receivable Interest if such reduction, assignment or termination
had not occurred or such Reduction  Notice had not been delivered,  over (B) the
sum of (x) to the  extent  all or a portion  of such  Capital  is  allocated  to
another  Receivable  Interest,  the amount of CP Costs or Yield actually accrued
during the  remainder  of such  period on such  Capital  for the new  Receivable
Interest,  and (y) to the  extent  such  Capital  is not  allocated  to  another
Receivable Interest,  the income, if any, actually received during the remainder
of such period by the holder of such  Receivable  Interest  from  investing  the
portion of such Capital not so allocated.  In the event that the amount referred
to in clause (B) exceeds the amount  referred  to in clause  (A),  the  relevant
Purchaser or  Purchasers  agree to pay to Seller the amount of such excess.  All
Broken Funding Costs shall be due and payable hereunder upon demand.

     "Business  Day" means any day on which banks are not authorized or required
to close in New York, New York, Detroit, Michigan, or Chicago, Illinois, and The
Depository Trust Company of New York is open for business and, if the applicable
Business  Day relates to any  computation  or payment to be made with respect to
the LIBO Rate,  any day on which  dealings in dollar  deposits are carried on in
the London interbank market.

     "Canadian  Receivables"  means  Receivables  which are  payable in Canadian
Dollars and generated from sales to Obligors located in Canada.

     "Capital" of any Receivable  Interest  means, at any time, (A) the Purchase
Price of such Receivable Interest,  minus (B) the sum of the aggregate amount of
Collections  and other  payments  received  by the Agent  which in each case are
applied to reduce such Capital in  accordance  with the terms and  conditions of
this Agreement; provided that such Capital shall be restored (in accordance with
Section  2.09  hereof) in the amount of any  Collections  or other  payments  so
received  and applied if at any time the  distribution  of such  Collections  or
payments are rescinded, returned or refunded for any reason.

     "Change of Control" means (i) any Person or Persons acting in concert shall
acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities
and Exchange  Commission  under the  Securities  Exchange Act of 1934) of 50% or
more of the outstanding shares of voting stock of Federal-Mogul;  or (ii) during
any period of twelve (12)  consecutive  months,  commencing  before or after the
date hereof,  individuals who at the beginning of such twelve-month  period were
directors of  Federal-Mogul  shall cease for any reason to constitute a majority
of the board of directors of Federal-Mogul;  or (iii)  Federal-Mogul shall cease
to own,

                                       4
<PAGE>

free and clear of all Adverse Claims,  all of the  outstanding  shares of voting
stock of the Seller on a fully diluted basis.

     "Closing Date" means July 1, 1999.

     "Collection Account" means each concentration account,  depositary account,
lock-box  account or similar  account in which any  Collections are collected or
deposited.

     "Collection Account Agreement" means, in the case of any actual or proposed
Collection Account, an agreement in substantially the form of Exhibit B hereto.

     "Collection  Bank" means,  at any time, any of the banks or other financial
institutions holding one or more Collection Accounts.

     "Collection  Notice"  means a notice in the form  attached to a  Collection
Account Agreement, from the Agent to a Collection Bank.

     "Collection  Period"  means,  with  respect  to any  Settlement  Date,  the
calendar month preceding the month in which such Settlement Date occurs.

     "Collections"  means, with respect to any Receivable,  all cash collections
and other  cash  proceeds  in  respect of such  Receivable,  including,  without
limitation,  all  cash  proceeds  of  Related  Security  with  respect  to  such
Receivable  and all Deemed  Collections  payable to the Agent for the account of
the applicable Purchaser(s) by the Seller.

     "Commercial  Paper" means  promissory  notes of the Conduits  issued by the
Conduits in the commercial paper market.

     "Commitment"   means   collectively  the  Falcon  Commitment  and  the  ISC
Commitment.

     "Conduit"  has the meaning  assigned  to that term in the  preamble to this
Agreement.

     "Confidential  Information"  means, in relation to any Person,  any written
information  delivered or made  available by or on behalf of another  Person (or
its  Affiliates  or   subsidiaries)  in  connection  with  or  pursuant  to  the
Transaction  Documents  or  the  transactions   contemplated  thereby  which  is
proprietary  in nature  and  clearly  marked or  identified  in writing as being
confidential  information,  other than information (a) which was publicly known,
or otherwise known to such Person, at the time of disclosure (except pursuant to
disclosure in connection with the Transaction Documents), (b) which subsequently
becomes  publicly known through no act or omission by such Person,  or (c) which
otherwise  becomes known other than through  disclosure by the Person to whom it
pertains or one of its Affiliates or subsidiaries.

                                       5
<PAGE>

     "Contractual Dilution Balance" means, as of any Report Date, the sum of (a)
2%  of  North  American  aftermarket  sales  during  the  immediately  preceding
Collection  Period, (b) the greater of (i) the accrual for obsolescence and (ii)
two times the  aggregate  amount of Credit Memos issued  during such  Collection
Period due to  obsolescence,  (c) 1.5 times the aggregate amount of Credit Memos
issued  during  such  Collection  Period  due to Stock  Lifts  and (d) the total
rebates  and  adjustments  currently  owed  to  Obligors  as of the  end of such
Collection  Period (as reflected in the Customer  Program  Balances in the books
and records of the Servicer).

     "Coverage  Shortfall"  means, as of any Report Date, the excess, if any, of
(a)  outstanding  Capital  as of  such  Report  Date,  over  (b)  the  Available
Receivables  determined  as of such  Report  Date minus the  Aggregate  Reserves
determined as of such Report Date.

     "CP Costs" means,  for each day, the sum of (i) discount  accrued on Pooled
Commercial  Paper on such day,  plus  (ii) any and all  accrued  commissions  in
respect of placement agents and Commercial Paper dealers, and issuing and paying
agent fees incurred,  in respect of such Pooled  Commercial  Paper for such day,
plus (iii) other costs  associated  with funding  small or odd-lot  amounts with
respect  to all  receivable  purchase  facilities  which  are  funded  by Pooled
Commercial  Paper for such day, minus (iv) any accrual of income net of expenses
received  on  such  day  from  investment  of  collections  received  under  all
receivable  purchase  facilities  funded  substantially  with Pooled  Commercial
Paper,  minus (v) any payment received on such day net of expenses in respect of
Broken  Funding Costs related to the prepayment of any  Receivables  Interest of
any Conduit pursuant to the terms of any receivable  purchase  facilities funded
substantially  with Pooled Commercial Paper. In addition to the foregoing costs,
if the Seller shall request any  Incremental  Purchase during any period of time
determined by the Agent in its sole discretion to result in incrementally higher
CP Costs applicable to such Incremental  Purchase,  the Capital  associated with
any such Incremental  Purchase shall, during such period, be deemed to be funded
by a Conduit in a special pool (which may include capital  associated with other
receivable  purchase  facilities) for purposes of determining such additional CP
Costs  applicable  only to such  special  pool and charged  each day during such
period against such Capital.

     "Credit  Memo"  means any credit memo  relating  to (a) the North  American
Aftermarket  obsolescence,  (b) the North American  Aftermarket Stock Lifts, (d)
the North American Aftermarket core deposits, (e) the North American Aftermarket
billing adjustments,  (f) the North American Aftermarket customer  accommodation
returns,  (g) the North American  Aftermarket  other and (h) original  equipment
manufacturers.

     "Credit Policies" has the meaning assigned to that term in Section 7.10.

     "Customer   Program  Balances"  means  rebates  owed  to  customers  by  an
Originator based upon prior purchases.

     "Deemed  Collections"  means the  aggregate of all amounts the Seller shall
have been deemed to

                                       6
<PAGE>

have  received as a Collection  of a  Receivable.  The Seller shall be deemed to
have  received  a  Collection  in full of a  Receivable  if at any  time (i) the
Outstanding  Balance of any such Receivable is either (x) reduced as a result of
any defective or rejected  goods or services,  any discount or any adjustment or
otherwise  by  the  Seller  (other  than  cash  Collections  on  account  of the
Receivables)  or (y) reduced or  cancelled as a result of a setoff in respect of
any claim by any Person  (whether such claim arises out of the same or a related
transaction  or  an  unrelated  transaction)  or  (ii)  the  representations  or
warranties  in Sections  4.01(i),  (j),  (l), (n) or (o) are no longer true with
respect  to  any  Receivable.  The  Seller  hereby  agrees  to  pay  all  Deemed
Collections  immediately to the Servicer for  application in accordance with the
terms and conditions hereof.

     "Default  Fee"  means with  respect  to any  amount due and  payable by the
Seller  hereunder  or under the Fee Letter,  an amount  equal to interest on any
such  amount at a rate per  annum  equal to 2% above  the Base  Rate;  provided,
however,  that such  interest  rate will not at any time exceed the maximum rate
permitted by applicable law.

     "Defaulted Receivable" means a Receivable:  (i) as to which any payment, or
part thereof,  remains unpaid for 90 days or more from the original due date for
such payment;  (ii) an Insolvency Event has occurred with respect to the Obligor
thereof;  (iii) as to  which  the  Obligor  thereof,  if a  natural  person,  is
deceased; or (iv) which has been identified by the Seller as uncollectible.

     "Delinquency Ratio" means, as of any Report Date, the percentage equivalent
of a fraction, (i) the numerator of which is the sum of (x) the aggregate amount
of  Receivables  as of  the  last  Business  Day of  the  immediately  preceding
Collection  Period that are 61 or more days past due and (y) the Placed Accounts
Balance,  and (ii) the  denominator  of  which  is the Pool  Balance  as of such
Business Day.

     "Dilution  Horizon Ratio" or "DHR" means,  for any Report Date, a fraction,
the  numerator  of  which  is the  sum  of  the  aggregate  amounts  of all  new
Receivables  generated during the two immediately  preceding  Collection Periods
and the  denominator  of which is the  Available  Receivables  as of such Report
Date.

     "Dilution Ratio" means, as of any Report Date, the percentage equivalent of
a  fraction,  the  numerator  of which is all  non-cash  reductions  to the Pool
Balance, not related to the credit-worthiness of the Obligor, including, but not
limited to, the aggregate  amount of Credit Memos issued during the  immediately
preceding  Collection Period,  adjustments  related to 2/10 discounts (i.e. cash
discounts  related to prompt  payments)  made during the  immediately  preceding
Collection Period,  and other adjustments made during the immediately  preceding
Collection  Period and the  denominator  of which is the Pool Balance as of such
Business Day.

     "Discount Rate" means, the LIBO Rate or the Base Rate, as applicable,  with
respect to each Receivable Interest of the Investors;  provided,  however,  that
from and after the occurrence of an Amortization  Event, the Discount Rate shall
be the Base Rate.

                                       7
<PAGE>

     "Eligible  Originator" means Federal-Mogul and each other Originator at any
time while it is  wholly-owned by  Federal-Mogul;  provided,  however,  any such
Person  shall  not be an  Eligible  Originator  (i)  upon the  occurrence  of an
Insolvency Event with respect to such Person,  or (ii) such Person is not on the
credit and accounts receivable management system and has not been audited by the
Agent on or prior to March 31, 2000.

     "Eligible  Receivable"  means each  Receivable  which  meets the  following
criteria:

          (1) the obligation is denominated  and payable in U.S.  dollars in the
     United States, or, if a Canadian Receivable,  is denominated and payable in
     Canadian  dollars  (provided  that for  purposes  of any  reporting  and/or
     calculations  hereunder Canadian dollars shall be reflected as U.S. dollars
     based upon the Bloomberg exchange rate used for  Federal-Mogul's  month end
     accounting  close);  or is related to an  original  equipment  manufacturer
     export and is denominated in U.S. dollars;

          (2) the related  Obligor is a resident of the United  States or Canada
     or is an original equipment manufacturer;

          (3) the  related  Obligor is not an  Affiliate  of any of the  parties
     hereto;

          (4) the contract terms of the  Receivables  call for payment within 90
     days of  original  billing  date,  except for up to 3% of the Pool  Balance
     which  may have  terms  that  call  for  payment  within  91 to 180 days of
     original billing date;

          (5) the Receivable is not more than 90 days past due;

          (6) the Receivable is an "account"  under Section 9-106 of the Uniform
     Commercial Code;

          (7) the  Receivable  is a legal,  valid and binding  obligation of the
     related Obligor;

          (8) the terms of the  contract for the  Receivable  do not require the
     consent of the Obligor to sell or assign such Receivable;

          (9) the Agent has not notified the Seller that the  Receivable  is not
     acceptable;

          (10) the Receivable  was generated in the ordinary  course of business
     by an Eligible Originator;

          (11) the  Receivable  satisfies  all  applicable  requirements  of the
     Credit Policies of an Eligible Originator and the Seller;

          (12)  with  respect  to  Receivables  for the  related  Obligor  which
     represent in the aggregate 3.00% or more of the Pool Balance,  there are no
     offset arrangements with respect to such Obligor;

                                       8
<PAGE>

          (13) the contract for the  Receivable  represents all or a part of the
     sales price of  merchandise,  insurance and services  within the meaning of
     ss. 3(c)(5) of the Investment Company Act of 1940, as amended; and

          (14) the  Receivable  has not been  materially  extended,  modified or
     "written up";

provided,  however,  that if, as of any Report  Date,  the  aggregate  amount of
Receivables  for an  Obligor  represent  2.00% or more of the Pool  Balance  and
30.00% or more of such Receivables are 91 days or more past due, all Receivables
relating to such Obligor shall not constitute "Eligible Receivables."

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time.

     "Excess  Concentration Amount" means, as of any Report Date, the sum of the
Obligor Overconcentrations on such date.

     "Expected  Floating  Dilution Ratio" or "EFD" means, as of any Report Date,
the average of the Floating Dilution Ratios for the twelve immediately preceding
Collection Periods.

     "Facility  Account" means the Seller's  Account No.  ___-_________ at First
Chicago.

     "Facility  Termination  Date"  means  the  earliest  of (i)  the  Liquidity
Termination  Date,  (ii)  the  date  the  Seller  shall  exercise  its  right to
repurchase the outstanding  Receivable Interests pursuant to Section 2.10, (iii)
any date selected by the Seller on not less than 30 days' prior  written  notice
to the Agent;  provided that such date should not be between Settlement Periods,
and  provided  further that if any Person then acting as Agent  hereunder  shall
have elected or been required to resign as Agent pursuant to Section 10.08,  the
Seller may elect, by written notice to the Agent given promptly following notice
to the Seller of such resignation,  to have the Facility  Termination Date occur
on the effective date of such resignation, (iv) the date of the occurrence of an
Amortization  Event  involving  the Seller and of the type  described in Section
8.01(a), (v) any date following the occurrence,  and during the continuance,  of
any other  Amortization Event which the Required Investors declare in writing to
be the  Facility  Termination  Date,  and (vi)  the date on which  Federal-Mogul
ceases selling  and/or  contributing  Receivables to the Seller  pursuant to the
Sale Agreement and/or the Subscription Agreement referred to therein.

     "Falcon"  has the  meaning  assigned  to that term in the  preamble to this
Agreement  and  includes  such  entity's  successors  and assigns  (but does not
include the Falcon Investors as assignees under Section 3.06).

     "Falcon  Acquisition  Amount"  means,  on the date of any  purchase  by the
Falcon Investors from Falcon of Receivable  Interests  pursuant to Section 3.06:
(a) with  respect to each Falcon  Investor  other than Bank One,  Michigan,  the
lesser of (i) such Falcon Investor's Pro Rata

                                       9
<PAGE>

Share of the Falcon Transfer Price and (ii) such Falcon Investor's unused Falcon
Commitment,  and (b) with respect to Bank One, Michigan,  the difference between
(i) the Falcon Transfer Price and (ii) the aggregate amount payable by all other
Falcon Investors on such date pursuant to clause (a) above.

     "Falcon Commitment" means, for each Falcon Investor, the commitment of such
Falcon Investor to purchase its Pro Rata Share of Receivable  Interests from (i)
the Seller and (ii) Falcon, such Pro Rata Share not to exceed, in the aggregate,
the amount set forth opposite such Falcon Investor's name on the signature pages
of this  Agreement,  as such amount may be modified in accordance with the terms
hereof.

     "Falcon  Defaulting  Investor" shall have the meaning assigned to such term
in Section 3.10.

     "Falcon Investors" means the financial institutions listed on the signature
pages  of  this  Agreement  under  the  heading  "Falcon  Investors"  and  their
respective successors and assigns.

     "Falcon  Non-Defaulting  Investor" shall have the meaning  assigned to such
term in Section 3.10.

     "Falcon  Purchase Limit" means,  collectively,  the aggregate of the Falcon
Commitments  of the  Falcon  Investors  hereunder  (which  aggregate  amount  is
$250,000,000 as of the date of this Agreement).

     "Falcon Residual" means the sum of the Falcon Transfer Price Reductions.

     "Falcon Transfer Price" means,  with respect to the assignment by Falcon of
one or more  Receivable  Interests  to the Agent for the  benefit  of the Falcon
Investors pursuant to Section 3.06, the sum of (i) the lesser of (a) the Capital
of each  Receivable  Interest  and  (b) the  Adjusted  Liquidity  Price  of each
Receivable Interest and (ii) all accrued and unpaid CP Costs for such Receivable
Interests.

     "Falcon  Transfer Price  Deficit" has the meaning  assigned to that term in
Section 3.10.

     "Falcon  Transfer Price  Reduction" means in connection with the assignment
of a  Receivable  Interest  by Falcon to the Agent for the benefit of the Falcon
Investors,  the positive  difference  between (i) the Capital of such Receivable
Interest and (ii) the Adjusted Liquidity Price for such Receivable Interest.

     "Federal  Funds  Effective  Rate"  means,  for any  period,  a  fluctuating
interest  rate per annum equal for each day during such period  equal to (i) the
weighted  average of the rates on  overnight  federal  funds  transactions  with
members of the Federal  Reserve  System  arranged by federal funds  brokers,  as
published for such day (or, if such day is not a Business Day, for the

                                       10
<PAGE>

preceding Business Day) by the Federal Reserve Bank of New York in the Composite
Closing Quotations for U.S. Governments Securities;  or (ii) if such rate is not
so published for any day which is a Business Day, the average of the  quotations
at  approximately  10:30 a.m.  (Chicago time) for such day on such  transactions
received by the  Reference  Bank from three  federal funds brokers of recognized
standing selected by it.

     "Federal-Mogul"  means Federal-Mogul  Corporation,  a Michigan corporation,
and its successors in interest to the extent permitted hereunder.

     "Fee Reserve Percentage" means (a) as of any Report Date when Turnover Days
have  been  less  than or  equal to 60 days  during  the  immediately  preceding
Collection  Period,  1.5%, and (b) as of any Report Date when Turnover Days have
been greater than 60 days during the immediately  preceding  Collection  Period,
2.0%.

     "Fees" means, collectively, the Administration Fee, Program Fee and Default
Fees.

     "Fee  Letter"  means that  certain  letter  agreement  dated as of the date
hereof  among the  Seller,  the Agent and the  Conduits  as it may be amended or
modified and in effect from time to time.

     "Finance Charges" means, with respect to an invoice, any finance, interest,
late payment  charges or similar  charges  owing by an Obligor  pursuant to such
invoice.

     "First  Chicago" means The First National Bank of Chicago in its individual
capacity and its successors.

     "First  Chicago  Roles" has the  meaning  assigned  to that term in Section
12.13.

     "Floating  Dilution  Ratio" means,  as of any Report Date,  the  percentage
equivalent of a fraction,  the numerator of which shall be the Floating Dilution
determined  as of such  Report  Date and the  denominator  of which shall be the
aggregate  amount of new  Receivables  transferred to the Seller pursuant to the
Sale Agreement during the second immediately preceding Collection Period.

     "Floating  Dilution"  means, as of any Report Date, the aggregate amount of
Credit Memos issued during the immediately  preceding Collection Period relating
to the (i) North American  Aftermarket  core  deposits,  (ii) the North American
Aftermarket billing  adjustments,  (iii) the North American Aftermarket customer
accommodation  returns,  (iv)  the  North  American  Aftermarket  other  and (v)
original equipment manufacturers.

     "Floating  Dilution  Reserve  Percentage" or "FDRP" shall equal,  as of any
Report Date, the greater of:

                                       11
<PAGE>

         (a)      7.0%, and

         (b) 1.75 X EFD X DHR + [ (FDS-EFD) x FDS/EFD ]

         where:

         FDR      =        Floating Dilution Ratio
         EFD      =        Expected Floating Dilution Ratio
         FDS      =        Floating Dilution Spike Ratio
         DHR      =        Dilution Horizon Ratio

     "Floating  Dilution Spike Ratio" or "FDS" means, as of any Report Date, the
highest  average  of  the  Floating  Dilution  Ratio  for  any  two  consecutive
Collection  Periods  that  occurred  during  the  twelve  immediately  preceding
Collection Periods.

     "Funding  Agreement"  means this  Agreement and any agreement or instrument
executed by any Funding Source with or for the benefit of any Conduit.

     "Funding Source" means (i) any Investor or (ii) any insurance company, bank
or other  financial  institution  providing  liquidity,  credit  enhancement  or
back-up purchase support or facilities to any Conduit.

     "Governmental Authority" shall mean the United States of America, any state
or other  political  subdivision  thereof and any entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government.

     "Guaranty"  means  any  guaranty  by any  Person of  Indebtedness  or other
obligations  of any other Person that is not a  consolidated  subsidiary of such
Person or any  assurance  with respect to the  financial  condition of any other
Person that is not a consolidated subsidiary of such Person (including,  without
limitation,   any  purchase  or  repurchase  agreement,  any  indemnity  or  any
keep-well,  take-or-pay,  through-put or other arrangement  having the effect of
assuring or holding  harmless any third Person  against loss with respect to any
Indebtedness  or other  obligation of such other Person) except  endorsements of
negotiable instruments for collection in the ordinary course of business.

     "Incremental Purchase" means a purchase of one or more Receivable Interests
which increases the total outstanding Capital hereunder.

     "Indebtedness"  means any (a)  indebtedness  for borrowed  money or for the
deferred  purchase price of property or services,  (b) obligations  under leases
which, in accordance with generally accepted  accounting  principles,  are to be
recorded  as capital  leases,  (c)  obligations  which are  evidenced  by notes,
acceptances or other instruments,  (d) net liabilities under interest rate swap,
foreign  currency  swap,  commodity  swap,  exchange or cap  agreements  and (e)
obligations, whether or not assumed, secured by Liens or payable out of proceeds
or

                                       12
<PAGE>

production from property now or hereafter owned or acquired;  provided, however,
that the term "Indebtedness" shall not include short-term obligations payable to
suppliers incurred in the ordinary course of business.

     "Indemnified  Amounts"  shall  have the  meaning  assigned  to such term in
Section 9.01.

     "Indemnified Party" shall have the meaning assigned to such term in Section
9.01.

     "Independent  Director" shall have the meaning assigned to such term in the
Sale Agreement.

     "Insolvency Event" means, with respect to any Person, the occurrence of any
of the following:

          (a) such Person files a petition commencing a voluntary case under any
     chapter of the Federal  bankruptcy  laws;  or such Person files a petition,
     answer or  consent  seeking  reorganization,  arrangement,  adjustment,  or
     composition  under any  other  similar  applicable  federal  law,  or shall
     consent to the filing of any such  petition,  answer,  or consent;  or such
     Person appoints, or consents to the appointment of, a custodian,  receiver,
     liquidator,  trustee,  assignee,  sequestrator or other similar official in
     bankruptcy or insolvency of it or of any substantial  part of its property;
     or such Person makes an assignment for the benefit of creditors,  or admits
     in writing its inability to pay its debts generally as they become due; or

          (b) an order for  relief is  entered  against  such  Person by a court
     having  jurisdiction  in the  premises  under any  chapter  of the  Federal
     bankruptcy laws; a decree or an order by a court having jurisdiction in the
     premises  is  entered  approving  as  properly  filed  a  petition  seeking
     reorganization,  arrangement,  adjustment,  or  composition  of such Person
     under any other similar  applicable federal law; or a decree or an order of
     a court  having  jurisdiction  in the  premises  for the  appointment  of a
     custodian, receiver, liquidator, trustee, assignee,  sequestrator, or other
     similar  official  in  bankruptcy  or  insolvency  of such Person or of any
     substantial  part of its property or for the winding up or  liquidation  of
     its affairs,  is entered (each of the foregoing  events in this clause (b),
     an "Involuntary Insolvency Event").

     "Intended   Characterization"   means,   for  income  tax   purposes,   the
characterization of the acquisition by the Purchasers of Receivable Interests as
a loan or loans by the Purchasers to the Seller secured by the Receivables,  the
Related Security, the Collection Accounts and the Collections.

     "Investor Fee Letter" means that certain letter  agreement  dated as of the
date hereof, among the Seller, the Agent and the financial  institutions parties
thereto, as amended or modified and in effect from time to time.

                                       13
<PAGE>

     "Investors"  means,   collectively,   the  Falcon  Investors  and  the  ISC
Investors.

     "ISC"  has the  meaning  assigned  to that  term  in the  preamble  to this
Agreement  and  includes  such  entity's  successors  and assigns  (but does not
include the ISC Investors as assignees under Section 3.11).

     "ISC  Acquisition  Amount"  means,  on the date of any  purchase by the ISC
Investors  from ISC of Receivable  Interests  pursuant to Section 3.11: (a) with
respect to each ISC Investor  other than Bank One,  Michigan,  the lesser of (i)
such ISC  Investor's  Pro Rata Share of the ISC Transfer Price and (ii) such ISC
Investor's  unused ISC Commitment,  and (b) with respect to Bank One,  Michigan,
the difference  between (i) the ISC Transfer Price and (ii) the aggregate amount
payable by all other ISC Investors on such date pursuant to clause (a) above.

     "ISC Commitment"  means, for each ISC Investor,  the commitment of such ISC
Investor to purchase  its Pro Rata Share of  Receivable  Interests  from (i) the
Seller and (ii) ISC, such Pro Rata Share not to exceed,  in the  aggregate,  the
amount set forth  opposite such ISC  Investor's  name on the signature  pages of
this  Agreement,  as such amount may be modified  in  accordance  with the terms
hereof.

     "ISC Defaulting  Investor" shall have the meaning  assigned to such term in
Section 3.15.

     "ISC Investors"  means the financial  institutions  listed on the signature
pages of this Agreement under the heading "ISC  Investors" and their  respective
successors and assigns.

     "ISC Non-Defaulting  Investor" shall have the meaning assigned to such term
in Section 3.15.

     "ISC  Purchase  Limit"  means,  collectively,  the  aggregate  of  the  ISC
Commitments  of  the  ISC  Investors   hereunder   (which  aggregate  amount  is
$200,000,000 as of the date of this Agreement).

     "ISC Residual" means the sum of the ISC Transfer Price Reductions.

     "ISC Transfer Price" means, with respect to the assignment by ISC of one or
more  Receivable  Interests  to the Agent for the  benefit of the ISC  Investors
pursuant to Section  3.11,  the sum of (i) the lesser of (a) the Capital of each
Receivable  Interest and (b) the  Adjusted  Liquidity  Price of each  Receivable
Interest and (ii) all accrued and unpaid CP Costs for such Receivable Interests.

     "ISC  Transfer  Price  Deficit"  has the  meaning  assigned to that term in
Section 3.15.

     "ISC Transfer Price Reduction" means in connection with the assignment of a
Receivable  Interest by ISC to the Agent for the  benefit of the ISC  Investors,
the positive

                                       14
<PAGE>

difference  between (i) the  Capital of such  Receivable  Interest  and (ii) the
Adjusted Liquidity Price for such Receivable Interest.

     "LIBO Rate" means the rate per annum equal to the sum of (i)(a) the rate at
which deposits in U.S.  Dollars are offered by the Reference Bank to first-class
banks in the London interbank  market at approximately  11:00 a.m. (London time)
two  Business  Days prior to the first day of the relevant  Tranche  Period such
deposits  being in the  approximate  amount  of the  Capital  of the  Receivable
Interest  to be  funded or  maintained,  divided  by (b) one  minus the  maximum
aggregate reserve requirement  (including all basic,  supplemental,  marginal or
other  reserves)  which is  imposed  against  the  Reference  Bank in respect of
Eurocurrency  liabilities,  as defined in Regulation D of the Board of Governors
of the Federal  Reserve  System as in effect from time to time  (expressed  as a
decimal),  applicable to such Tranche Period plus (ii) 0.75% per annum. The LIBO
Rate shall be rounded, if necessary, to the next higher 1/16 of 1%.

     "Liquidity  Termination  Date"  means June 28,  2000,  unless  such date is
extended by mutual  written  agreement of the Seller,  the Agent and each of the
Purchasers.

     "Loss Reserve  Percentage" means, as of any Report Date, the greater of (a)
9.0% and (b) 3 times the Loss-to-Liquidation Ratio.

     "Loss-to-Liquidation  Ratio" means, as of any Report Date, a fraction,  the
numerator of which equals the sum of (a) the aggregate of Receivables  that were
61 to 90  days  past  due  as of the  last  day  of  the  immediately  preceding
Collection  Period and (b) the excess,  if any, of (i) the  aggregate  amount of
Placed Accounts Balance during the immediately  preceding Collection Period over
(ii)  the  aggregate  amount  of  Placed  Accounts  Balance  during  the  second
immediately  preceding  Collection  Period,  and the  denominator  of  which  is
Collections received during the immediately preceding Collection Period.

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
financial  condition,  business or operations  of the Seller or any  Originator,
(ii) the  ability of the Seller or any  Originator  to perform  its  obligations
under any Transaction Document,  (iii) the legality,  validity or enforceability
of this Agreement,  any Transaction Document or any Collection Account Agreement
or  Collection  Notice  relating to a  Collection  Account into which a material
portion of  Collections  are  deposited,  (iv) the  Seller's or any  Purchaser's
interest  in the  Receivables  generally  or in any  significant  portion of the
Receivables,  the Related Security or the Collections  with respect thereto,  or
(v) the  collectibility of the Receivables  generally or of any material portion
of the Receivables.

     "Minimum  Enhancement Amount" means, as of any Report Date, an amount equal
to the  greater  of: (a) an amount  equal to the  product  of (i) the  Aggregate
Reserve  Percentage  as of such Report Date and (ii) a fraction the numerator of
which is equal to outstanding Capital as of such Report Date and the denominator
of which is 1 minus such Aggregate Reserve Percentage plus (iii) the Contractual
Dilution Balance as of such Report Date and (b) $15,800,000.

                                       15
<PAGE>

     "Monthly Servicing Fee" shall have the meaning specified in Section 7.11.

     "Net  Receivables  Balance"  means, at anytime,  the aggregate  Outstanding
Balance  of all  Eligible  Receivables  at  such  time,  reduced  by the  Excess
Concentration Amount.

     "New  Concentration  Account"  has the  meaning  assigned  to that  term in
Section 6.01(k).

     "Obligations" shall have the meaning assigned to such term in Section 2.05.

     "Obligor" means a Person obligated to make payments pursuant to an invoice.

     "Obligor Overconcentration" means, as of any Report Date, the excess of (a)
the  aggregate  of all amounts of Eligible  Receivables  owned by the Seller and
generated  under accounts  receivable with any one Obligor or type of Receivable
as of the last day of the Collection  Period  immediately  preceding such Report
Date  over  (b)  3.0%  of the  Eligible  Receivables  on the  last  day of  such
immediately   preceding   Collection   Period;   provided   that   the   Obligor
Overconcentration   with  respect  to  the   following   Obligors  or  types  of
Receivables, shall be the applicable amount described in clause (a) in excess of
the following percentages respectively,  of the Eligible Receivables on the last
day of such immediately preceding Collection Period:

Obligor/Receivable Type                                           Percentage
-----------------------                                           ----------
Chrysler                                                                  7%
Ford                                                                      7%
General Motors                                                            7%
Auto Zone                                                                 7%
Genuine Parts                                                             6%
Canadian Receivables                                                      6%
OEM Export Receivables                                                    5%

     "Originator"  means each of (a)  Federal-Mogul;  (b)  Federal-Mogul  Canada
Limited; (c) Federal-Mogul Piston Rings, Inc.; (d) Federal-Mogul Flowery Branch,
LLC; (e) Federal-Mogul Powertain, Inc.; (f) Federal-Mogul Sealing Systems, Inc.;
(g)  Federal-Mogul  Carolina,  Inc.;  (i)  Federal-Mogul  South Bend,  Inc., (j)
Federal-Mogul  LaGrange,  Inc.; (k) Federal-Mogul  Sintered Products,  Inc.; (l)
Federal-Mogul  Sintered  Products-Waupun,  Inc.;  (m)  Federal-Mogul  Engineered
Bearings, Inc.; (n) Federal-Mogul  Camshafts,  Inc.; (o) Federal-Mogul Aviation,
Inc.; (p) Federal-Mogul Ignition Company; (q) Federal-Mogul Products,  Inc.; (r)
Federal-Mogul  Systems  Protection  Group,  Inc.;  and shall  include  any other
wholly-owned  Subsidiary  of  Federal-Mogul  which the Agent and the  Purchasers
unanimously approve.

     "Outstanding  Balance"  of  any  Receivable  at any  time  means  the  then
outstanding principal balance thereof, and shall exclude any interest or finance
charges  thereon,  without  regard to  whether  any of the same  shall have been
capitalized.

                                       16
<PAGE>

     "Person" means an individual, partnership, corporation, association, trust,
or any other entity,  or  organization,  including a  Governmental  Authority or
other government or political subdivision or agent or instrumentality thereof.

     "PBGC" means the Pension Benefit Guaranty Corporation created under Section
4002(a) of ERISA or any successor thereto.

     "Placed Accounts  Balance" means the aggregate  Outstanding  Balance of any
Receivables that have been moved to a separate credit manager code in accordance
with the Credit Policies.

     "Plan" means any defined  benefit plan  maintained or contributed to by the
Originator  or any  Subsidiary  of the  Originator  or by any trade or  business
(whether or not  incorporated)  under common  control with the Originator or any
Subsidiary of the Originator as defined in Section  4001(b) of ERISA and insured
by the PBGC under Title IV of ERISA.

     "Pool  Balance"  means,  as of  the  time  of  determination  thereof,  the
aggregate  Outstanding  Balance of all  Receivables  owned by the Seller at such
time.

     "Pooled  Commercial  Paper"  means  Commercial  Paper notes of each Conduit
subject to any particular  pooling  arrangement  by such Conduit,  but excluding
Commercial  Paper  issued  by  such  Conduit  for  a  tenor  and  in  an  amount
specifically  requested by any Person in connection with any agreement  effected
by such Conduit.

     "Potential  Amortization  Event" means an event which,  with the passage of
time or the giving of notice, or both, would constitute an Amortization Event.

     "Pro Rata Share" means, for each Investor,  the Commitment of such Investor
divided by the related  Purchase Limit,  adjusted as necessary to give affect to
the application of the terms of Sections 3.06, 3.10, 3.11 and 3.15.

     "Program Fee" shall have the meaning specified in the Fee Letter.

     "Proposed  Reduction Date" has the meaning assigned to that term in Section
2.03.

     "Purchase  Limit" means (i) the aggregate of the Falcon  Purchase Limit and
the ISC Purchase Limit (which aggregate amount is $450,000,000 as of the date of
this  Agreement);  (ii) with respect to Falcon,  the Falcon Purchase Limit;  and
(iii) with respect to ISC, the ISC Purchase Limit, in each case, as applicable.

     "Purchase  Date" means the date of the sale by Seller,  and the purchase by
the  Conduits  or the  Agent on  behalf  of the  Investors,  of any  Receivables
Interests hereunder.

     "Purchase Notice" shall have the meaning specified in Section 2.02.

                                       17
<PAGE>

     "Purchase Price" means, with respect to any Incremental Purchase, the least
of:

          (a) the amount of Capital requested by the Seller,

          (b) the remaining unused portion of the Purchase Limit, and

          (c) the  maximum  amount by which the  aggregate  outstanding  Capital
     could be  increased  such that  after  giving  effect to such  increase  in
     Capital,  the Net  Receivables  Balance will equal or exceed the sum of (i)
     (x) Capital divided by (y) 1 minus the Aggregate  Reserve  Percentage,  and
     (ii) the Contractual Dilution Balance.

     "Purchaser" means Falcon, ISC and/or an Investor, as applicable.

     "Purchasing  Investors"  has the  meaning  assigned to that term in Section
11.01(b).

     "Reassignment  Amount" means,  with respect to any Settlement  Date,  after
giving  effect to any  deposits and  distributions  otherwise to be made on such
Settlement  Date, the sum of (i) the Capital on such  Settlement  Date, (ii) the
amount of accrued and unpaid CP Costs or Yield, as applicable,  relating to such
Settlement  Date or any  prior  Settlement  Date  which was  previously  due and
unpaid,  and (iii) the amount of any accrued and unpaid Fees and Broken  Funding
Costs.

     "Receivable"  means all the U.S.  dollar  denominated  and all the Canadian
dollar-denominated  accounts receivable shown on the records of Federal-Mogul or
any other Originator, and from time to time thereafter, arising from the sale of
merchandise by  Federal-Mogul  or any other Originator in the ordinary course of
business;  provided, however, that "Receivable" that includes a Stock Lift shall
be sold to Seller net of any adjustment with respect to such Stock Lift.

     "Receivable Interest" means, at any time, an undivided percentage ownership
interest (computed as set below) associated with a designated amount of Capital,
Discount Rate and Tranche Period  selected  pursuant to the terms and conditions
hereof in: (a) all Receivables  transferred to or otherwise  acquired or held by
the Seller  and  arising  prior to the time of the most  recent  computation  or
recomputation of such undivided interest,  (b) all Related Security with respect
to such Receivables, and (c) all Collections with respect to, and other proceeds
of, such Receivables. Such undivided percentage interest shall equal:

                                        C
                 ---------------------------------------------
                                    AVR - AR

                                       18
<PAGE>

         where:

         C        =        the Capital of such Receivable Interest.

         AVR      =        the Available Receivables.

         AR       =        the Aggregate Reserves.

     "Receivables  Purchase Agreement" means the Receivables  Purchase Agreement
dated as of the Closing Date by and between Federal-Mogul, as Purchaser, and the
other Originators, as sellers, as amended, modified or supplemented from time to
time.

     "Records"  means,  with respect to any  Receivable,  all invoices and other
documents, books, records and other information (including,  without limitation,
computer  programs,  tapes,  disks,  punch cards,  data processing  software and
related property and rights)  relating to such Receivable,  any Related Security
therefor and the related Obligor.

     "Reduction Notice" has the meaning assigned to such term in Section 2.03.

     "Reduction  Percentage" means, for any Receivable  Interest acquired by the
Investors from the related  Conduit for less than the Capital of such Receivable
Interest,  a percentage equal to a fraction the numerator of which is the Falcon
Transfer Price Reduction or the ISC Transfer Price Reduction, as applicable, for
such  Receivable  Interest and the  denominator  of which is the Capital of such
Receivable Interest.

     "Reference  Bank" means Bank One,  Michigan or such other bank as the Agent
shall designate with the consent of the Seller.

     "Reinvestment" has the meaning assigned to that term in Section 2.06.

     "Related Security" means, with respect to any Receivable:

          (i) all of the Seller's  interest in the goods,  the shipment of which
     gave rise to such Receivable,

          (ii) all  other  security  interests  or liens  and  property  subject
     thereto from time to time,  if any,  purporting  to secure  payment of such
     Receivable,  whether  pursuant to the invoice related to such Receivable or
     otherwise,  together with all financing  statements and security agreements
     describing any collateral securing such Receivable,

          (iii) all guaranties,  insurance and other  agreements or arrangements
     of whatever  character from time to time supporting or securing  payment of
     such Receivable  whether pursuant to the invoice related to such Receivable
     or otherwise,

          (iv) all Records related to such Receivables,

                                       19
<PAGE>

          (v) all of the Seller's right, title and interest in, to and under the
     Sale Agreement and the Receivables  Purchase Agreement and, with respect to
     such  Agreement,  each bill of lading,  instrument,  document or  agreement
     executed in  connection  therewith in favor of or otherwise for the benefit
     of the Seller; and

          (vi) all proceeds of any of the foregoing.

     "Report Date" means the fifteenth day of each month,  or if such day is not
a Business Day, the next succeeding Business Day.

     "Required  Investors"  means,  collectively  at any  time,  Investors  with
Commitments in excess of 66 2/3% of the Purchase Limit.

     "Required Notice Period" means the number of days required notice set forth
below applicable to the Aggregate Reduction indicated below:

         Aggregate Reduction                         Required Notice Period
         -------------------                         ----------------------

 LESS THAN$100,000,000                               two Business Days
          $100,000,000 to $250,000,000               five Business Days
 MORE THAN$250,000,000                               ten Business Days

     "Requirements  of  Law"  for any  Person  shall  mean  the  certificate  of
incorporation and by-laws or other organizational or governing documents of such
Person,  and  any  law,  treaty,  rule or  regulation,  or  determination  of an
arbitrator or Governmental Authority, in each case applicable to or binding upon
such Person or to which such Person is subject,  whether Federal, state or local
(including usury laws and the Federal Truth in Lending Act).

     "Restricted  Junior Payment" means (i) any dividend or other  distribution,
direct or  indirect,  on account of any shares of any class of capital  stock of
the Seller now or hereafter  outstanding,  except a dividend  payable  solely in
shares of that class of stock or in any junior class of stock to any Originator,
(ii) any redemption,  retirement,  sinking fund or similar payment,  purchase or
other acquisition for value,  direct or indirect,  of any shares of any class of
capital stock of the Seller now or hereafter  outstanding,  (iii) any payment or
prepayment of principal of, premium, if any, or interest,  fees or other charges
on or with respect to, and any  redemption,  purchase,  retirement,  defeasance,
sinking fund or similar payment and any claim for rescission with respect to the
Indebtedness  evidenced  by the  Subordinated  Notes  (as  defined  in the  Sale
Agreement), (iv) any payment made to redeem, purchase,  repurchase or retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire  shares of any class of capital  stock of the  Seller  now or  hereafter
outstanding, and (v) any payment of management fees by the Seller.

     "Sale Agreement"  means that certain Amended and Restated  Receivables Sale
and  Contribution  Agreement  of even  date  herewith  between  the  Seller,  as
purchaser, and Federal-

                                       20
<PAGE>

Mogul,  as  seller,  as the  same  may be  amended,  restated,  supplemented  or
otherwise modified from time to time.

     "Section"  means a  numbered  section  of this  Agreement,  unless  another
document is specifically referenced.

     "Servicer"  means at any time the  Person  (which  may be the  Agent)  then
authorized   pursuant  to  Article  VII  to  service,   administer  and  collect
Receivables.

     "Settlement  Date"  means,  (a)  prior  to the  earlier  to occur of (i) an
Amortization  Event or (ii) the Facility  Termination  Date,  (1) the  twentieth
(20th)  day of each  month  or,  if such  day is not a  Business  Day,  the next
succeeding  Business Day or (2) the last day of the Relevant  Tranche  Period in
respect of each Receivable Interest of the Investors, and (b) from and after the
earlier to occur of (i) an Amortization  Event or (ii) the Facility  Termination
Date,  (x) the  twentieth  (20th)  day of each  month  or,  if such day is not a
Business Day, the next succeeding Business Day, (y) the last day of the Relevant
Tranche Period in respect of each  Receivable  Interest of the Investors and (z)
or any other Business Day designated by the Agent.

     "Settlement  Date Statement" means a report,  in substantially  the form of
Exhibit C hereto  (appropriately  completed),  furnished  by the Servicer to the
Agent pursuant to Section 7.05.

     "Settlement  Period" means (A) in respect of each Receivable  Interest of a
Conduit,  the immediately  preceding Accrual Period,  and (B) in respect of each
Receivable  Interest  of the  Investors,  the  entire  Tranche  Period  of  such
Receivable Interest.

     "Stock Lift" means an account  receivable,  or portion thereof, as to which
Federal-Mogul  or one of its subsidiaries has issued a credit in an amount equal
to the balance of such account receivable or portion thereof.

     "Subsidiary"  of a Person  means (i) any  corporation  more than 50% of the
outstanding  securities  having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its  Subsidiaries or by such Person and one or more of its  Subsidiaries,  or
(ii)  any   partnership,   association,   joint  venture  or  similar   business
organization  more than 50% of the ownership  interests  having  ordinary voting
power of which  shall at the time be so owned or  controlled.  Unless  otherwise
expressly  provided,  all  references  herein  to a  "Subsidiary"  shall  mean a
Subsidiary of the Seller.

     "Taxes" shall have the meaning set forth in Section 9.04.

     "Term" means, with respect to each Investor's Commitment, June 28, 2000.

     "Terminating Tranche" has the meaning set forth in Section 3.03(b).

                                       21
<PAGE>

     "Tranche Period" means, with respect to any Receivable  Interest held by an
Investor:

          (a) if Yield for such  Receivable  Interest is calculated on the basis
     of the LIBO Rate, a period of one, two, three or six months,  or such other
     period as may be mutually agreeable to the Agent and the Seller, commencing
     on a Business  Day  selected  by the Seller or the Agent  pursuant  to this
     Agreement.  Such  Tranche  Period  shall  end on the day in the  applicable
     succeeding  calendar month which  corresponds  numerically to the beginning
     day of such Tranche  Period;  provided,  however,  that if there is no such
     numerically corresponding day in such succeeding month, such Tranche Period
     shall end on the last Business Day of such succeeding month; or

          (b) if Yield for such  Receivable  Interest is calculated on the basis
     of the Base Rate,  a period  commencing  on a Business  Day selected by the
     Seller and agreed to by the Agent,  provided no such period shall exceed 30
     days.

If any  Tranche  Period  would end on a day which is not a  Business  Day,  such
Tranche Period shall end on the next succeeding Business Day; provided, however,
that in the case of Tranche Periods corresponding to the LIBO Rate, if such next
succeeding  Business Day falls in a new month,  such Tranche Period shall end on
the  immediately  preceding  Business Day. In the case of any Tranche Period for
any Receivable Interest which commences before the Facility Termination Date and
would  otherwise end on a date occurring  after the Facility  Termination  Date,
such Tranche Period shall end on the Facility  Termination Date. The duration of
each Tranche Period which commences after the Facility Termination Date shall be
of such duration as selected by the Agent.

     "Transaction  Documents"  means,  collectively,  this  Agreement,  the Sale
Agreement, the Subscription Agreement, the Subordinated Notes (as defined in the
Sale  Agreement),  the Fee Letter,  the  Investor  Fee Letter,  each  Collection
Agreement,  each Collection Notice,  the Receivables  Purchase Agreement and all
other instruments, documents and agreements executed and delivered by the Seller
or any Originator in connection herewith.

     "Turnover  Days" means,  as of any Report Date, an amount equal to the Pool
Balance  as of the  last  day of the  immediately  preceding  Collection  Period
divided by Collections  relating to the immediately  preceding Collection Period
times 30.

     "UCC" means the Uniform  Commercial  Code as from time to time in effect in
the specified jurisdiction.

     "Weekly  Settlement  Date" has the meaning assigned to that term in Section
7.07.

     "Weekly Report" has the meaning assigned to that term in Section 7.07.

     "Year 2000 Problem" means any  significant  risk that computer  hardware or
software used in the business or operations of the Seller,  in the case of dates
or time periods

                                       22
<PAGE>

occurring after December 31, 1999, will not function at least as effectively and
reliably as in the case of dates or time  periods  occurring  before  January 1,
2000.

     "Yield" means for each  respective  Tranche  Period  relating to Receivable
Interests of the  Investors,  an amount  equal to the product of the  applicable
Discount  Rate for each  Receivable  Interest  multiplied by the Capital of such
Receivable Interest for each day elapsed during such Tranche Period,  annualized
on a 360 day basis.

     Section 1.02 Other Definitional Provisions.

     (a) All accounting terms not specifically defined herein shall be construed
in accordance  with generally  accepted  accounting  principles in effect in the
United States from time to time.

     (b) All terms  used in  Article 9 of the UCC in the State of New York,  and
not specifically defined herein, are used herein as defined in such Article 9.

     (c) The words  "hereof",  "herein"  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,  subsection,
Schedule  and  Exhibit   references  are  to  this  Agreement  unless  otherwise
specified.

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

                                  ARTICLE II.
                PURCHASE ARRANGEMENTS; PAYMENTS AND COLLECTIONS;
                                 CONDUIT FUNDING

     Section  2.01  Purchase  Facility.  Upon  the  terms  and  subject  to  the
conditions  hereof,  the Seller may, at its option,  sell and assign  Receivable
Interests  to the Agent for the  benefit of each  Conduit or the  Investors.  In
accordance with the terms and conditions set forth herein,  each Conduit may, at
its option,  instruct the Agent to purchase on behalf of such Conduit or if such
Conduit shall decline to purchase,  the Agent shall  purchase,  on behalf of the
related Investors, Receivable Interests from time to time in an aggregate amount
not to exceed each  Conduit's  applicable  Purchase Limit during the period from
the date hereof to but not including the Facility Termination Date.

     The Seller may, upon at least 30 days' prior written  irrevocable notice to
the Agent,  terminate in whole or permanently  reduce in part, ratably among the
Investors,  the unused portion of the Purchase Limit; provided that each partial
reduction of the Purchase Limit shall be in a minimum amount equal to $2,000,000
or a larger integral multiple of $1,000,000.

     Section 2.02  Increases.  The Seller shall  provide the Agent with at least
three  Business  Days'  prior  notice in a form set forth as Exhibit A hereto of
each Incremental  Purchase

                                       23
<PAGE>

(a "Purchase  Notice").  Each  Purchase  Notice shall be subject to Section 5.02
and,  except as set forth  below,  shall be  irrevocable  and shall  specify the
requested  Purchase Price (which shall not be less than  $2,000,000) and date of
purchase  (which,  in the case of any  Incremental  Purchase  (after the initial
purchase hereunder),  shall only be on a Settlement Date) and, in the case of an
Incremental Purchase to be funded by the Investors,  the requested Discount Rate
and Tranche  Period.  Following  receipt of a Purchase  Notice,  the Agent shall
determine  whether  each  Conduit  agrees to make the  purchase.  If any Conduit
declines to make a proposed purchase,  the Seller may cancel the Purchase Notice
or, in the  absence of such a  cancellation,  the  Incremental  Purchase  of the
Receivable Interest shall be made by the related Investors.  On the date of each
Incremental  Purchase,  upon satisfaction of the applicable conditions precedent
set forth in Article V, each  Conduit or the  Investors,  as  applicable,  shall
deposit to the Facility Account,  in immediately  available funds, no later than
12:00 noon (Chicago  time),  an amount equal to (i) in the case of each Conduit,
the aggregate  Purchase Price of the  Receivable  Interests such Conduit is then
purchasing or (ii) in the case of an Investor, such Investor's Pro Rata Share of
the aggregate  Purchase Price of the Receivable  Interests the related Investors
are purchasing.

     Section  2.03  Decreases.  The Seller  shall  provide  the Agent with prior
written notice,  substantially  in the form of Exhibit H, in conformity with the
Required Notice Period of any reduction of Capital from Collections requested by
the Seller (a "Reduction Notice"). Such Reduction Notice shall designate (i) the
date (the  "Proposed  Reduction  Date") upon which any such reduction of Capital
shall  occur  (which date shall give effect to the  applicable  Required  Notice
Period),  and (ii) the aggregate  amount of Capital to be reduced which shall be
applied ratably to the Receivable Interests of each Conduit and the Investors in
accordance with the amount of Capital (if any) owing to each Conduit, on the one
hand, and the amount of Capital (if any) owing to the Investors (ratably,  based
on  their  respective  Pro Rata  Shares),  on the  other  hand  (the  "Aggregate
Reduction").  Only one (1) Reduction  Notice shall be  outstanding  at any time.
Notwithstanding the foregoing,  the Aggregate Reduction shall not be made if the
Facility  Termination Date shall have occurred for any reason on or prior to the
Proposed Reduction Date.

     Section 2.04 Payment  Requirements.  All amounts to be paid or deposited by
the  Seller  pursuant  to any  provision  of  this  Agreement  shall  be paid or
deposited in accordance with the terms hereof no later than 11:00 a.m.  (Chicago
time) on the day when due in immediately  available  funds,  and if not received
before  11:00 a.m.  (Chicago  time)  shall be deemed to be  received on the next
succeeding  Business Day. If such amounts are payable to a Purchaser  they shall
be paid to the Agent,  for the account of such Purchaser,  at One First National
Plaza,  Chicago,  Illinois  60670 until  otherwise  notified by the Agent.  Upon
notice to the Seller,  the Agent may debit the Facility  Account for all amounts
due and payable hereunder.  All computations of Yield, per annum fees calculated
as part of any CP Costs, per annum fees hereunder and under the Fee Letter shall
be made on the  basis  of a year of 360  days  for  the  actual  number  of days
elapsed.  If any  amount  hereunder  shall be  payable  on a day  which is not a
Business Day, such amount shall be payable on the next succeeding Business Day.

     Section 2.05 Payments. Notwithstanding any limitation on recourse contained
in this Agreement,  the Seller shall  immediately pay to the Agent when due, for
the account of the

                                       24
<PAGE>

relevant  Purchaser or Purchasers on a full recourse basis, (i) such fees as set
forth in the Fee Letter (which fees shall be sufficient to pay all fees owing to
the Investors),  (ii) all amounts payable as Deemed  Collections (which shall be
applied to reduce outstanding  Capital hereunder in accordance with Section 2.06
and 2.07),  (iii) all amounts  payable  pursuant to Article IX, if any, (iv) all
Servicer  costs and expenses in connection  with  servicing,  administering  and
collecting  the  Receivables,  (v) all Broken Funding Costs and (vi) all Default
Fees (collectively,  the  "Obligations").  If any Person fails to pay any of the
Obligations  when due, such Person agrees to pay, on demand,  the Default Fee in
respect thereof until paid.  Notwithstanding the foregoing, no provision of this
Agreement or the Fee Letter shall  require the payment or permit the  collection
of any amounts  hereunder in excess of the maximum  permitted by applicable law.
If at any time the Seller  receives any  Collections or is deemed to receive any
Collections,  the  Seller  shall  immediately  pay such  Collections  or  Deemed
Collections  to the  Servicer  and,  at all times  prior to such  payment,  such
Collections  shall be held in trust by the Seller for the  exclusive  benefit of
the Purchasers and the Agent.

     Section  2.06  Collections  Prior to  Amortization.  Prior to the  Facility
Termination  Date, any  Collections  received by the Servicer (after the initial
purchase of a  Receivable  Interest  hereunder  and on or prior to the  Facility
Termination  Date of such  Receivable  Interest)  shall be set aside and held in
trust by the  Servicer  for the  payment of any  accrued  and  unpaid  Aggregate
Unpaids.  If at any time any  Collections  are received by the Servicer prior to
the Facility  Termination  Date,  the Seller hereby  requests and the Purchasers
hereby agree to make,  simultaneously  with such receipt, a reinvestment (each a
"Reinvestment")  with that portion of each and every Collection  received by the
Servicer that is part of any Receivable Interest,  such that after giving effect
to  such  Reinvestment,  the  amount  of  Capital  of such  Receivable  Interest
immediately after such receipt and corresponding  Reinvestment shall be equal to
the amount of Capital immediately prior to such receipt, but after giving effect
to any  reduction of Capital  pursuant to Section 2.03 and reduction in Purchase
Limit  pursuant to section 2.01 to be effected on such date. On each  Settlement
Date prior to the  occurrence  of the Facility  Termination  Date,  the Servicer
shall  remit to the Agent's  account  the  amounts set aside  during the related
Settlement  Period and apply such amounts (if not previously  paid in accordance
with Section 2.05) to reduce unpaid CP Costs,  Yield and other  Obligations.  If
such CP  Costs,  Yield and  other  Obligations  shall be  reduced  to zero,  any
additional  Collections  received by the Servicer  shall (i) if  applicable,  be
remitted to the Agent's  account no later than 11:00 a.m.  (Chicago time) to the
extent required to fund any Aggregate Reduction on such Settlement Date and (ii)
thereafter be remitted from the Servicer to the Seller on such Settlement Date.

     Section  2.07   Collections   Following   Amortization.   On  the  Facility
Termination  Date and on each day  thereafter,  the Servicer shall set aside and
hold in trust,  for the  holder of each  Receivable  Interest,  all  Collections
received on such day and an additional  amount of Collections for the payment of
any accrued and unpaid Obligations owed by the Seller and not previously paid by
the  Seller  in  accordance  with  Section  2.05.  On  and  after  the  Facility
Termination  Date, the Servicer shall, at any time upon the request from time to
time by (or pursuant to standing  instructions  from) the Agent (i) remit to the
Agent's  account the amounts set

                                       25
<PAGE>

aside pursuant to the preceding sentence,  and (ii) apply such amounts to reduce
the  Capital  associated  with  each  such  Receivable  Interest  and any  other
Aggregate Unpaids.

     Section 2.08  Application of  Collections.  If there shall be  insufficient
funds on deposit for the Servicer to distribute  funds in payment in full of the
aforementioned  amounts  pursuant to Section 2.06 or 2.07 (as  applicable),  the
Servicer shall distribute funds:

          first, to the payment of the Servicer's reasonable out-of-pocket costs
     and expenses in connection with servicing, administering and collecting the
     Receivables  if the Seller or one of its  Affiliates  is not then acting as
     the Servicer,

          second,  to the  reimbursement  of the Agent's costs of collection and
     enforcement of this Agreement,

          third, ratably to the payment of all accrued and unpaid fees under the
     Fee Letter, CP Costs and Yield,

          fourth,  (if  applicable)  in reduction  of Capital of the  Receivable
     Interests,

          fifth,  for the  ratable  payment  of all  other  unpaid  Obligations,
     provided  that to the  extent  such  Obligations  relate to the  payment of
     Servicer  costs and expenses  when the Seller or one of its  Affiliates  is
     acting as the  Servicer,  such costs and  expenses  shall not be paid until
     after the payment in full of all other Obligations, and

          sixth,  after the Aggregate Unpaids have been indefeasibly  reduced to
     zero, to the Seller.

     Collections   applied  to  the  payment  of  Aggregate   Unpaids  shall  be
distributed in accordance with the aforementioned provisions, and, giving effect
to each of the  priorities  set  forth in this  Section  2.08,  shall be  shared
ratably  (within each priority) among the Agent and the Purchasers in accordance
with the amount of such  Aggregate  Unpaids  owing to each of them in respect of
each such priority.

     Section 2.09 Payment Recission.  No payment of any of the Aggregate Unpaids
shall be considered  paid or applied  hereunder to the extent that, at any time,
all or any portion of such payment or application is rescinded by application of
law or judicial  authority,  or must  otherwise  be returned or refunded for any
reason.  The Seller  shall  remain  obligated  for the amount of any  payment or
application  so rescinded,  returned or refunded,  and shall promptly pay to the
Agent (for  application  to the Person or Persons who suffered  such  recission,
return or refund) the full amount thereof, plus the Default Fee from the date of
any such recission, return or refunding.

     Section 2.10 Clean Up Call. In addition to the Seller's  rights pursuant to
Section 2.03, the Seller shall have the right (after providing written notice to
the Agent in accordance with the Required Notice Period),  at any time following
the  reduction of the Capital

                                       26
<PAGE>

to a level that is less than 10.0% of the original Purchase Limit, to repurchase
from  the  Purchasers  all,  but not less  than  all,  of the  then  outstanding
Receivable  Interests.  The purchase price in respect thereof shall be an amount
equal to the Aggregate  Unpaids through the date of such repurchase,  payable in
immediately  available funds.  Such repurchase shall be without  representation,
warranty or recourse of any kind by, on the part of, or against any Purchaser or
the Agent.

     Section  2.11 CP Costs.  The Seller  shall pay CP Costs with respect to the
Capital  associated with each  Receivable  Interest of each Conduit for each day
that any Capital in respect of such  Receivable  Interest is  outstanding.  Each
Receivable  Interest funded  substantially  with Pooled  Commercial  Paper shall
accrue CP Costs each day on a pro rata basis,  based upon the  percentage  share
the Capital in respect of such Receivable Interest represents in relation to all
assets held by each  Conduit  and funded  substantially  with Pooled  Commercial
Paper.

     Section 2.12 CP Costs Payments.  On each Settlement  Date, the Seller shall
pay to the Agent (for the benefit of each Conduit) an aggregate  amount equal to
all accrued and unpaid CP Costs in respect of the  Capital  associated  with all
Receivable  Interests  of such  Conduit for the  immediately  preceding  Accrual
Period in accordance with this Article II.

     Section 2.13 Calculation of CP Costs. On or prior to the fifth Business Day
immediately  preceding each  Settlement  Date,  each Conduit shall calculate the
aggregate amount of CP Costs for the applicable  Accrual Period and shall notify
the Seller of such aggregate amount.

                                  ARTICLE III.
                       INVESTOR FUNDING LIQUIDITY FACILITY

     Section 3.01 Investors' Funding.  Each Receivable Interest of the Investors
shall  accrue  Yield for each day during its  Tranche  Period at either the LIBO
Rate or the Base Rate in accordance with the terms and conditions hereof.  Until
the Seller gives notice to the Agent of another Discount Rate in accordance with
Section 3.04, the initial Discount Rate for any Receivable Interest  transferred
to the Investors  pursuant to the terms and conditions  hereof shall be the Base
Rate.  If the  Investors  acquire by  assignment  from the  related  Conduit any
Receivable  Interest  pursuant to this Article III, each Receivable  Interest so
assigned  shall each be deemed to have a new Tranche  Period  commencing  on the
date of any such assignment.

     Section 3.02 Yield  Payments.  On the Settlement  Date for each  Receivable
Interest of the Investors, the Seller shall pay to the Agent (for the benefit of
the Investors) an aggregate amount equal to the accrued and unpaid Yield for the
entire  Tranche  Period of each such  Receivable  Interest  in  accordance  with
Article II hereof.

     Section 3.03 Selection and Continuation of Tranche Periods.

     (a) With  consultation  from (and approval by) the Agent,  the Seller shall
from time to time request  Tranche  Periods for the Receivable  Interests of the
Investors,  provided that,

                                       27
<PAGE>

if at any time the Investors shall have a Receivable Interest,  the Seller shall
always request  Tranche  Periods such that at least one Tranche Period shall end
on each Settlement Date.

     (b) The  Seller or the Agent  may,  effective  on the last day of a Tranche
Period (the "Terminating Tranche") for any Receivable Interest,  divide any such
Receivable  Interest  into  multiple  Receivable  Interests  or combine any such
Receivable  Interest with one or more other  Receivable  Interests  which either
have a Terminating  Tranche ending on such day or are newly created on such day,
provided,  in no event may a Receivable Interest of any Conduit be combined with
a Receivable Interest of the Investors.

     Section 3.04 Investors' Discount Rates. The Seller may select the LIBO Rate
or the Base Rate for each Receivable Interest of the Investors. The Seller shall
by 11:00 a.m.  (Chicago time): (i) at least three (3) Business Days prior to the
expiration  of any  Terminating  Tranche  with respect to which the LIBO Rate is
being  requested as a new  Discount  Rate and (ii) at least one (1) Business Day
prior to the  expiration  of any  Terminating  Tranche with respect to which the
Base Rate is being requested as a new Discount Rate, give the Agent  irrevocable
notice of the new Discount Rate for the Receivable Interest associated with such
Terminating Tranche.

     Section 3.05 Suspension of the LIBO Rate.

     (a) If any Investor  notifies the Agent that it has determined that funding
its Pro Rata Share of the  Receivable  Interests of such Investor at a LIBO Rate
would  violate  any  applicable  law,  rule,  regulation,  or  directive  of any
governmental or regulatory authority, whether or not having the force of law, or
that  (i)  deposits  of a type  and  maturity  appropriate  to  match  fund  its
Receivable  Interests at such LIBO Rate are not  available,  (ii) such LIBO Rate
does not  accurately  reflect the cost of acquiring or  maintaining a Receivable
Interest  at such LIBO Rate or (iii) the  Reference  Bank shall have  determined
(which  determination  shall be  conclusive  and binding on the Seller) that, by
reason of circumstances  affecting the relevant market,  adequate and reasonable
means do not exist for  determining  the LIBO Rate, then the Agent shall suspend
the  availability  of such LIBO Rate and  require  the Seller to select the Base
Rate for any Receivable Interest accruing Yield at such LIBO Rate.

     Section 3.06  Transfer to Falcon  Investors.  Each Falcon  Investor  hereby
agrees,  subject to Section  3.09,  that  immediately  upon written  notice from
Falcon delivered on or prior to the Liquidity Termination Date, it shall acquire
by assignment from Falcon,  without recourse or warranty,  its Pro Rata Share of
one or more of the Receivable  Interests of Falcon as specified by Falcon.  Each
such  assignment  by Falcon  shall be made pro rata among the Falcon  Investors,
provided,  however,  that  Falcon may at any time and from time to time,  in its
sole and absolute discretion,  make any such assignment to any Affected Investor
on a non-pro rata basis.  Each Falcon  Investor  shall,  no later than 1:00 p.m.
(Chicago  time) on the date of such  assignment,  pay in  immediately  available
funds to the Agent at an account  designated  by the Agent,  for the  benefit of
Falcon, its Falcon Acquisition Amount. Unless a Falcon Investor has notified the
Agent that it does not intend to pay its Falcon  Acquisition  Amount,  the Agent
may assume that

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<PAGE>

such  payment  has been made and may,  but shall not be  obligated  to, make the
amount of such  payment  available to Falcon in reliance  upon such  assumption.
Falcon  hereby  sells and  assigns to the Agent for the  ratable  benefit of the
Falcon  Investors,  and the Agent  hereby  purchases  and assumes  from  Falcon,
effective  upon  the  receipt  by  Falcon  of the  Falcon  Transfer  Price,  the
Receivable Interests of Falcon which are the subject of any transfer pursuant to
this Article III.

     Section 3.07 Transfer  Price  Reduction  Yield.  If the Adjusted  Liquidity
Price is  included  in the  calculation  of the  Falcon  Transfer  Price for any
Receivable  Interest,  each Falcon  Investor  agrees that the Agent shall pay to
Falcon the Reduction  Percentage of any Yield received by the Agent with respect
to such Receivable Interest.

     Section 3.08 Payments to Falcon.  In consideration for the reduction of the
Falcon Transfer Prices by the Falcon Transfer Price  Reductions,  effective only
at such time as the aggregate amount of the Capital of the Receivable  Interests
of the Falcon Investors equals the Falcon Residual,  each Falcon Investor hereby
agrees that the Agent shall not  distribute  to the Falcon  Investors  and shall
immediately remit to Falcon any Yield, Collections or other payments received by
it to be applied pursuant to the terms hereof or otherwise to reduce the Capital
of the Receivable Interests of the Falcon Investors.

     Section  3.09   Limitation   on   Commitment   to  Purchase   from  Falcon.
Notwithstanding  anything to the contrary in this Agreement,  no Falcon Investor
shall have any  obligation  to purchase  any  Receivable  Interest  from Falcon,
pursuant to Section 3.06 or otherwise, if:

          (i) Falcon shall have  voluntarily  commenced any  proceeding or filed
     any petition  under any  bankruptcy,  insolvency or similar law seeking the
     dissolution, liquidation or reorganization of Falcon or taken any corporate
     action for the purpose of effectuating any of the foregoing; or

          (ii)  involuntary  proceedings or an  involuntary  petition shall have
     been commenced or filed against Falcon by any Person under any  bankruptcy,
     insolvency  or  similar  law  seeking  the   dissolution,   liquidation  or
     reorganization  of Falcon and such  proceeding  or petition  shall have not
     been dismissed.

     Section 3.10 Defaulting Falcon  Investors.  If one or more Falcon Investors
defaults in its  obligation  to pay its Falcon  Acquisition  Amount  pursuant to
Section  3.06 (each such Falcon  Investor  shall be called a "Falcon  Defaulting
Investor" and the aggregate  amount of such defaulted  obligations  being herein
called the "Falcon  Transfer Price  Deficit"),  then upon notice from the Agent,
each  Falcon  Investor  other than the Falcon  Defaulting  Investors  (a "Falcon
Non-Defaulting  Investor")  shall  promptly  pay to the  Agent,  in  immediately
available funds, an amount equal to the lesser of (x) such Falcon Non-Defaulting
Investor's  proportionate  share (based upon the relative Falcon  Commitments of
the Falcon  Non-Defaulting  Investors) of the Falcon  Transfer Price Deficit and
(y)  the  unused  portion  of  such  Falcon  Non-Defaulting   Investor's  Falcon
Commitment.  A Falcon Defaulting Investor shall forthwith upon demand pay

                                       29
<PAGE>

to the Agent for the account of the Falcon Non-Defaulting  Investors all amounts
paid by each Falcon Non-Defaulting  Investor on behalf of such Falcon Defaulting
Investors,  together with interest thereon, for each day from the date a payment
was  made by a  Falcon  Non-Defaulting  Investor  until  the  date  such  Falcon
Non-Defaulting  Investor has been paid such amounts in full, at a rate per annum
equal to the Federal  Funds  Effective  Rate plus two percent (2%). In addition,
without prejudice to any other rights that Falcon may have under applicable law,
each Falcon Defaulting  Investor shall pay to Falcon forthwith upon demand,  the
difference  between such Falcon Defaulting  Investor's unpaid Falcon Acquisition
Amount and the amount  paid with  respect  thereto by the Falcon  Non-Defaulting
Investors,  together  with interest  thereon,  for each day from the date of the
Agent's request for such Falcon Defaulting  Investor's Falcon Acquisition Amount
pursuant to Section 3.06 until the date the  requisite  amount is paid to Falcon
in full, at a rate per annum equal to the Federal Funds  Effective Rate plus two
percent (2%).

     Section 3.11 Transfer to ISC  Investors.  Each ISC Investor  hereby agrees,
subject to Section 3.14, that immediately upon written notice from ISC delivered
on or prior to the  Liquidity  Termination  Date, it shall acquire by assignment
from ISC, without recourse or warranty, its Pro Rata Share of one or more of the
Receivable  Interests of ISC as specified by ISC.  Each such  assignment  by ISC
shall be made pro rata among the ISC Investors,  provided, however, that ISC may
at any time and from time to time, in its sole and absolute discretion, make any
such  assignment  to any  Affected  Investor on a non-pro  rata basis.  Each ISC
Investor  shall,  no later  than  1:00 p.m.  (Chicago  time) on the date of such
assignment,  pay in  immediately  available  funds to the  Agent  at an  account
designated  by the Agent,  for the benefit of ISC, its ISC  Acquisition  Amount.
Unless an ISC Investor has notified the Agent that it does not intend to pay its
ISC Acquisition Amount, the Agent may assume that such payment has been made and
may, but shall not be obligated to, make the amount of such payment available to
ISC in reliance upon such assumption.  ISC hereby sells and assigns to the Agent
for the ratable benefit of the ISC Investors, and the Agent hereby purchases and
assumes from ISC,  effective upon the receipt by ISC of the ISC Transfer  Price,
the Receivable  Interests of ISC which are the subject of any transfer  pursuant
to this Article III.

     Section 3.12 Transfer  Price  Reduction  Yield.  If the Adjusted  Liquidity
Price  is  included  in the  calculation  of the  ISC  Transfer  Price  for  any
Receivable  Interest,  each ISC Investor  agrees that the Agent shall pay to ISC
the Reduction Percentage of any Yield received by the Agent with respect to such
Receivable Interest.

     Section 3.13 Payments to ISC. In consideration for the reduction of the ISC
Transfer  Prices by the ISC Transfer  Price  Reductions,  effective only at such
time as the aggregate  amount of the Capital of the Receivable  Interests of the
ISC Investor  equals the ISC Residual,  each ISC Investor hereby agrees that the
Agent shall not distribute to the ISC Investors and shall  immediately  remit to
ISC any  Yield,  Collections  or other  payments  received  by it to be  applied
pursuant  to the  terms  hereof  or  otherwise  to  reduce  the  Capital  of the
Receivable Interests of the ISC Investors.

                                       30
<PAGE>

     Section 3.14 Limitation on Commitment to Purchase from ISC. Notwithstanding
anything  to the  contrary in this  Agreement,  no ISC  Investor  shall have any
obligation to purchase any  Receivable  Interest  from ISC,  pursuant to Section
3.11 or otherwise, if:

          (i) ISC shall have  voluntarily  commenced any proceeding or filed any
     petition  under any  bankruptcy,  insolvency  or similar  law  seeking  the
     dissolution,  liquidation or  reorganization  of ISC or taken any corporate
     action for the purpose of effectuating any of the foregoing; or

          (ii)  involuntary  proceedings or an  involuntary  petition shall have
     been  commenced or filed  against ISC by any Person  under any  bankruptcy,
     insolvency  or  similar  law  seeking  the   dissolution,   liquidation  or
     reorganization  of ISC and such  proceeding or petition shall have not been
     dismissed.

     Section  3.15  Defaulting  ISC  Investors.  If one or  more  ISC  Investors
defaults in its obligation to pay its ISC Acquisition Amount pursuant to Section
3.11 (each such ISC Investor  shall be called an "ISC  Defaulting  Investor" and
the aggregate amount of such defaulted  obligations being herein called the "ISC
Transfer  Price  Deficit"),  then upon notice from the Agent,  each ISC Investor
other than the ISC Defaulting Investors (a "ISC Non-Defaulting  Investor") shall
promptly pay to the Agent,  in immediately  available  funds, an amount equal to
the lesser of (x) such ISC Non-Defaulting  Investor's proportionate share (based
upon the relative ISC  Commitments of the ISC  Non-Defaulting  Investors) of the
ISC Transfer Price Deficit and (y) the unused portion of such ISC Non-Defaulting
Investor's  ISC's  Commitment.  An ISC Defaulting  Investor shall forthwith upon
demand pay to the Agent for the account of the ISC Non-Defaulting  Investors all
amounts  paid by  each  ISC  Non-Defaulting  Investor  on  behalf  of  such  ISC
Defaulting Investor,  together with interest thereon, for each day from the date
a payment was made by an ISC Non-Defaulting  Investor until the date of such ISC
Non-Defaulting  Investor has been paid such amounts in full, at a rate per annum
equal to the Federal Fund  Effective  Rate plus two percent  (2%).  In addition,
without  prejudice to any other rights that ISC may have under  applicable  law,
each ISC  Defaulting  Investor  shall  pay to ISC  forthwith  upon  demand,  the
difference between such ISC Defaulting  Investor's unpaid ISC Acquisition Amount
and the  amount  paid with  respect  thereto  by the  Non-Defaulting  Investors,
together  with  interest  thereon,  for each  day  from the date of the  Agent's
request for such ISC Defaulting  Investor's ISC  Acquisition  Amount pursuant to
Section 3.11 until the date the  requisite  amount is paid to ISC in full,  at a
rate per annum equal to the Federal Funds Effective Rate plus two percent (2%).

                                  ARTICLE IV.
                         REPRESENTATIONS AND WARRANTIES

     Section  4.01 Seller  Representations  and  Warranties.  The Seller  hereby
represents and warrants to the Agent and the Purchasers that:

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<PAGE>

     (a)  Corporate  Existence  and  Power.  The  Seller is a  corporation  duly
organized and validly  existing and in good standing  under the law of the State
of Michigan and has, in all material respects,  full corporate power,  authority
and  legal  right  to own  its  properties  and  conduct  its  business  as such
properties are presently owned and such business is presently conducted,  and to
execute,  deliver and perform its obligations under the Transaction Documents to
which it is a party.

     (b) Due  Qualification.  The Seller is duly  qualified to do business  and,
where necessary, is in good standing as a foreign corporation (or is exempt from
such requirement) and has obtained all necessary  licenses and approvals in each
jurisdiction  in which the conduct of its business  requires such  qualification
except where the failure to so qualify,  be in good standing or obtain  licenses
or approvals would not have a Material Adverse Effect.

     (c) Due  Authorization;  No  Conflict.  The  execution  and delivery of the
Transaction  Documents to which the Seller is a party,  the  performance  of the
transactions contemplated thereby and the fulfillment of the terms thereof, will
not  conflict  with,  result  in any  breach  of any of the  material  terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
material default under, any indenture,  contract,  agreement,  mortgage, deed of
trust, or other  instrument to which the Seller is a party or by which it or its
properties are bound. The execution and delivery of the Transaction Documents to
which the Seller is a party,  the performance of the  transactions  contemplated
thereby and the  fulfillment  of the terms thereof  which are  applicable to the
Seller,  will not  conflict  with or violate any  material  Requirements  of Law
applicable to the Seller.

     (d) No Consents. Other than the filing of the financing statements required
hereunder,  no authorization or approval or other action by, and no notice to or
filing with, any  Governmental  Authority or regulatory body is required for the
due  execution,  delivery  and  performance  by the  Seller  of the  Transaction
Documents to which it is a party, other than authorizations, approvals, actions,
notices or filings  the  failure to obtain or perform  would not  reasonably  be
expected to have a Material Adverse Effect.

     (e) Binding  Effect.  The  Transaction  Documents  to which the Seller is a
party have been duly  executed and  delivered by the Seller and  constitute  the
legal,  valid and  binding  obligations  of the Seller  enforceable  against the
Seller in accordance with their respective terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws  relating  to or limiting  creditors'  rights in general and except as such
enforceability   may  be  limited  by  general  principles  of  equity  (whether
considered in a suit at law or in equity).

     (f) No Proceedings.  There are no actions, suits or proceedings pending, or
to the best of the Seller's  knowledge,  threatened,  against or  affecting  the
Seller or any Originator,  or any of the respective  properties of the Seller or
any  Originator,  in or before any court,  arbitrator  or other body,  which are
reasonably likely to have a Material Adverse Effect.  Neither the Seller

                                       32
<PAGE>

nor any  Originator  is in  default  with  respect  to any  order of any  court,
arbitrator or Governmental Authority.

     (g) Accuracy of Information.  All information  heretofore  furnished by the
Seller or any of its  Affiliates to the Agent or the  Purchasers for purposes of
or in connection with this Agreement,  any of the other Transaction Documents or
any  transaction  contemplated  hereby or thereby  is, and all such  information
hereafter  furnished by the Seller or any of its  Affiliates  to the  Purchasers
will be,  true  and  accurate  in  every  material  respect,  on the  date  such
information  is  stated  or  certified  and does not and  will not  contain  any
material  misstatement  of fact or omit to  state a  material  fact or any  fact
necessary to make the statements contained therein not misleading.

     (h) Use of Proceeds. No proceeds of any purchase hereunder will be used for
"purchasing" or "carrying" any "margin stock" within the respective  meanings of
each of the quoted  terms under  Regulation  U of the Board of  Governors of the
United States  Federal  Reserve System as now and from time to time hereafter in
effect or for any purpose which  violates the  provisions of the  Regulations of
such  Board  of  Governors  (including  but not  limited  to the  provisions  of
Regulation U and  Regulation  X) or any similar  rule of any other  Governmental
Authority.

     (i) Title to Receivables.  Each Receivable has been purchased by the Seller
from  Federal-Mogul in accordance with the terms of the Sale Agreement,  and the
Seller has thereby  irrevocably  obtained all legal and equitable  title to, and
has the legal right to sell and encumber,  such Receivable,  its Collections and
the Related  Security.  Each such Receivable has been  transferred to the Seller
free and clear of any Adverse Claim.  Without limiting the foregoing,  there has
been  duly  filed all  financing  statements  or other  similar  instruments  or
documents  necessary  under  the UCC of all  appropriate  jurisdictions  (or any
comparable law) to perfect the Seller's ownership interest in such Receivable.

     (j) Good Title;  Perfection.  Immediately prior to each purchase hereunder,
the  Seller  shall be the  legal and  beneficial  owner of the  Receivables  and
Related  Security  with respect  thereto,  free and clear of any Adverse  Claim,
except as created by the Transaction Documents.  This Agreement is effective to,
and shall, upon each purchase  hereunder,  transfer to the relevant Purchaser or
Purchasers  (and such  Purchaser or Purchasers  shall acquire from the Seller) a
valid and perfected first priority  undivided  percentage  ownership interest in
each Receivable  existing or hereafter  arising and in the Related  Security and
Collections with respect thereto, free and clear of any Adverse Claim, except as
created by the Transactions Documents.

     (k)  Places  of  Business.  The  principal  places  of  business  and chief
executive  office of the Seller and the offices  where the Seller  keeps all its
Records  are  located  at the  address(es)  listed on  Exhibit  D or such  other
locations   notified  to  the  Agent  in  accordance  with  Section  6.02(a)  in
jurisdictions  where all action  required by Section  6.02(a) has been taken and
completed.  The Seller's Federal Employer Identification Number is correctly set
forth on Exhibit D.

                                       33
<PAGE>

          (l) Collection Banks;  etc. Except as otherwise  notified to the Agent
     in accordance with Section 6.02(b):

          (i) the Seller has instructed, or has required the Originators and the
     Servicer to  instruct,  all Obligors to pay all  Collections  directly to a
     segregated lock-box identified on Exhibit E hereto,

          (ii) in the case of all proceeds  remitted to any such lock-box  which
     is now or hereafter  established,  such proceeds will be deposited directly
     by the  applicable  Collection  Bank  into  a  concentration  account  or a
     depository account listed on Exhibit E,

          (iii) the names and addresses of all Collection  Banks,  together with
     the  account  numbers  of the  Collection  Accounts  of the  Seller at each
     Collection Bank, are listed on Exhibit E, and

          (iv) each lock-box and  Collection  Account to which  Collections  are
     remitted shall be subject to a Collection Account Agreement that is then in
     full force and effect.

In the case of lock-boxes and Collection  Accounts identified on Exhibit E which
were  established  by any  Originator  or by any Person  other than the  Seller,
exclusive  dominion and control thereof has been transferred to the Seller.  The
Seller has not granted any Person,  other than the Agent as contemplated by this
Agreement,  dominion and control of any lock-box or Collection  Account,  or the
right to take  dominion and control of any lock-box or  Collection  Account at a
future time or upon the occurrence of a future event.

     (m) Names.  In the past five years,  the Seller has not used any  corporate
names, trade names or assumed names other than the name in which it has executed
this Agreement.

     (n)  Credit  Policies.  With  respect  to  each  Receivable,  each  of  the
Originators,  the Seller and the Servicer has complied in all material  respects
with the Credit Policies.

     (o) Payments to Federal-Mogul.  With respect to each Receivable transferred
to the Seller, the Seller has given reasonably equivalent value to Federal-Mogul
in  consideration  for such transfer of such Receivable and the Related Security
with respect thereto under the Sale Agreement and such transfer was not made for
or  on  account  of  an  antecedent   debt.  No  transfer  or   contribution  by
Federal-Mogul  of any  Receivable is or may be voidable under any Section of the
Federal  Bankruptcy  Reform  Act of 1978 (11  U.S.C.  ss.ss.  101 et  seq.),  as
amended.

     (p) Ownership of the Seller. Federal-Mogul directly owns 100% of the issued
and  outstanding  capital  stock of the Seller.  Such  capital  stock is validly
issued, fully paid and nonassessable and there are no options, warrants or other
rights to acquire securities of the Seller.

                                       34
<PAGE>

     (q) Not an Investment  Company.  The Seller is not an `investment  company"
within the meaning of the  Investment  Company Act of 1940, as amended from time
to time, or any successor statute.

     (r) Purpose. The Seller has determined that, from a business viewpoint, the
purchase of Receivables and related interests from Federal-Mogul  under the Sale
Agreement,  and the sale of Receivable Interests to the Purchasers and the other
transactions contemplated herein, are in the best interest of the Seller.

     (s) Net  Receivables  Balance.  Both before and after giving effect to each
Incremental  Purchase and  Reinvestment,  the Net Receivables  Balance equals or
exceeds the sum of (i) (x) Capital divided by (y) 1 minus the Aggregate  Reserve
Percentage, and (ii) the Contractual Dilution Balance.

     (t) Year 2000 Problem.  Seller has reviewed its  operations  with a view to
assessing whether its business will, in the receipt,  transmission,  processing,
manipulation, storage, retrieval,  retransmission, or other utilization of data,
be vulnerable to a Year 2000 Problem that could reasonably be expected to have a
Material Adverse Effect.  Based on such review,  Seller has no reason to believe
that a  Material  Adverse  Effect  will occur with  respect to its  business  or
operations resulting from a Year 2000 Problem.

     Section 4.02 Investor Representations and Warranties.  Each Investor hereby
represents and warrants to the Agent, the other Purchasers and the Seller that:

     (a)  Existence  and Power.  Such  Investor  is a  corporation  or a banking
association duly organized, validly existing and in good standing under the laws
of its  jurisdiction of  incorporation  or  organization,  and has all corporate
power to perform its obligations hereunder.

     (b) No Conflict.  The execution,  delivery and performance by such Investor
of this Agreement are within its corporate powers,  have been duly authorized by
all necessary corporate action, do not contravene or violate (i) its certificate
or articles of incorporation  or association or by-laws,  (ii) any material law,
rule or regulation  applicable to it, (iii) any restrictions  under any material
agreement,  contract or instrument to which it is a party or any of its property
is bound, or (iv) any order, writ, judgment, award, injunction or decree binding
on or  affecting  it or its  property,  and do not  result  in the  creation  or
imposition  of any Adverse  Claim on its assets.  This  Agreement  has been duly
authorized, executed and delivered by such Investor.

     (c)  Governmental  Authorization.  No  authorization  or  approval or other
action  by,  and no notice to or filing  with,  any  governmental  authority  or
regulatory  body is required for the due execution,  delivery and performance by
such Investor of this Agreement.

     (d) Binding Effect. This Agreement constitutes the legal, valid and binding
obligation of such Investor enforceable against such Investor in accordance with
its terms,  except

                                       35
<PAGE>

as  such  enforcement  may be  limited  by  applicable  bankruptcy,  insolvency,
reorganization  or other similar laws relating to or limiting  creditors' rights
generally.

                                   ARTICLE V.
                             CONDITIONS OF PURCHASES

     Section 5.01 Conditions Precedent to Initial Purchase. The initial purchase
of a  Receivable  Interest  under this  Agreement  is subject to the  conditions
precedent  that (a) the Agent shall have  received on or before the date of such
purchase those  documents  listed on Schedule A hereto,  and (b) the Agent shall
have been paid all fees  required to be paid on such date  pursuant to the terms
of the Fee Letter.

     Section 5.02 Conditions Precedent to All Purchases and Reinvestments.  Each
purchase of a  Receivable  Interest  (other than  pursuant to Sections  3.06 and
3.11) and each Reinvestment shall be subject to the further conditions precedent
that:

     (a) in the case of each  Incremental  Purchase,  the  Servicer  shall  have
delivered  to the Agent on or prior to the  Purchase  Date all  Settlement  Date
Statements as and when due under Section 7.05;

     (b) on the date of each Incremental Purchase or Reinvestment, the following
statements shall be true both before and after giving effect to such purchase or
Reinvestment  (and  acceptance of the proceeds of such purchase or  Reinvestment
shall be deemed a representation and warranty by the Seller that such statements
are then true):

          (i) the  representations  and warranties set forth in Section 4.01 are
     correct on and as of the date of such  purchase or  Reinvestment  as though
     made on and as of such date;

          (ii) no event has  occurred,  or would  result  from such  purchase or
     Reinvestment,  that will constitute an Amortization Event, and no event has
     occurred  and  is  continuing,  or  would  result  from  such  purchase  or
     Reinvestment, that would constitute a Potential Amortization Event; and

          (iii)  neither  the  Liquidity   Termination  Date  nor  the  Facility
     Termination  Date  shall  have  occurred,  the  aggregate  Capital  of  all
     Receivable  Interests shall not exceed the Purchase Limit and the aggregate
     Receivable Interests shall not exceed 100%; and

          (iv) if the  proposed  date  of such  purchase  or  Reinvestment  is a
     Settlement Date, the Seller shall have paid immediately  available funds in
     the amount of any Coverage Shortfall that will exist after giving effect to
     such  purchase  or  Reinvestment  to  the  Agent  for  distribution  to the
     Purchasers; and

     (c) the Agent  shall  have  received  such  other  approvals,  opinions  or
documents as it may reasonably request.

                                       36
<PAGE>

                                  ARTICLE VI.
                             COVENANTS OF THE SELLER

     Section 6.01 Affirmative  Covenants of Seller.  Until the date on which the
Aggregate  Unpaids  have  been  indefeasibly  paid in full,  the  Seller  hereby
covenants and agrees that:

     (a) Notices.  Except as set forth in clauses  (vii) and (viii)  below,  the
Seller will notify the Agent in writing of any of (x) the events specified below
in clauses (i) and (iv)  immediately,  and (y) the events  specified  in clauses
(ii),  (iii),  (v) and (vi)  within  three  Business  Days,  in each case,  upon
learning of the occurrence thereof,  describing the same and, if applicable, the
steps being taken with respect thereto:

          (i)  Amortization  Events  or  Potential   Amortization   Events.  The
     occurrence of each Amortization Event or Potential Amortization Event, by a
     statement of the Chief  Financial  Officer,  the Treasurer or the Assistant
     Treasurer of the Seller;

          (ii) Judgment. The entry of any judgment or decree against the Seller;

          (iii)  Litigation.  The  institution  of any  litigation,  arbitration
     proceeding or  governmental  proceeding  against the Seller or to which the
     Seller becomes party;

          (iv)  Termination  Date  under  Sale  Agreement.  The  declaration  by
     Federal-Mogul of the "Termination Date" under the Sale Agreement; and/or

          (v)  Downgrade.  Any  downgrade in the rating of any  Indebtedness  of
     Federal-Mogul  by  Standard & Poor's  Ratings  Services,  a division of The
     McGraw-Hill Companies,  Inc. or by Moody's Investors Service, Inc., setting
     forth the Indebtedness affected and the nature of such change.

          (vi)  Copies  of  Notices,   Etc.   under  Sale  Agreement  and  Other
     Transaction  Documents.  Forthwith upon its receipt of any notice,  request
     for consent, financial statements of Federal-Mogul,  certification,  report
     or other communication under or in connection with any Transaction Document
     from any Person other than the Agent or the Conduits, copies of the same.

          (vii)  Change  in  Credit  Policies.  At  least  30 days  prior to the
     effectiveness  of  any  material  change  in or  amendment  to  the  Credit
     Policies,  a copy of the  Credit  Policies  then  in  effect  and a  notice
     indicating such change or amendment.

          (viii) Other  Information.  As soon as  reasonably  practicable,  such
     other information (including non-financial information) as the Agent or any
     Purchaser may from time to time reasonably request.

                                       37
<PAGE>

     (b) Compliance  with Laws. The Seller will comply in all material  respects
with  all  applicable  laws,  rules,   regulations,   orders  writs,  judgments,
injunctions, decrees or awards to which it may be subject.

     (c)  Audits;  Inspection  Rights.  The Seller  will,  or will  require  the
Originators  and the  Servicer  to,  furnish to the Agent from time to time such
information  with respect to it and the  Receivables as the Agent may reasonably
request.  The Seller shall,  from time to time during regular  business hours as
requested by the Agent upon reasonable  notice,  permit the Agent, or its agents
or representatives (and shall require the Originators and the Servicer to permit
the Agent or its agents or  representatives)  (i) to examine  and make copies of
and  abstracts  from all Records in the  possession  or under the control of the
Seller or any  Originator  relating to  Receivables  and the  Related  Security,
including,  without  limitation,  the  related  invoices,  and (ii) to visit the
offices  and  properties  of the Seller or the  Originators  for the  purpose of
examining such materials  described in clause (i) above,  and to discuss matters
relating  to  the  Seller's  or  any  Originator's  financial  condition  or the
Receivables and the Related Security or the Seller's performance  hereunder,  or
any Originator's  performance under any of the other Transaction  Documents,  or
the Seller's or any Originator's  performance under the invoices with any of the
officers or employees of the Seller or any Originator  having  knowledge of such
matters.

     (d) Keeping and Marking of Records and Books.

          (ii)  The  Seller  will,  and will  require  the  Originators  and the
     Servicer to, maintain and implement administrative and operating procedures
     (including,  without limitation,  an ability to recreate records evidencing
     Receivables in the event of the destruction of the originals thereof),  and
     keep and  maintain  all  documents,  books,  records and other  information
     reasonably  necessary or advisable for the  collection  of all  Receivables
     (including,  without  limitation,  records adequate to permit the immediate
     identification   of  each  new  Receivable  and  all   Collections  of  and
     adjustments to each existing Receivable). The Seller will, and will require
     the  Originators and the Servicer to, give the Agent notice of any material
     change in the  administrative and operating  procedures  referred to in the
     previous sentence.

          (iii) The  Seller  will,  and will  require  the  Originators  and the
     Servicer  to:  (a) on or prior to the date  hereof,  mark its  master  data
     processing  records and other books and  records,  if any,  relating to the
     Receivable Interests with a legend, acceptable to the Agent, describing the
     Receivable  Interests  and (b) upon the request of the Agent  following  an
     Amortization  Event:  (A) mark each  invoice with a legend  describing  the
     Receivable  Interests and (B) deliver to the Agent all invoices (including,
     without limitation, all multiple originals of any such invoice) relating to
     the Receivables.

     (a) Compliance with Invoices and Credit  Policies;  Taxes. The Seller will,
and will  require the  Originators  and the  Servicer  to,  timely and fully (i)
perform and comply with all provisions, covenants and other promises required to
be observed by it under the invoices (other than bills of lading) related to the
Receivables,  and (ii) comply in all material  respects with any

                                       38
<PAGE>

bills of lading  included  in the  invoices  and with the Credit  Policies.  The
Seller will, and will require the Originators to, pay when due any taxes payable
in connection with the Receivables.

     (b)  Purchase of  Receivables  from the  Originators.  With respect to each
Receivable  purchased  under  the Sale  Agreement,  the  Seller  shall (or shall
require the Originators and the Servicer to) take all actions  necessary to vest
legal  and  equitable  title  to  such  Receivable  and  the  Related   Security
irrevocably  in the Seller,  including,  without  limitation,  the filing of all
financing  statements or other similar  instruments or documents necessary under
the UCC of all appropriate  jurisdictions (or any comparable law) to perfect the
Seller's  interest in such Receivable and such other action to perfect,  protect
or more fully  evidence the  interest of the Seller as the Agent may  reasonably
request.

     (c)  Ownership  Interest.  The Seller  shall take all  necessary  action to
establish and maintain a valid and perfected first priority undivided percentage
ownership  interest in the Receivables and the Related  Security and Collections
with respect thereto,  to the full extent  contemplated  herein, in favor of the
Agent and the Purchasers,  including, without limitation,  taking such action to
perfect,  protect  or more  fully  evidence  the  interest  of the Agent and the
Purchasers hereunder as the Agent may reasonably request.

     (d) Payment to Federal-Mogul.  With respect to any Receivable  purchased by
the Seller from Federal-Mogul,  such sale shall be effected under, and in strict
compliance with the terms of, the Sale Agreement, including, without limitation,
the  terms  relating  to the  amount  and  timing  of  payments  to be  made  to
Federal-Mogul in respect of the purchase price for such Receivable.

     (e) Performance and Enforcement of Sale Agreement.  The Seller shall timely
perform the  obligations  required  to be  performed  by the  Seller,  and shall
vigorously  enforce the rights and  remedies  accorded to the Seller,  under the
Sale  Agreement.  The Seller  shall take all  actions to perfect and enforce its
rights and  interests  (and the rights and interests of the  Purchasers  and the
Agents,  as assignees of the Seller)  under the Sale  Agreement as the Agent may
from time to time reasonably  request,  including,  without  limitation,  making
claims to which it may be entitled under any indemnity, reimbursement or similar
provision contained in the Sale Agreement.

     (f) Purchasers'  Reliance.  The Seller acknowledges that the Purchasers are
entering into the  transactions  contemplated by this Agreement in reliance upon
the  Seller's  identity  as a legal  entity  that is  separate  from each of the
Originators.  Therefore,  from and after the date of  execution  and delivery of
this Agreement,  the Seller shall take all reasonable steps  including,  without
limitation,  all  steps  that the Agent or any  Purchaser  may from time to time
reasonably  request to maintain the Seller's identity as a separate legal entity
and to make it  manifest  to third  parties  that the  Seller is an entity  with
assets and  liabilities  distinct from those of each of the  Originators and any
Affiliates  thereof and not just a division of an Originator.  Without  limiting
the generality of the foregoing and in addition to the other covenants set forth
herein, the Seller shall:

                                       39
<PAGE>

          (iv) maintain its own separate books and records and bank accounts;

          (v) at all times  hold  itself  out to the  public  as a legal  entity
     separate from the Servicer, the Originators,  any Affiliates thereof or any
     other Person;

          (vi) at all times have at least one  member of its Board of  Directors
     who is an Independent Director;

          (vii)  file its own tax  returns,  if any,  as may be  required  under
     applicable  law, to the extent not part of a  consolidated  group  filing a
     consolidated  return or  returns,  and pay any taxes so required to be paid
     under applicable law;

          (viii)  not  commingle  its  assets  with  assets of any other  Person
     (except as contemplated by the Transaction Documents);

          (ix) conduct its business in its own name;

          (x) maintain separate financial statements;

          (xi) pay its own liabilities only out of its own funds;

          (xii) maintain an arm's length relationship with its Affiliates;

          (xiii) pay the salaries of its own employees, if any;

          (xiv) not  guarantee  or become  obligated  for the debts of any other
     Person or hold out its credit as being available to satisfy the obligations
     of others;

          (xv)  allocate  fairly and  reasonably  any overhead for shared office
     space;

          (xvi) use separate stationery, invoices and checks;

          (xvii) not pledge  its assets for the  benefit of any other  Person or
     make any loans or advances  to any Person  (except as  contemplated  by the
     Transaction Documents);

          (xviii)  correct any known  misunderstanding  regarding  its  separate
     identity;

          (xix) maintain adequate capital in light of its contemplated  business
     purposes; and

          (xx) cause its Board of  Directors  to meet at least  annually  or act
     pursuant to written  consent and keep minutes of such  meetings and actions
     and observe all other Michigan corporate formalities;

     (a)  Collections.  The Seller shall  instruct all Obligors,  or require the
Originators  and the Servicer to instruct,  all Obligors to pay all  Collections
directly to a

                                       40
<PAGE>

segregated  lock-box or other  Collection  Account  listed on Exhibit E, each of
which is subject to a  Collection  Account  Agreement.  In the case of  payments
remitted to any such  lock-box,  the Seller shall require all proceeds from such
lock-box to be deposited directly by a Collection Bank into a Collection Account
listed on Exhibit E, which is subject to a  Collection  Account  Agreement.  The
Seller shall maintain  exclusive  dominion and control  (subject to the terms of
this Agreement) to each such Collection  Account. In the case of any Collections
received  by the  Seller or an  Originator,  the  Seller  shall  remit (or shall
require  the  Originators  and the  Servicer  to remit)  such  Collections  to a
Collection  Account not later than the Business Day  immediately  following  the
date of receipt of such Collections, and, at all times prior to such remittance,
the Seller shall itself hold (or, if applicable,  shall require the  Originators
and the Servicer to hold) such Collections in trust,  for the exclusive  benefit
of the Purchasers and the Agent. In the case of any remittances  received by the
Seller in any such Collection  Account that shall have been  identified,  to the
satisfaction of the Servicer, to not constitute Collections or other proceeds of
the  Receivables or the Related  Security,  the Seller shall promptly remit such
items to the  Person  identified  to it as being the owner of such  remittances.
From and after  the date the Agent  delivers  to any of the  Collection  Banks a
Collection  Notice  pursuant to Section  7.03,  the Agent may  request  that the
Seller, and the Seller thereupon promptly shall and shall direct the Originators
to, direct all Obligors on  Receivables  to remit all payments  thereon to a new
depositary account (the "New Concentration Account") specified by the Agent and,
at all times  thereafter the Seller shall not deposit or otherwise  credit,  and
shall not  permit any  Originator  or any other  Person to deposit or  otherwise
credit to the New  Concentration  Account  any cash or  payment  item other than
Collections.  Alternatively,  the Agent may  request  that the  Seller,  and the
Seller thereupon  promptly shall,  direct all Persons then making remittances to
any Collection Account listed on Exhibit E which remittances are not payments on
Receivables  to deliver  such  remittances  to a location  other than an account
listed on Exhibit E.

     (b) Minimum Net Worth.  The Seller shall at all times maintain total assets
which exceed its total liabilities by not less than $14,250,000.

     (c) Year 2000 Problems.  Seller shall take all reasonable actions to ensure
that its computer-based  system are able to effectively process data,  including
dates on and after  January 1, 2000,  without any Year 2000 Problem  which could
reasonably  be expected  to have a Material  Adverse  Effect.  At the request of
Agent or any  Purchaser,  Seller  shall  provide  Agent or such  Purchaser  with
substantiation  reasonably  acceptable to Agent or such Purchaser as to Seller's
capability  to process  data on and after,  or  otherwise  with respect to dates
occurring on or after, January 1, 2000 without any Year 2000 Problem.

     Section  6.02  Negative  Covenants  of Seller.  Until the date on which the
Aggregate  Unpaids  have  been  indefeasibly  paid in full,  the  Seller  hereby
covenants, individually and in its capacity as Servicer, that:

     (a) Name Change,  Offices,  Records and Books of Accounts.  The Seller will
not change its name,  identity  or  corporate  structure  (within the meaning of
Section  9-402(7) of any applicable  enactment of the UCC) or relocate its chief
executive  office or any office where

                                       41
<PAGE>

Records  are kept  unless  it shall  have:  (i) given the Agent at least 45 days
prior notice  thereof (or such lesser  number of days as the parties  hereto may
agree  upon)  and  (ii)  delivered  to  the  Agent  all  financing   statements,
instruments and other  documents  requested by the Agent in connection with such
change or relocation.

     (b) Change in Payment Instructions to Obligors.  The Seller will not add or
terminate any bank as a Collection  Bank from those listed in Exhibit E, or make
any change in its instructions to Obligors  regarding payments to be made to the
Seller or payments to be made to any lock-box,  Collection Account or Collection
Bank, unless the Agent shall have received,  at least fifteen (15) Business Days
before the proposed effective date therefor:

          (ii) written notice of such addition, termination or change, and

          (iii) with respect to the addition of a lock-box,  Collection  Account
     or  Collection  Bank,  an  executed  account   agreement  and  an  executed
     Collection Account Agreement from such Collection Bank relating thereto;

provided,  however, that the Seller may make changes in instructions to Obligors
regarding  payments  if such  new  instructions  require  such  Obligor  to make
payments to another existing lock-box or Collection Account that is subject to a
Collection Account Agreement then in effect.

     (a)  Modifications to Credit Policies.  The Seller will not make any change
to the Credit Policies which would be reasonably  likely to adversely affect the
collectibility of any material portion of the Receivables or decrease the credit
quality of any newly created Receivables. Except as provided in Section 7.02(c),
the Seller, acting as Servicer or otherwise, will not extend, amend or otherwise
modify the terms of any Receivable or any invoice  related thereto other than in
accordance with the Credit Policies.

     (b) Sales,  Liens,  Etc. The Seller shall not sell, assign (by operation of
law or otherwise) or otherwise  dispose of, or grant any option with respect to,
or  create  or  suffer  to exist any  Adverse  Claim  upon  (including,  without
limitation,  the filing of any  financing  statement)  or with  respect  to, any
Receivable,  Related  Security or  Collections,  or upon or with  respect to any
invoice under which any Receivable arises, or any lock-box or Collection Account
or assign any right to receive  income in respect  thereof  (other than, in each
case,  the  creation  of the  interests  therein  in favor of the  Agent and the
Purchasers  provided for herein),  and the Seller shall defend the right,  title
and  interest  of the  Agent  and the  Purchasers  in,  to and  under any of the
foregoing  property,  against all claims of third  parties  claiming  through or
under the Seller or any Originator.

     (c) Nature of Business;  Other Agreements;  Other Indebtedness.  The Seller
shall not  engage in any  business  or  activity  of any kind or enter  into any
transaction or indenture,  mortgage,  instrument,  agreement, contract, lease or
other  undertaking  other than the  transactions  contemplated and authorized by
this Agreement and the Sale  Agreement.  Without  limiting the generality of the
foregoing,  the Seller shall not create, incur,  guarantee,  assume or suffer to
exist any indebtedness or other liabilities, whether direct or contingent, other
than:

                                       42
<PAGE>

          (i) as a result  of the  endorsement  of  negotiable  instruments  for
     deposit or collection  or similar  transactions  in the ordinary  course of
     business,

          (ii) the incurrence of obligations under this Agreement,

          (iii) the incurrence of obligations,  as expressly contemplated in the
     Sale  Agreement,  to  make  payment  to  Federal-Mogul  thereunder  for the
     purchase of Receivables from Federal-Mogul under the Sale Agreement, and

          (iv) the  incurrence of operating  expenses in the ordinary  course of
     business  of the type  otherwise  contemplated  in Section  6.01(j) of this
     Agreement.

In the event the Seller shall at any time borrow a "Subordinated Loan" under the
Sale Agreement,  the obligations of the Seller in connection  therewith shall be
subordinated  to the  obligations  of the Seller to the Purchasers and the Agent
under this Agreement, on such terms as shall be satisfactory to the Agent.

     (d) Amendments to Sale Agreement.  The Seller shall not,  without the prior
written consent of the Agent:

          (i) cancel or terminate the Sale Agreement,

          (ii) give any consent,  waiver,  directive or approval  under the Sale
     Agreement,

          (iii) waive any  default,  action,  omission or breach  under the Sale
     Agreement, or otherwise grant any indulgence thereunder, or

          (iv) amend,  supplement  or  otherwise  modify any of the terms of the
     Sale Agreement.

     (e)  Amendments  to  Corporate  Documents.  The Seller  shall not amend its
Certificate  of  Incorporation  or By-Laws in any respect  that would impair its
ability  to  comply  with the  terms  or  provisions  of any of the  Transaction
Documents, including, without limitation, Section 6.01(j) of this Agreement.

     (f) Merger.  The Seller  shall not merge or  consolidate  with or into,  or
convey,  transfer,  lease or otherwise dispose of (whether in one transaction or
in a series of transactions, and except as otherwise contemplated herein) all or
substantially all of its assets (whether now owned or hereafter acquired) to, or
acquire all or substantially all of the assets of, any Person.

     (g) Restricted  Junior  Payments.  The Seller shall not make any Restricted
Junior Payment if an Amortization Event or a Potential Amortization Event exists
or would result therefrom.

                                       43
<PAGE>

                                  ARTICLE VII.
           SERVICING, ADMINISTRATION AND COLLECTION OF THE RECEIVABLES

     Section 7.01 Designation of Servicer. (a) The servicing, administration and
collection of the Receivables shall be conducted by such Person (the "Servicer")
so  designated  from  time  to  time  in  accordance  with  this  Section  7.01.
Federal-Mogul  is hereby  designated as, and hereby agrees to perform the duties
and  obligations of, the Servicer  pursuant to the terms of this Agreement.  The
Agent  may at  any  time  following  the  occurrence  of an  Amortization  Event
designate  as  Servicer  any Person to succeed  Federal-Mogul  or any  successor
Servicer.

     (b)  Without  the prior  written  consent  of the  Agent  and the  Required
Investors, Federal-Mogul shall not be permitted to delegate any of its duties or
responsibilities as Servicer to any Person other than the other Originators.  If
at any time the  Agent  shall  designate  as  Servicer  any  Person  other  than
Federal-Mogul,   all  duties  and  responsibilities   theretofore  delegated  by
Federal-Mogul  to any other  Originator  may, at the discretion of the Agent, be
terminated  forthwith on notice given by the Agent to  Federal-Mogul  and to the
Seller.

     (c) Notwithstanding  the foregoing  subsection (b), (i) Federal-Mogul shall
be and remain  primarily liable to the Agent and the Purchasers for the full and
prompt performance of all duties and  responsibilities of the Servicer hereunder
and (ii) the Agent and the Purchasers shall be entitled to deal exclusively with
Federal-Mogul in matters relating to the discharge by the Servicer of its duties
and  responsibilities  hereunder.  The  Agent  and the  Purchasers  shall not be
required to give notice,  demand or other communication to any Person other than
Federal-Mogul in order for communication to the Servicer and its sub-servicer or
other delegate with respect thereto to be  accomplished.  Federal-Mogul,  at all
times  that  it  is  the  Servicer,  shall  be  responsible  for  providing  any
sub-servicer  or other  delegate of the  Servicer  with any notice  given to the
Servicer under this Agreement.

     Section 7.02 Duties of Servicer.

     (a) The Servicer shall take or cause to be taken all such actions as may be
necessary  or advisable to collect  each  Receivable  from time to time,  all in
accordance with applicable laws, rules and regulations, with reasonable care and
diligence,  and in  accordance  with  the  applicable  invoices  and the  Credit
Policies.

     (b) The Servicer shall  administer the  Collections in accordance  with the
procedures  described herein and in Article II. The Servicer shall set aside and
hold in trust for the account of the Seller and the Purchasers  their respective
shares of the  Collections of  Receivables in accordance  with Sections 2.06 and
2.07.  The Servicer  shall upon the request of the Agent after the occurrence of
an Amortization Event segregate,  in a manner acceptable to the Agent, all cash,
checks  and other  instruments  received  by it from  time to time  constituting
Collections  from the general  funds of the  Servicer or the Seller prior to the
remittance  thereof in accordance  with Section  2.07. If the Servicer  shall be
required to  segregate  Collections  pursuant  to the  preceding  sentence,  the
Servicer  shall  segregate and deposit with a bank  designated by the

                                       44
<PAGE>

Agent such  allocable  share of  Collections  of  Receivables  set aside for the
Purchasers on the first  Business Day following  receipt by the Servicer of such
Collections, duly endorsed or with duly executed instruments of transfer.

     (c) The Servicer,  may, in accordance with the Credit Policies,  extend the
maturity of any Receivable or adjust the  Outstanding  Balance of any Receivable
as the Servicer may determine to be appropriate to maximize Collections thereof;
provided,  however, that such extension or adjustment shall not alter the status
of such Receivable as a Defaulted Receivable or limit the rights of the Agent or
the Purchasers  under this Agreement.  Notwithstanding  anything to the contrary
contained  herein,  from and after the occurrence of an Amortization  Event, the
Agent shall have the  absolute  and  unlimited  right to direct the  Servicer to
commence  or settle  any legal  action  with  respect  to any  Receivable  or to
foreclose upon or repossess any Related Security.

     (d) The Servicer shall hold in trust for the Seller and the Purchasers,  in
accordance with their respective interests in the Receivables,  all Records that
evidence or relate to the Receivables, the related invoices and Related Security
or that are  otherwise  necessary or desirable  to collect the  Receivables  and
shall, as soon as practicable  upon demand of the Agent following the occurrence
of an  Amortization  Event,  deliver  or make  available  to the  Agent all such
Records to such  location as the Agent may  designate  in writing.  The Servicer
shall,  as soon as  practicable  following  receipt  thereof,  turn  over to the
Seller: (i) that portion of Collections of Receivables representing the Seller's
undivided  fractional  ownership  interest  therein,  less,  in the  event  that
Federal-Mogul  or one of its Affiliates is not then acting as the Servicer,  all
reasonable  out-of-pocket  costs and  expenses  of the  Servicer  of  servicing,
administering  and collecting the Receivables,  and (ii) any cash collections or
other cash  proceeds  received  with respect to  indebtedness  not  constituting
Receivables.  The Servicer shall,  from time to time at the request of the Agent
or any  Purchaser,  furnish  to the Agent  for  distribution  to the  Purchasers
(promptly after any such request) a calculation of the amounts set aside for the
Purchasers pursuant to Section 2.07.

     (e) Any payment by an Obligor in respect of any indebtedness  owed by it to
the Seller  shall,  except as  otherwise  specified by such Obligor or otherwise
required by contract or law and unless  otherwise  instructed  by the Agent,  be
applied as a Collection  of any  Receivable of such Obligor  (starting  with the
oldest  such  Receivable)  to the  extent of any  amounts  then due and  payable
thereunder  before being applied to any other  receivable or other obligation of
such Obligor.

     Section 7.03  Collection  Notices.  The Agent is  authorized at any time to
date and to  deliver  to the  Collection  Banks a  Collection  Notice  under any
Collection Account  Agreement.  The Seller hereby transfers to the Agent for the
benefit of the  Purchasers,  effective when the Agent delivers such notice,  the
exclusive  ownership  and  control  of the  Collection  Accounts.  In  case  any
authorized  signatory  of the Seller  whose  signature  appears on a  Collection
Account Agreement shall cease to have such authority before the delivery of such
notice,  such Collection Notice shall nevertheless be valid as if such authority
had remained in force.  The

                                       45
<PAGE>

Seller hereby  authorizes the Agent, and agrees that the Agent shall be entitled
to (i) endorse the Seller's  name on checks and other  instruments  representing
Collections,  (ii) enforce the Receivables, the related invoices and the Related
Security  and (iii) take such action as shall be necessary or desirable to cause
all cash, checks and other instruments  constituting  Collections of Receivables
to come into the possession of the Agent rather than the Seller.

     Section  7.04  Responsibilities  of  the  Seller.  Anything  herein  to the
contrary notwithstanding,  the exercise by the Agent and the Purchasers of their
rights  hereunder shall not release the Servicer or the Seller from any of their
duties or  obligations  with  respect to any  Receivables  or under the  related
invoices.  The Purchasers  shall have no obligation or liability with respect to
any  Receivables  or related  invoices,  nor shall any of them be  obligated  to
perform the obligations of the Seller.

     Section 7.05  Settlement Date  Statements.  On or prior to the Report Date,
the Servicer will provide to the Agent a Settlement Date Statement substantially
in the form of Exhibit C, and on each Settlement Date the Agent shall forward to
each Purchaser such statement.

     Section 7.06 Quarterly Servicer's  Certificate.  The Servicer shall deliver
to the Agent on or prior to the Report Date  occurring in the month  immediately
succeeding each of the first three calendar quarters of each year, a certificate
signed by a senior  financial  officer of the Servicer stating that (a) a review
of the activities of the Servicer during the preceding  calendar  quarter and of
its performance  under the Transaction  Documents was made under the supervision
of the officer signing such  Compliance  Certificate and (b) to the best of such
officer's  knowledge,  based on such review,  the Servicer has  performed in all
material  respects its obligations  under the Transaction  Documents  throughout
such quarter, or, if there has been a material default in the performance of any
such  obligation,  specifying  each such  default  known to such officer and the
nature and status thereof.

     Section  7.07 Weekly  Report and  Distribution.  Notwithstanding  any other
provision  of  any of the  Transaction  Documents,  upon  the  occurrence  of an
Amortization  Event, the Agent, at its sole option, may provide a written notice
to the Seller,  the Servicer and the  Purchasers to the effect that the Servicer
shall deliver a weekly report (the "Weekly Report") and  distributions  shall be
made to the Purchasers on a weekly basis, in each case, as described below. Upon
receipt of such notice, on Friday of each week, or if such day is not a Business
Day, the next  succeeding  Business  Day, the Servicer  shall deliver the Weekly
Report to the Agent. Each Weekly Report shall provide the following information:
(i) the aggregate  Collections  deposited in the  Collection  Account during the
current week, or the preceding week, as applicable, (ii) the aggregate amount of
Receivables  as of the date of the  Weekly  Report,  and (iii) the  amount to be
distributed on the second Business Day  immediately  succeeding the date of such
report (the "Weekly Settlement Date"). On each Weekly Settlement Date the Agent,
in  accordance  with the Weekly Report  delivered by the Servicer,  shall make a
distribution  to the  Purchasers.  The amounts to be  distributed on each Weekly
Settlement  Date shall be a pro rata  portion of the

                                       46
<PAGE>

amounts  specified in the Transaction  Documents based upon the actual number of
days in the preceding week and a 30-day month.

     Section 7.08 Reporting Covenants of the Servicer.

     (a) Financial Reporting.  The Servicer, for so long as Federal-Mogul is the
Servicer and any Aggregate Unpaids remain outstanding,  hereby covenants that it
shall maintain, for itself and each of its Subsidiaries,  a system of accounting
established and  administered in accordance with generally  accepted  accounting
principles, and furnish to the Agent:

          (i) Annual  Reporting.  As soon as available,  but in any event within
     120 days  after the close of each  fiscal  year of the  Servicer,  an audit
     report not  qualified  for  anything  under the  control  of the  Servicer,
     certified by independent public accountants  acceptable to the Agent (which
     until the Agent  notifies  the  Servicer in writing to the  contrary may be
     Ernst &  Young  LLP,  public  accountants),  prepared  in  accordance  with
     generally  accepted  accounting  principles on a consolidated basis for the
     Servicer and its Subsidiaries  including  consolidated balance sheets as of
     the end of such period,  and related profit and loss and  reconciliation of
     the surplus statements;

          (ii)  Quarterly  Reporting.  As soon as  available,  but in any  event
     within 60 days after the close of the first three quarterly periods of each
     fiscal  year of the  Servicer,  for  the  Servicer  and  its  Subsidiaries,
     consolidated  unaudited  balance sheets as at the close of each such period
     and consolidated  profit and loss and  reconciliation of surplus statements
     for the period  beginning from the beginning of such fiscal year to the end
     of such quarter; and

          (iii) Securities and Exchange Commission  Filings.  The Servicer shall
     provide the Agent,  promptly  after the same are  available,  copies of all
     proxy  statements,  financial  statements and reports as the Servicer shall
     send or make available generally to any of its public security holders, and
     copies of all regular and period reports and of all registration statements
     which the Servicer may file with the Securities and Exchange  Commission or
     with any securities exchange.

     (b) Notices. The Servicer shall promptly notify the Agent in writing of any
of the following immediately upon learning of the occurrence thereof, describing
the same, and if applicable, the steps being taken with respect thereto; (i) the
occurrence of each Amortization Event and each Potential  Amortization Event, by
a statement of the  corporate  comptroller  or senior  financial  officer of the
Servicer,  (ii) the  entry  of one or more  judgments  or  decrees  against  the
Servicer  or  any of  its  Subsidiaries  if the  aggregate  amount  of all  such
judgments and decrees  outstanding (not paid or fully covered by insurance as to
which  the  insurance   carrier  has  admitted   liability)  equals  or  exceeds
$30,000,000,  (iii) the occurrence of any  Insolvency  Event with respect to the
Servicer, (iv) the occurrence of any Insolvency Event with respect to the Seller
or any Originator of which the Servicer becomes aware, and (v) the occurrence of
any  other  event of  which  the  Servicer  becomes  aware  that  has,  or could
reasonably be expected to have, a

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<PAGE>

Material Adverse Effect or that constitutes an Amortization Event or a Potential
Amortization Event.

     Section 7.09 Inspection  Rights.  The Servicer shall provide the Agent, and
any of its agents and  representatives,  with access to (a) any books,  records,
files and documents  (including,  without limitation,  computer tapes and discs)
relating to the Transaction Documents,  the Receivables and the servicing of the
Receivables,  and the  Agent  and  such  representatives  and  agents  shall  be
permitted  to make  copies  of and  abstracts  from  the  foregoing  and (b) the
officers,  directors  and  auditors of the  Servicer to discuss the business and
operations  of the  Servicer  relating  to the  Transaction  Documents  and  the
Receivables and the Servicer's performance under the Transaction Documents,  but
only (i) upon  reasonable  request,  (ii) during normal  business  hours,  (iii)
subject to the Servicer's  normal  security and  confidentiality  procedures and
(iv) at reasonably accessible offices designated by the Servicer.

     Section  7.10 Credit  Policies.  The  Servicer  shall  timely and fully (a)
perform and comply with all provisions and covenants and other promises required
to be  observed  by it under  terms of such  Receivable  and (b)  comply  in all
material  respects  with the credit and  collection  policies and  procedures in
effect  on  the  date  hereof  (the  "Credit  Policies")  with  respect  to  the
Receivables, a copy of which is attached hereto as Exhibit G. The Servicer shall
not amend,  modify or  supplement  the Credit  Policies in any material  adverse
respect without the prior written consent of the Agent,  which consent shall not
be unreasonably withheld. Upon any amendment,  modification or supplement to the
Credit  Policies  consented to by the Agent,  the Servicer  shall deliver to the
Agent,  for  distribution  to the Purchasers,  such  amendment,  modification or
supplement  and  Exhibit  G shall be  deemed to be  amended  by such  amendment,
modification or supplement.

     Section  7.11  Servicing  Compensation.  The  monthly  servicing  fee  (the
"Monthly  Servicing  Fee") shall be payable to the Servicer,  either (a) through
withdrawals  from  Collections  as  provided  in  Sections  2.08 or (b) shall be
payable in arrears,  on each Settlement Date in respect of any Collection Period
(or portion thereof) occurring prior to the earlier of the first Settlement Date
following reduction of the Pool Balance to zero and the first Settlement Date on
which Capital is zero. The Monthly Servicing Fee shall be an amount equal to the
product of (a) 0.50% per annum and (b) the Pool Balance and (c) a fraction,  the
numerator  of which is the  actual  number of days in the  preceding  Collection
Period and the  denominator of which is 360. The Monthly  Servicing Fee shall be
payable  to the  Servicer  solely  to  the  extent  amounts  are  available  for
distribution in accordance with the terms of Sections 2.06 and 2.07.

                                 ARTICLE VIII.
                               AMORTIZATION EVENTS

     Section  8.01  Amortization  Events.  If any one or  more of the  following
events (each, an "Amortization Event") shall occur:

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<PAGE>

          (a) Insolvency Events. An Insolvency Event shall occur with respect to
     the  Seller,  the  Servicer  or an  Originator,  and,  in  the  case  of an
     Involuntary Insolvency Event concerning an Originator, shall have continued
     undischarged or unstayed for a period of 60 days;

          (b) Failure to Make Payments and Deposits.  Failure on the part of the
     Seller, Federal-Mogul, the Servicer or any other Originator, as applicable,
     to  make  any  payment  or  deposit  required  by the  terms  of any of the
     Transaction Documents;

          (c) Settlement Date Statements. Failure on the part of the Servicer to
     deliver a Settlement Date Statement  within 5 days of the date such item is
     due to be delivered under any of the Transaction Documents;

          (d) Other Covenants.  Failure on the part of the Seller, the Servicer,
     Federal-Mogul or any other  Originator,  as applicable,  to duly observe or
     perform in any material respect any of their other respective  covenants or
     agreements set forth in the Transaction Documents,  which failure continues
     unremedied  for a period of ten days  after the  earlier of (i) the date on
     which the  Seller,  the  Servicer,  Federal-Mogul  or such  Originator,  as
     applicable,  becomes  aware  of such  failure  and  (ii)  the date on which
     written  notice of such failure,  requiring the same to be remedied,  shall
     have been  received  by the Seller,  the  Servicer,  Federal-Mogul  or such
     Originator, as applicable;

          (e) Material  Misrepresentations.  Any representation or warranty made
     by the Seller,  Federal-Mogul  or any other  Originator in any  Transaction
     Document to which it is a party:  (i) shall prove to have been incorrect in
     any material  respect when made,  and shall continue to be incorrect in any
     material  respect for a period of 10 days after the earlier to occur of (A)
     the date on which written notice of such failure,  requiring the same to be
     remedied, shall have been given to the Seller by the Agent, or (B) the date
     on which the Seller,  the Servicer,  Federal-Mogul or such  Originator,  as
     applicable,  becomes  aware of such  failure,  and (ii) as a result of such
     incorrectness, a Material Adverse Effect occurs; provided, however, that an
     Amortization  Event  shall  not be  deemed  to  have  occurred  under  this
     paragraph if the misrepresentation related to a specific Receivable and the
     Seller has repurchased the related  Receivable or all such Receivables,  if
     applicable,  during such period in accordance  with the  provisions of this
     Agreement;

     (f)  Investment  Company.  The  Seller or any  Originator  shall  become an
"investment company" within the meaning of the Investment Company Act;

     (g)  Delinquency  Ratio.  The  Delinquency  Ratio  for any two  consecutive
Collection Periods is a rate equal to or greater than 7.00%;

     (h) Loss-to-Liquidation  Ratio. The average  Loss-to-Liquidation  Ratio for
any three  consecutive  Collection  Periods is a rate  equal to or greater  than
5.50%;

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<PAGE>

     (i) Dilution Ratio.  The average  Dilution Ratio for any three  consecutive
Collection Periods is a rate equal to or greater than 4.50%;

     (j)  Nonpayment  of Coverage  Shortfall.  The Coverage  Shortfall,  if any,
relating to any Settlement  Date is not paid to the Purchasers on the applicable
Settlement Date;

     (k)  Minimum  Enhancement  Amount.  The  sum of  Contractual  Dilution  and
Aggregate Reserves is less than the Minimum Enhancement Amount;

     (l) Change of Control. A Change of Control shall occur;

     (m) Event of Default in Material  Debt.  Failure of the  Servicer or any of
its  Subsidiaries to pay any  Indebtedness in excess of $10,000,000 in aggregate
principal amount  ("Material  Debt") when due; or the default by the Servicer or
any of its  Subsidiaries in the performance of any term,  provision or condition
contained  in any  agreement  under  which any  Material  Debt was created or is
governed, the effect of which is to cause, or to permit the holder or holders of
such  Material  Debt to cause,  such  Material  Debt to become  due prior to its
stated maturity; or any Material Debt of the Servicer or any of its Subsidiaries
shall be declared to be due and payable or required to be prepaid (other than by
a regularly scheduled payment) prior to the date of maturity thereof;

     (n) A final judgment  shall have been entered  against the Seller or one or
more final  judgments  shall be entered  against  any  Originator  or any of its
Subsidiaries for the payment of money in the aggregate amount of $30,000,000, or
the  equivalent  thereof in another  currency,  or more on claims not covered by
insurance or as to which the  insurance  carrier has denied its  responsibility,
and such  judgment  shall  continue  unsatisfied  and in effect for thirty  (30)
consecutive days without a stay of execution;

     (o) Any Plan of the  Seller or any  Originator  or any of its  Subsidiaries
shall be terminated  within the meaning of Title IV of ERISA except as permitted
by Section  4044(d) of ERISA, or a trustee shall be appointed by the appropriate
U.S.  District  Court to administer  any Plan of the Seller or any Originator or
any of its  Subsidiaries,  or the PBGC shall institute  proceedings to terminate
any  Plan of the  Seller  or any  Originator  or any of its  Subsidiaries  or to
appoint a trustee to administer any such Plan and each such event,  individually
or in the  aggregate,  could  reasonably be expected to have a Material  Adverse
Effect;

then,  subject to applicable law, and after the applicable grace period, if any,
an Amortization Event shall occur without any notice or other action on the part
of the Agent or any of the Purchasers,  immediately  upon the occurrence of such
event and the  Agent,  by notice  then  given in  writing  to the Seller and the
Servicer,  may terminate all but not less than all of the rights and obligations
(other  than  its  obligations  that  have  accrued  up  to  the  time  of  such
termination)  of the Servicer as Servicer  under the  Transaction  Documents and
appoint a successor Servicer hereunder, provided however, that the provisions of
this sentence  should not be applicable  if any  Amortization  Event occurs with
respect to any Originator or a group of Originators  (other than  Federal-Mogul)
that  individually or as a group have originated less than 5.0% of the aggregate

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<PAGE>

Outstanding  Balances  of all  Eligible  Receivables  as of  the  date  of  such
Amortization  Event, and the Agent receives notice from the Seller within 3 days
of the occurrence of such Amortization Event, that the Receivables originated by
such  Originator  or such  group  of  Originators  with  respect  to  which  the
Amortization Event occurred (i) shall not constitute Eligible  Receivables as of
the date of such Amortization  Event, and (ii) the Seller shall not purchase any
Receivables  from  Federal-Mogul  pursuant to the Sale  Agreement that have been
originated  by such  Originator  or group of  Originators.  For  purposes of the
immediately  preceding  sentence,  an Amortization Event shall be deemed to have
occurred  with respect to a "group of  Originators"  if any  Amortization  Event
occurs with respect to two or more Originators within any period of time.

All authority and power granted to the Servicer or any successor  Servicer under
the Transaction  Documents shall  automatically cease and terminate upon payment
in full of the Aggregate Unpaids.

                                  ARTICLE IX.
                                 INDEMNIFICATION

     Section 9.01  Indemnities by the Seller.  Without limiting any other rights
which the Agent or any Purchaser may have hereunder or under applicable law, the
Seller  hereby  agrees  to  indemnify  the Agent  and each  Purchaser  and their
respective  officers,  directors,  agents and employees  (each,  an "Indemnified
Party")  from  and  against  any  and  all  damages,   losses,   claims,  taxes,
liabilities,  costs,  expenses  and for all  other  amounts  payable,  including
reasonable  attorneys'  fees (which  attorneys  may be employees of the Agent or
such  Purchaser)  and  disbursements  (all of the foregoing  being  collectively
referred to as "Indemnified Amounts") awarded against or incurred by any of them
arising  out of or as a result  of this  Agreement  or the  acquisition,  either
directly  or  indirectly,  by a Purchaser  of an  interest  in the  Receivables,
excluding, however:

          (a)  Indemnified  Amounts to the extent  final  judgment of a court of
     competent  jurisdiction holds such Indemnified  Amounts resulted from gross
     negligence  or  willful  misconduct  on the part of the  Indemnified  Party
     seeking indemnification;

          (b)  Indemnified  Amounts to the extent  the same  includes  losses in
     respect  of  Receivables   which  are   uncollectible  on  account  of  the
     insolvency,  bankruptcy or lack of creditworthiness of the related Obligor;
     or

          (c) taxes  imposed on such  Indemnified  Party to the extent  that the
     computation of such taxes is consistent with the Intended Characterization;

provided,  however,  that  nothing  contained in this  sentence  shall limit the
liability of the Seller or the Servicer or limit the recourse of the  Purchasers
to the Seller or Servicer for amounts otherwise specifically provided to be paid
by the  Seller  or the  Servicer  under  the  terms of this  Agreement.  Without
limiting  the  generality  of the  foregoing  indemnification,  the Seller shall
indemnify  the Agent and the  Purchasers  for  Indemnified  Amounts  (including,
without limitation,

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<PAGE>

losses  in  respect  of   uncollectible   receivables,   regardless  of  whether
reimbursement  therefor would constitute recourse to the Seller or the Servicer)
relating to or resulting from:

          (i) any  representation or warranty made by the Seller, any Originator
     or the  Servicer  (or any  officers of the  Seller,  an  Originator  or the
     Servicer) under or in connection with this Agreement, any other Transaction
     Document,  any Settlement Date Statement or any other information or report
     delivered by the Seller,  any Originator or the Servicer pursuant hereto or
     thereto, which shall have been false or incorrect when made or deemed made;

          (ii) the  failure by the Seller,  any  Originator  or the  Servicer to
     comply with any  applicable  law,  rule or  regulation  with respect to any
     Receivable  or  invoice  related  thereto,  or  the  nonconformity  of  any
     Receivable or invoice  included  therein with any such applicable law, rule
     or regulation;

          (i) any  failure of the  Seller,  any  Originator  or the  Servicer to
     perform its duties or obligations in accordance with the provisions of this
     Agreement or any other Transaction Document;

          (ii) RESERVED;

          (iii) any dispute,  claim,  offset or defense (other than discharge in
     bankruptcy of the Obligor) of any Obligor to the payment of any  Receivable
     (including,  without limitation,  a defense based on such Receivable or the
     related  invoice not being a legal,  valid and binding  obligation  of such
     Obligor  enforceable against it in accordance with its terms), or any other
     claim resulting from the sale of the merchandise or service related to such
     Receivable  or the  furnishing  or failure to furnish such  merchandise  or
     services;

          (iv) the  commingling  of  Collections of Receivables at any time with
     other funds;

          (v) any investigation,  litigation or proceeding related to or arising
     from this Agreement or any other  Transaction  Document,  the  transactions
     contemplated hereby or thereby, the use of the proceeds of a purchase,  the
     ownership  of  the  Receivable   Interests  or  any  other   investigation,
     litigation or proceeding  relating to the Seller or any Originator in which
     any  Indemnified  Party  becomes  involved  as  a  result  of  any  of  the
     transactions  contemplated  hereby or  thereby  other  than (a)  litigation
     between  the  Seller  on the one hand and the  Agent and one or more of the
     Investors  on the  other  hand in  which  the  Seller  prevails  or (b) any
     investigation  or  proceeding  arising  from (i) the  gross  negligence  or
     willful  misconduct  of the  Agent  or one or more  Investors  or (ii)  the
     unlawful conduct of the Agent or one or more Investors;

          (vi) any  inability  to  litigate  any claim  against  any  Obligor in
     respect of any  Receivable  as a result of such  Obligor  being immune from
     civil  and  commercial  law

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<PAGE>

     and suit on the grounds of  sovereignty or otherwise from any legal action,
     suit or proceeding; or

          (vii) any Insolvency Event with respect to the Servicer.

     Section 9.02 Increased Cost and Reduced Return.

     (a) If after the date hereof,  any Funding Source shall be charged any fee,
expense or increased cost on account of the adoption of any applicable law, rule
or regulation  (including  any  applicable  law,  rule or  regulation  regarding
capital adequacy) or any change therein,  or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration  thereof, or compliance
with any  request or  directive  (whether or not having the force of law) of any
such authority,  central bank or comparable agency (a "Regulatory Change"):  (i)
which  subjects  any  Funding  Source to any  charge or  withholding  on or with
respect to any  Funding  Agreement  or a Funding  Source's  obligations  under a
Funding  Agreement,  or on or with  respect to the  Receivables,  or changes the
basis of taxation of payments to any Funding Source of any amounts payable under
any Funding  Agreement (except for changes in the rate of tax on the overall net
income of a Funding Source) or (ii) which imposes,  modifies or deems applicable
any  reserve,   assessment,   insurance  charge,   special  deposit  or  similar
requirement  against  assets of,  deposits  with or for the account of a Funding
Source,  or credit extended by a Funding Source pursuant to a Funding  Agreement
or (iii) which  imposes any other  condition  the result of which is to increase
the cost to a  Funding  Source of  performing  its  obligations  under a Funding
Agreement,  or to reduce the rate of return on a Funding  Source's  capital as a
consequence  of its  obligations  under a Funding  Agreement,  or to reduce  the
amount of any sum  received or  receivable  by a Funding  Source under a Funding
Agreement  or to require any payment  calculated  by  reference to the amount of
interests  or loans held or interest  received by it,  then,  upon demand by the
Agent,  the Seller  shall pay to the  Agent,  for the  benefit  of the  relevant
Funding  Source,  such amounts charged to such Funding Source or compensate such
Funding Source for such reduction.

     (b)  Payment of any sum  pursuant to Section  9.02(a)  shall be made by the
Seller to the Agent, for the benefit of the relevant  Funding Source,  not later
than ten (10) days after any such demand is made. A  certificate  of any Funding
Source, signed by an authorized officer claiming compensation under this Section
9.02 and  setting  forth the  additional  amount to be paid for its  benefit and
explaining  the manner in which such amount was  determined  shall be conclusive
evidence of the amount to be paid, absent manifest error.

     (c) Each  Investor  will  promptly  notify  the Seller and the Agent of any
event of which it has  knowledge  which is  reasonably  likely to  entitle  such
Investor to compensation pursuant to this Section 9.02; provided,  however, that
no failure to give or delay in giving such  notification  shall adversely affect
the rights of any Investor to such compensation.

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<PAGE>

     Section  9.03 Costs and  Expenses  Relating to this  Agreement.  The Seller
shall pay to the Agent,  Falcon  and/or ISC on demand all  reasonable  costs and
out-of-pocket expenses in connection with the preparation,  execution,  delivery
and administration of this Agreement,  the transactions  contemplated hereby and
the other documents to be delivered hereunder, including without limitation, the
reasonable  cost of Falcon's and/or ISC's auditors  auditing the books,  records
and procedures of the Seller and the Servicer, reasonable fees and out-of-pocket
expenses of legal  counsel for Falcon,  ISC and/or the Agent (which such counsel
may be  employees  of Falcon,  ISC or the Agent) with  respect  thereto and with
respect to advising Falcon,  ISC and the Agent as to their respective rights and
remedies under this  Agreement.  The Seller shall pay to the Agent on demand any
and all costs and expenses of the Agent and the  Purchasers,  if any,  including
reasonable  counsel fees and expenses in connection with the enforcement of this
Agreement and the other documents delivered hereunder and in connection with any
restructuring   or  workout  of  this  Agreement  or  such  documents,   or  the
administration of this Agreement following an Amortization Event.

     Section 9.04 Taxes.

     (a) Any and all  payments  and  deposits  required to be made  hereunder or
under any other Transaction Document by the Seller or the Servicer to or for the
benefit  of the  Conduits  or any  Investor  shall be made free and clear of and
without  deduction  for any and all present or future  taxes,  levies,  imposts,
deductions,  charges or withholdings,  and all liabilities with respect thereto,
excluding  taxes  imposed on, or measured  by  reference  to, the net income of,
franchise taxes imposed on, and taxes (other than withholding  taxes) imposed on
the receipts or gross  receipts that are imposed on any Conduit or such Investor
by  any of  (i)  the  United  States  or  any  State  thereof,  (ii)  the  state
jurisdiction  under the laws of which any Conduit or such  Investor is organized
or in which it is otherwise  doing  business or (iii) any political  subdivision
thereof (all such non-excluded  taxes,  levies,  imposts,  deductions,  charges,
withholdings and liabilities being hereinafter  referred to as "Taxes").  If the
Seller or the  Servicer  shall be required by law to deduct any Taxes from or in
respect  of any sum  required  to be paid or  deposited  hereunder  or under any
instrument  delivered  hereunder  to or for the  benefit  of any  Conduit or any
Investor,  (A) such sum shall be  increased  as may be  necessary  so that after
making all required deductions  (including  deductions  applicable to additional
sums  required  to be paid or  deposited  under  this  Section  9.04) the amount
received by the  Conduits  or the  relevant  Investor,  or  otherwise  deposited
hereunder or under such  instrument,  shall be equal to the sum which would have
been so received or deposited had no such  deductions  been made, (B) the Seller
or the Servicer (as  appropriate)  shall make such deductions and (c) the Seller
or the Servicer (as appropriate) shall pay the full amount of such deductions to
the relevant taxation authority or other authority in accordance with applicable
law.

     (b) The Seller will indemnify each of the Purchasers for the full amount of
Taxes (including,  without limitation,  any Taxes imposed by any jurisdiction on
amounts  payable  under  this  Section  9.04)  paid  by such  Purchaser  and any
liability  (including  penalties,  interest and expenses)  arising  therefrom or
required  to be paid with  respect  thereto.  Each of the  Purchasers  agrees to
promptly  notify  the  Seller  of any  payment  of  Taxes  made  by it  and,  if

                                       54
<PAGE>

practicable,  any request, demand or notice received in respect thereof prior to
such  payment.  Each of the  Purchasers  shall be  entitled  to  payment of this
indemnification,  as owner of Receivable  Interests within 30 days from the date
such  Purchaser  makes written  demand  therefor to the Agent and the Seller.  A
certificate as to the amount of such indemnification submitted to the Seller and
the Agent by any Purchaser, setting forth the calculation thereof, shall (absent
manifest error) be conclusive and binding for all purposes.

     (c)  Within 30 days after the date of any  payment of Taxes,  the Seller or
the  Servicer  (as the case may be) will  furnish to the Agent the original or a
certified copy of a receipt evidencing payment thereof.

     (d)  Notwithstanding the foregoing and any other provisions of this Section
9.04,  the  obligations of the Servicer under this Section 9.04 shall be payable
only out of Collections.

     (e) Each Investor that is organized under the laws of a jurisdiction  other
than the United States or a state thereof hereby agrees to complete, execute and
deliver to the Agent from time to time prior to the initial  Settlement  Date on
which the Agent, acting on behalf of such Investor,  will be entitled to receive
distributions pursuant to this Agreement, Internal Revenue Service Forms 1001 or
4224 (or any successor form), as applicable, or such other forms or certificates
as may be required  under the laws of any  applicable  jurisdiction  in order to
permit the Seller or the Servicer to make  payments to, and deposit  funds to or
for the account of, the Agent, acting on behalf of such Investor,  hereunder and
under the other  Transaction  Documents without any deduction or withholding for
or on  account of any tax or with such  withholding  or  deduction  at a reduced
rate.

                                   ARTICLE X.
                                    THE AGENT

     Section 10.01  Authorization  and Action.  Each Purchaser hereby designates
and appoints The First  National  Bank of Chicago to act as its agent  hereunder
and under each other Transaction Document, and authorizes the Agent to take such
actions as agent on its behalf and to exercise  such powers as are  delegated to
the Agent by the terms of the Transaction Documents together with such powers as
are  reasonably  incidental  thereto.  The Agent  shall  not have any  duties or
responsibilities,  except  those  expressly  set  forth  herein  or in any other
Transaction Document, or any fiduciary  relationship with any Purchaser,  and no
implied  covenants,   functions,   responsibilities,   duties,   obligations  or
liabilities  on the part of the Agent shall be read into this  Agreement  or any
other  Transaction  Document or otherwise exist for the Agent. In performing its
functions and duties hereunder and under the other  Transaction  Documents,  the
Agent shall act solely as agent for the Purchasers and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its  successors  or assigns.  The Agent shall not be
required to take any action  which  exposes the Agent to personal  liability  or
which  is  contrary  to  this  Agreement,  any  other  Transaction  Document  or
applicable  law. The  appointment  and  authority of the Agent  hereunder  shall

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<PAGE>

terminate upon the indefeasible  payment in full of all Aggregate Unpaids.  Each
Purchaser  hereby  authorizes  the Agent to execute on behalf of such  Purchaser
(the  terms of which  shall be binding on such  Purchaser)  each of the  Uniform
Commercial Code financing  statements,  together with such other  instruments or
documents  determined  by the Agent to be  necessary  or  desirable  in order to
perfect,  evidence  or  more  fully  protect  the  interest  of  the  Purchasers
contemplated hereunder.

     Section 10.02 Delegation of Duties. The Agent may execute any of its duties
under this Agreement and each other Transaction Document by or through agents or
attorneys-in-fact  and shall be  entitled  to advice of counsel  concerning  all
matters  pertaining to such duties.  The Agent shall not be responsible  for the
negligence or misconduct of any agents or attorneys-in-fact  selected by it with
reasonable care.

     Section  10.03  Exculpatory  Provisions.  Neither  the Agent nor any of its
directors,  officers,  agents or  employees  shall be (i)  liable for any action
lawfully taken or omitted to be taken by it or them under or in connection  with
this Agreement or any other Transaction  Document (except for its, their or such
Person's own gross negligence or willful misconduct), or (ii) responsible in any
manner to any of the Purchasers for any recitals, statements, representations or
warranties made by the Seller contained in this Agreement, any other Transaction
Document or any certificate,  report, statement or other document referred to or
provided for in, or received under or in connection with, this Agreement, or any
other  Transaction   Document  or  for  the  value,   validity,   effectiveness,
genuineness,  enforceability  or  sufficiency  of this  Agreement,  or any other
Transaction  Document or any other document furnished in connection  herewith or
therewith, or for any failure of the Seller to perform its obligations hereunder
or thereunder,  or for the satisfaction of any condition specified in Article V,
or  for  the  perfection,  priority,  condition,  value  or  sufficiency  or any
collateral  pledged in  connection  herewith.  The Agent  shall not be under any
obligation to any  Purchaser to ascertain or to inquire as to the  observance or
performance  of any of the  agreements or covenants  contained in, or conditions
of,  this  Agreement  or any  other  Transaction  Document,  or to  inspect  the
properties,  books or records of the  Seller.  The Agent  shall not be deemed to
have knowledge of an Amortization Event or a Potential Amortization Event unless
the Agent has received notice from the Seller or a Purchaser.

     Section 10.04  Reliance by Agent.  The Agent shall in all cases be entitled
to  rely,  and  shall be fully  protected  in  relying,  upon  any  document  or
conversation  believed by it to be genuine and correct and to have been  signed,
sent or made by the proper  Person or Persons and upon advice and  statements of
legal  counsel  (including,   without   limitation,   counsel  to  the  Seller),
independent accountants and other experts selected by the Agent. The Agent shall
in all cases be fully  justified in failing or refusing to take any action under
this Agreement or any other  Transaction  Document unless it shall first receive
such advice or  concurrence of Falcon,  ISC or the Required  Investors or all of
the  Purchasers,  as applicable,  as it deems  appropriate and it shall first be
indemnified  to its  satisfaction  by the  Purchasers,  provided that unless and
until the Agent shall have received  such advice,  the Agent may take or refrain
from  taking  any  action,  as the Agent  shall deem  advisable  and in the best
interests of the Purchasers. The Agent shall in all

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<PAGE>

cases, be fully protected in acting, or in refraining from acting, in accordance
with  a  respect  of  Falcon,  ISC  or  the  Required  Investors  or  all of the
Purchasers,  as applicable,  and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Purchasers.

     Section 10.05  Non-Reliance on Agent and Other  Purchasers.  Each Purchaser
expressly  acknowledges  that  neither  the  Agent,  nor  any of  its  officers,
directors,  employees,  agents,  attorneys-in-fact  or  affiliates  has made any
representations  or  warranties  to it and  that no act by the  Agent  hereafter
taken, including,  without limitation,  any review of the affairs of the Seller,
shall be deemed to constitute any  representation or warranty by the Agent. Each
Purchaser   represents  and  warrants  to  the  Agent  that  it  has  and  will,
independently  and without  reliance  upon the Agent or any other  Purchaser and
based on such documents and information as it has deemed  appropriate,  made its
own  appraisal of and  investigation  into the business,  operations,  property,
prospects, financial and other conditions and creditworthiness of the Seller and
made its own  decision  to enter  into this  Agreement,  the  other  Transaction
Documents and all other documents related hereto or thereto.

     Section 10.06  Reimbursement and  Indemnification.  The Purchasers agree to
reimburse  and  indemnify  the Agent  and its  officers,  directors,  employees,
representatives  and agents ratably  according to their Pro Rata Shares,  to the
extent not paid or  reimbursed  by the Seller (i) for any  amounts for which the
Agent,  acting in its  capacity as Agent,  is entitled to  reimbursement  by the
Seller  hereunder and (ii) for any other expenses  incurred by the Agent, in its
capacity as Agent and acting on behalf of the Purchasers, in connection with the
administration and enforcement of the Transaction Documents.

     Section  10.07  Agent  in  its  Individual  Capacity.  The  Agent  and  its
Affiliates may make loans to, accept  deposits from and generally  engage in any
kind of business  with the Seller or any  Affiliate  of the Seller as though the
Agent  were  not  the  Agent  hereunder.  With  respect  to the  acquisition  of
Receivable  Interests pursuant to this Agreement,  the Agent shall have the same
rights and powers  under this  Agreement as any  Purchaser  and may exercise the
same as though it were not the  Agent,  and the terms  "Investor,"  "Purchaser,"
"Investors" and "Purchasers" shall include the Agent in its individual  capacity
if applicable.

     Section 10.08 Successor  Agent. The Agent may, upon ten days' notice to the
Seller and the Purchasers,  and the Agent will, upon the direction of all of the
Purchasers  (other than the Agent, in its individual  capacity) resign as Agent.
If the Agent shall  resign,  then the Required  Investors  during such  five-day
period shall  appoint from among the  Purchasers a successor  agent.  If for any
reason no successor  Agent is appointed  by the Required  Investors  during such
five-day  period,  then effective upon the  termination of such five day period,
the Purchasers  shall perform all of the duties of the Agent hereunder and under
the other  Transaction  Documents  and the  Seller  shall make all  payments  in
respect of the Aggregate  Unpaids directly to the applicable  Purchasers and for
all purposes shall deal directly with the Purchasers. After the effectiveness of
any retiring Agent's resignation hereunder as Agent, the retiring Agent shall be
discharged  from its  duties  and  obligations  hereunder  and  under  the other
Transaction  Documents and the provisions of this Article X and Article IX shall
continue in effect for its benefit with

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respect  to any  actions  taken or  omitted to be taken by it while it was Agent
under this Agreement and under the other Transaction Documents.

                                  ARTICLE XI.
                           ASSIGNMENTS; PARTICIPATIONS

     Section 11.01 Assignments.

     (a) The Seller and each  Investor  hereby agree and consent to the complete
or partial  assignment by any Conduit of all of its rights  under,  interest in,
title to and  obligations  under  this  Agreement  to the  applicable  Investors
pursuant to Section 3.06 or Section 3.11 or to any other  Person,  and upon such
assignment,  such Conduit  shall be released from its  obligations  so assigned.
Further,  the Seller and each  Investor  hereby  agree that any  assignee of any
Conduit of this  Agreement  or all or any of the  Receivable  Interests  of such
Conduit shall have all of the rights and benefits under this Agreement as if the
term "Conduit"  explicitly  referred to such party, and no such assignment shall
in any way impair the rights and benefits of the Conduits hereunder.  The Seller
shall  not have the  right to  assign  its  rights  or  obligations  under  this
Agreement.

     (b) Any  Investor  may at any time and from  time to time  assign to one or
more  Persons  ("Purchasing  Investors")  all or any  part  of  its  rights  and
obligations under this Agreement pursuant to an assignment agreement,  in a form
and  substance  satisfactory  to the Agent (the  "Assignment  and  Acceptance"),
executed by such Purchasing  Investor and such selling Investor.  The consent of
the related  Conduit shall be required  prior to the  effectiveness  of any such
assignment.  Each assignee of an Investor must have a short-term  debt rating of
A-1 or better by Standard & Poor's  Ratings  Group and P-1 by Moody's  Investors
Service,  Inc. and must agree to deliver to the Agent,  promptly  following  any
request  therefor  by the Agent or the  applicable  Conduit,  an  enforceability
opinion  in form and  substance  satisfactory  to the Agent  and the  applicable
Conduit.  Upon delivery of the executed  Assignment and Acceptance to the Agent,
such selling  Investor shall be released from its  obligations  hereunder to the
extent of such  assignment.  Thereafter  the  Purchasing  Investor shall for all
purposes be an Investor  party to this  Agreement  and shall have all the rights
and  obligations of an Investor under this Agreement to the same extent as if it
were an original  party  hereto and no further  consent or action by the Seller,
the Purchasers or the Agent shall be required.

     (c) Each of the  Investors  agrees that in the event that it shall cease to
have a short-term debt rating of A-1 or better by Standard & Poor's  Corporation
and P-1 by Moody's  Investors  Service,  Inc.  (an  "Affected  Investor"),  such
Affected Investor shall be obliged, at the request of the related Conduit or the
Agent,  to assign all of its rights and  obligations  hereunder  to (x)  another
Investor  or (y)  another  financial  institution  nominated  by the  Agent  and
acceptable to the related Conduit,  and willing to participate in this Agreement
through the Liquidity  Termination Date in the place of such Affected  Investor;
provided that the Affected  Investor  receives  payment in full,  pursuant to an
Assignment and Acceptance,  of an amount equal to such Investor's Pro Rata Share
of the Capital and Yield owing to the Investors and all accruing but

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unpaid  fees and other  costs and  expenses  payable  in respect of its Pro Rata
Share of the Receivable Interests.

     Section 11.02  Participations.  Any Investor may, in the ordinary course of
its business at any time sell to one or more  Persons  (each,  a  "Participant")
participating interests in its Pro Rata Share of the Receivable Interests of the
Investors,  its  obligation  to pay the related  Conduit its Falcon  Acquisition
Amounts  or ISC  Acquisition  Amounts  or any other  interest  of such  Investor
hereunder.  Notwithstanding  any such  sale by an  Investor  of a  participating
interest to a Participant,  such Investor's  rights and  obligations  under this
Agreement shall remain unchanged,  such Investor shall remain solely responsible
for the performance of its obligations  hereunder,  and the Seller, the Conduits
and the Agent shall  continue to deal solely and directly  with such Investor in
connection  with such Investor's  rights and  obligations  under this Agreement.
Each  Investor  agrees that any  agreement  between  such  Investor and any such
Participant  in respect of such  participating  interest shall not restrict such
Investor's right to agree to any amendment,  supplement,  waiver or modification
to this Agreement, except for any amendment,  supplement, waiver or modification
described in clause (i) of Section 12.01(b).

                                  ARTICLE XII.
                                  MISCELLANEOUS

     Section 12.01 Waivers and Amendments.

     (a) No failure or delay on the part of any party hereto in  exercising  any
power,  right or remedy under this Agreement  shall operate as a waiver thereof,
nor shall any  single or partial  exercise  of any such  power,  right or remedy
preclude any other further  exercise thereof or the exercise of any other power,
right or remedy. The rights and remedies herein provided shall be cumulative and
nonexclusive  of any  rights or  remedies  provided  by law.  Any waiver of this
Agreement shall be effective only in the specific  instance and for the specific
purpose for which given.

     (b) No provision of this Agreement may be amended,  supplemented,  modified
or waived  except in writing in accordance  with the  provisions of this Section
12.01(b). The Conduits,  the Seller, the Agent, and the Required Investors,  may
enter into written modifications or waivers of any provisions of this Agreement,
provided, however, that no such modification or waiver shall:

          (i)  without the consent of each  affected  Purchaser:  (A) extend the
     Liquidity  Termination  Date  or the  date of any  payment  or  deposit  of
     Collections  by the Seller or the  Servicer,  (B) reduce the rate or extend
     the time of payment of CP Costs or Yield, as applicable,  (or any component
     thereof),  (C) reduce any fee  payable to the Agent for the  benefit of the
     Purchasers or extend the time for payment  thereof,  (D) except pursuant to
     Article Xl hereof,  change the amount of the Capital of any  Purchaser,  an
     Investor's Pro Rata Share or an Investor's Commitment, (E) amend, modify or
     waive any provision of the definition of Required Investors or this Section
     12.01(b), (F) consent to or permit the

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<PAGE>

     assignment  or transfer by the Seller of any of its rights and  obligations
     under this Agreement,  (G) change the definition of "Eligible  Receivable,"
     "Floating  Dilution Ratio" "Dilution  Reserve",  "Discount  Reserve," "Loss
     Reserve   Percentage,"   "Aggregate   Reserve   Percentage,"   or  "Obligor
     Overconcentration", (H) amend or modify Section 2.08 hereof or (I) amend or
     modify any defined term (or any defined term used directly or indirectly in
     such defined  term) used in clauses (A) through (H) above in a manner which
     would  circumvent  the  intention  of the  restrictions  set  forth in such
     clauses; or

          (ii) without the written consent of the then Agent,  amend,  modify or
     waive any  provision of this  Agreement if the effect  thereof is to affect
     the rights or duties of such Agent.

Notwithstanding  the foregoing,  (i) without the consent of the  Investors,  the
Agent may,  with the  consent of the  Seller,  amend  this  Agreement  solely to
increase the Purchase Limit and/or add additional Persons as Investors hereunder
and revise the definitions of "Available Funding Amount", "Purchase Limit", "ISC
Purchase  Limit",  "Falcon  Purchase Limit" and any other definition in order to
increase  the  Purchase  Limit and (ii)  without the consent of the Seller,  the
Agent,  the Required  Investors  and the Conduits may enter into  amendments  to
modify any of the terms or provisions  of Article III,  Article X, Article XI or
Section  12.13  provided  that such  amendment  has no negative  impact upon the
Seller.  Any  modification  or waiver made in accordance with this Section 12.01
shall  apply to each of the  Purchasers  equally  and shall be binding  upon the
Seller, the Purchasers and the Agent.

     (c) Neither the Seller nor the Agent shall  consent to any amendment of the
Sale Agreement  without the prior written  consent of the Required  Investors if
such amendment would have a material adverse effect on any Investor.

     Section 12.02 Notices.

     (a) Except as provided in  subsection  (b) below,  all  communications  and
notices  provided  for  hereunder  shall be in  writing  (including  bank  wire,
telecopy or electronic  facsimile  transmission or similar writing) and shall be
given to the other  parties  hereto at their  respective  addresses  or telecopy
numbers set forth on the signature  pages hereof.  All such  communications  and
notices  shall,  when mailed,  telecopied,  telegraphed,  telexed or cabled,  be
effective when received through the mails, transmitted by telecopy, delivered to
the telegraph  company,  confirmed by telex answerback or delivered to the cable
company,  respectively,  except that  communications and notices to the Agent or
any  Purchaser  pursuant  to  Article  II or III  shall not be  effective  until
received by the intended recipient.

     (b) The Seller hereby  authorizes the Agent to effect purchases and Tranche
Period and Discount  Rate  selections  based on  telephonic  notices made by any
Person  whom the  Agent in good  faith  believes  to be  acting on behalf of the
Seller.   The  Seller  agrees  to  deliver  promptly  to  the  Agent  a  written
confirmation  of each telephonic  notice signed by an authorized

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<PAGE>

officer of the  Seller.  However,  the  absence of such  confirmation  shall not
affect the validity of such notice. If the written confirmation differs from the
action taken by the Agent, the records of the Agent shall govern absent manifest
error.

     Section  12.03 Ratable  Payments.  If any  Purchaser,  whether by setoff or
otherwise,  has payment made to it with respect to any portion of the  Aggregate
Unpaids  owing to such  Purchaser  (other  than  payments  received  pursuant to
Section 9.02 or 9.03) in a greater  proportion  than that  received by any other
Purchaser  entitled to receive a ratable share of such Aggregate  Unpaids,  such
Purchaser agrees, promptly upon demand, to purchase for cash without recourse or
warranty a portion of the Aggregate Unpaids held by the other Purchasers so that
after such  purchase  each  Purchaser  will hold its ratable  proportion  of the
Aggregate Unpaids;  provided that if all or any portion of such excess amount is
thereafter  recovered from such Purchaser,  such purchase shall be rescinded and
the  purchase  price  restored  to the  extent  of such  recovery,  but  without
interest.

     Section 12.04  Protection of Ownership  Interests of the Agent on behalf of
the Purchasers.

     (a) The  Seller  agrees  that from time to time,  at its  expense,  it will
promptly  execute  and  deliver  all  instruments  and  documents,  and take all
actions,  that may be necessary or desirable,  or that the Agent may request, to
perfect,  protect or more fully evidence the Receivable Interests,  or to enable
the Agent or the  Purchasers  to exercise and enforce  their rights and remedies
hereunder.  The Agent may,  or the Agent may  direct  the Seller to,  notify the
Obligors of Receivables,  at any time following the replacement of the Seller as
Servicer  and  at  the  Seller's  expense,  of the  ownership  interests  of the
Purchasers under this Agreement and may also direct that payments of all amounts
due or that  become due under any or all  Receivables  be made  directly  to the
Agent or its designee.  The Seller shall,  at any Purchaser's  written  request,
withhold the identity of such Purchaser in any such notification.

     (b) If the Seller or the Servicer  fails to perform any of its  obligations
hereunder,  the  Agent or any  Purchaser  may (but  shall  not be  required  to)
perform,  or cause  performance  of,  such  obligation;  and the Agent's or such
Purchaser's costs and expenses incurred in connection therewith shall be payable
by the  Seller  (if the  Servicer  that  fails to so perform is the Seller or an
Affiliate  thereof) as provided in Section 9.03, as  applicable.  The Seller and
the Servicer each irrevocably  authorizes the Agent at any time and from time to
time in the  sole  discretion  of the  Agent,  and  appoints  the  Agent  as its
attorney-in-fact, to act on behalf of the Seller and the Servicer (i) to execute
on behalf of the Seller as debtor and to file financing  statements necessary or
desirable  in the  Agent's  sole  discretion  to  perfect  and to  maintain  the
perfection and priority of the interest of the Purchasers in the Receivables and
(ii) to file a carbon,  photographic or other  reproduction of this Agreement or
any financing statement with respect to the Receivables as a financing statement
in such offices as the Agent in its sole discretion deems necessary or desirable
to perfect and to maintain the  perfection  and priority of the interests of the
Purchasers in the Receivables.  This appointment is coupled with an interest and
is irrevocable.

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<PAGE>

     Section  12.05  Confidentiality.  Each of the  Seller,  Federal-Mogul,  the
Servicer (if other than  Federal-Mogul),  the Agent and the Purchasers agrees to
use it best efforts,  and to cause its agents and  representatives  to use their
best efforts, to hold in confidence all Confidential Information;  provided that
nothing herein shall prevent the Agent or any Purchaser from  delivering  copies
of any  financial  statements  and  other  documents  constituting  Confidential
Information, or disclosing any other Confidential Information, to:

          (i) the Agent's,  any Purchaser's or any Funding  Source's  respective
     directors,   officers,   employees,   agents,   accountants,   professional
     consultants and enhancement providers,

          (ii) any other Purchaser,

          (iii) any other Funding  Source or any Person to which such  Purchaser
     offers to sell or assign or sells or  assigns  such  Purchaser  or any part
     thereof or any rights  associated  therewith so long as such other  Funding
     Source or Person shall have agreed to hold in confidence  all  Confidential
     Information,

          (iv) any federal or state  regulatory  authority  having  jurisdiction
     over the Agent, such Purchaser or any Funding Source,

          (v) any nationally  recognized  rating agency that requires  access to
     such Purchaser's  investment  portfolio and any Funding Source's investment
     portfolio,

          (vi) any other  Person to which such  delivery  or  disclosure  may be
     necessary or appropriate:  (a) in compliance with any law, rule, regulation
     or order applicable to the Agent, any Purchaser or any Funding Source,  (b)
     in response to any  subpoena  or other legal  process or (c) in  connection
     with any litigation to which the Agent, such Purchaser or Funding Source is
     a party, or

          (vii) if any Amortization Event has occurred and is continuing, to the
     extent  the Agent or such  Purchaser  may  reasonably  determine  that such
     delivery and disclosure is necessary or  appropriate in the  enforcement or
     for the  protection  of the  rights  and  remedies  under  the  Transaction
     Documents.

The Agent and the Purchasers shall provide written notice to the Seller whenever
any such disclosure is made except to the extent prohibited by law and shall use
their best efforts to provide the Seller with five day's  advance  notice of any
disclosure pursuant to clause (vi) of this Section 12.05.

     Section 12.06 Bankruptcy Petition.  The Seller, the Agent and each Investor
hereby  covenants  and agrees that,  prior to the date which is one year and one
day after the payment in full of all outstanding  senior  indebtedness of Falcon
or ISC, it will not institute  against,  or join any other Person in instituting
against, Falcon or ISC any bankruptcy,

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<PAGE>

reorganization,  arrangement,  insolvency or  liquidation  proceedings  or other
similar  proceeding  under  the laws of the  United  States  or any state of the
United States.

     Section 12.07  Limitation  of  Liability.  Except with respect to any claim
arising out of the willful  misconduct or gross negligence of the Conduits,  the
Agent or any Investor,  no claim may be made by the Seller,  the Servicer or any
other Person against the Conduits, the Agent or any Investor or their respective
Affiliates, directors, officers, employees, attorneys or agents for any special,
indirect,  consequential  or punitive damages in respect of any claim for breach
of contract or any other  theory of  liability  arising out of or related to the
transactions  contemplated  by this  Agreement,  or any act,  omission  or event
occurring in connection therewith;  and the Seller hereby waives,  releases, and
agrees not to sue upon any claim for any such  damages,  whether or not  accrued
and whether or not known or suspected to exist in its favor.

     Section  12.08  CHOICE  OF  LAW.  THIS  AGREEMENT  SHALL  BE  CONSTRUED  IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
NEW YORK.

     Section 12.09 CONSENT TO JURISDICTION.  EACH OF THE SELLER AND THE SERVICER
HEREBY: (A) IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE  JURISDICTION OF ANY UNITED
STATES  FEDERAL OR NEW YORK  STATE  COURT  SITTING IN NEW YORK,  NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE TRANSACTION DOCUMENTS AND
(B)  IRREVOCABLY  AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD  AND  DETERMINED  IN ANY SUCH  COURT  AND  IRREVOCABLY  WAIVES  ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,  ACTION
OR  PROCEEDING  BROUGHT  IN SUCH A COURT OR THAT SUCH  COURT IS AN  INCONVENIENT
FORUM.  NOTHING  HEREIN  SHALL LIMIT THE RIGHT OF THE AGENT OR ANY  PURCHASER TO
BRING PROCEEDINGS  AGAINST THE SELLER OR THE SERVICER IN THE COURTS OF ANY OTHER
JURISDICTION  WHEREIN ANY ASSETS OF THE SELLER,  THE SERVICER OR ANY  ORIGINATOR
MAY BE LOCATED.  ANY JUDICIAL  PROCEEDING BY THE SELLER OR THE SERVICER  AGAINST
THE  AGENT  OR ANY  PURCHASER  OR ANY  AFFILIATE  OF THE  AGENT  OR A  PURCHASER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH THE TRANSACTION DOCUMENTS SHALL BE BROUGHT ONLY IN A COURT
IN NEW YORK, NEW YORK.

     Section  12.10  WAIVER OF JURY  TRIAL.  EACH OF THE PARTIES  HERETO  HEREBY
WAIVES  TRIAL  BY  JURY  IN  ANY  JUDICIAL  PROCEEDING  INVOLVING,  DIRECTLY  OR
INDIRECTLY,  ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF,

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<PAGE>

RELATED TO, OR CONNECTED  WITH THE  TRANSACTION  DOCUMENTS OR THE  RELATIONSHIPS
ESTABLISHED THEREUNDER.

     Section 12.11  Integration;  Survival of Terms.  The Transaction  Documents
contain  the final and  complete  integration  of all prior  expressions  by the
parties  hereto with respect to the subject  matter hereof and shall  constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof superseding all prior oral or written  understandings.  The provisions of
Article IX and Section 12.06 shall survive any termination of this Agreement.

     Section 12.12 Counterparts; Severability. This Agreement may be executed in
any  number  of  counterparts  and  by  different  parties  hereto  in  separate
counterparts,  each of which when so executed  shall be deemed to be an original
and all of  which  when  taken  together  shall  constitute  one  and  the  same
Agreement.   Any   provisions  of  this   Agreement   which  are  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.

     Section 12.13 First Chicago Roles. Each of the Investors  acknowledges that
First Chicago and certain of its Affiliates  including  (First  Chicago  Capital
Markets,  Inc.) act, or may in the future act, (i) as  administrative  agent for
the Conduits,  (ii) as issuing and paying agent for the Commercial Paper,  (iii)
to  provide  credit or  liquidity  enhancement  for the timely  payment  for the
Commercial  Paper and (iv) to provide  other  services from time to time for the
Conduits  (collectively,  the  "First  Chicago  Roles").  Without  limiting  the
generality of this Section 12.13, each Investor hereby acknowledges and consents
to any and all First Chicago Roles and agrees that in connection  with any First
Chicago Role,  First Chicago may take, or refrain from taking,  any action which
it, in its discretion, deems appropriate,  including, without limitation, in its
role as administrative agent for the Conduits, the giving of notice to the Agent
of a mandatory purchase pursuant to Sections 3.06 and 3.11.

     Section 12.14 Characterization.

     (a)  It is the  intention  of the  parties  hereto  that,  except  for  tax
purposes,  each purchase  hereunder shall constitute an absolute and irrevocable
sale (for  non-tax  purposes),  which  purchase  shall  provide  the  applicable
Purchaser  with the full  benefits of  ownership  of the  applicable  Receivable
Interest.  Except as  specifically  provided in this  Agreement,  each sale (for
non-tax purposes) of a Receivable Interest hereunder is made without recourse to
the  Seller;  provided,  however,  that (i) the  Seller  shall be liable to each
Purchaser and the Agent for all  representations,  warranties and covenants made
by the Seller pursuant to the terms of this  Agreement,  and (ii) such sale (for
non-tax  purposes)  does not  constitute  and is not  intended  to  result in an
assumption  by  any  Purchaser  or the  Agent  or any  assignee  thereof  of any
obligation  of the  Seller or any  Originator  or any other  person  arising  in
connection with the Receivables,  the Related Security, or the related invoices,
or any other obligations of the Seller or such Originator.

                                       64
<PAGE>

     (b) If the  conveyance  by the Seller to the  Purchasers  of  interests  in
Receivables  hereunder shall be  characterized  as a secured loan and not a sale
for any purpose in addition to tax purposes,  it is the intention of the parties
hereto  that  this  Agreement  shall  constitute  a  security   agreement  under
applicable law, and that the Seller shall be deemed to have granted to the Agent
for the ratable benefit of the Purchasers a duly perfected  security interest in
all of the Seller's right,  title and interest in, to and under the Receivables,
the Collections,  each Collection Account, all Related Security, all payments on
or with respect to such  Receivables,  all other rights relating to and payments
made in respect of the Receivables,  the Receivables Purchase Agreement, and all
proceeds  of any  thereof  prior to all other  liens on and  security  interests
therein.  After an Amortization  Event, the Agent and the Purchasers shall have,
in addition to the rights and remedies which they may have under this Agreement,
all other rights and remedies provided to a secured creditor after default under
the UCC and other applicable law, which rights and remedies shall be cumulative.

     It is the  intention  of all parties  hereto that each  purchase  hereunder
shall be  characterized  as a secured  loan for income tax  purposes.  It is the
intention of all parties hereto that each party will act in a manner  consistent
with the treatment of each purchase as a secured loan for income tax purposes.

     Section 12.15 Acknowledgments. The Seller hereby acknowledges that:

     (a) it has been  advised  by  counsel  in the  negotiation,  execution  and
delivery of this Agreement;

     (b) neither the Agent nor any Purchaser has any fiduciary relationship with
or  fiduciary  duty to the  Seller  arising  out of or in  connection  with this
Agreement, and the relationship between the Agent and the Purchasers, on the one
hand, and the Seller, 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 otherwise exists by virtue of the
transactions  contemplated  hereby among the  Purchasers or among the Seller and
the Purchasers or among the Seller and the Agent.

                            [signature pages follow]

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.

Seller:                            FEDERAL-MOGUL FUNDING CORPORATION

                                   By:______________________________________
                                          Name:
                                          Title:

                                       65
<PAGE>

                                   Address for Notices:
                                   Federal-Mogul Funding Corporation
                                   26555 Northwestern Highway
                                   Southfield, Ml 48034

                                   Attention: Treasury Department

                                   Phone:  (248) 354-7700
                                   Fax:  (248) 354-6746

Servicer:                          FEDERAL-MOGUL CORPORATION

                                   By:______________________________________
                                          Name:
                                          Title:

                                   Address for Notices:

                                   Federal-Mogul Corporation
                                   26555 Northwestern Highway
                                   Southfield, MI 48034

                                   Attention: Treasury Department

                                   Phone:  (248) 354-7700
                                   Fax:  (248) 354-6746

Agent:                             THE FIRST NATIONAL BANK OF CHICAGO,
                                   as Agent

                                   By:____________________________________
                                        Name:
                                        Title:

                                   Address for Notices:

                    Receivables Interest Purchase Agreement
<PAGE>

                                   The First National Bank of Chicago
                                   Mail Code IL1-0079
                                   One First National Plaza
                                   Chicago, Illinois 60670-0079

                                   Attention: Garrett Ahitow

                                   Phone:  (312) 732-5844
                                   Fax:  (312) 732-4487

The Conduits:                      FALCON ASSET SECURITIZATION CORPORATION

                                   By: _________________________________
                                              Authorized Signatory

                                   Address for Notices:

                                   Falcon Asset Securitization Corporation
                                   c/o The First National Bank
                                   of Chicago
                                   Asset-Backed Finance
                                   One First National Plaza
                                   Chicago, Illinois 60670-0079

                                   Attention: Garrett Ahitow

                                   Fax:  (312) 732-5844
                                   Phone:  (312) 732-2566

                    Receivables Interest Purchase Agreement
<PAGE>

                                   INTERNATIONAL SECURITIZATION CORPORATION

                                   By: _____________________________
                                              Authorized Signatory

                                   Address for Notices:

                                   International Securitization Corporation
                                   c/o The First National Bank of Chicago
                                   Asset-Backed Finance
                                   One First National Plaza
                                   Chicago, Illinois 60670-0079

                                   Attention: Garrett Ahitow

                                   Fax:  (312) 732-5844
                                   Phone:  (312) 732-2566

                    Receivables Interest Purchase Agreement
<PAGE>

Falcon Investors:

Commitment                         BANK ONE, MICHIGAN

$10,000,000                        By:_______________________________
                                       Name:
                                       Title:

                                   Address for Notices:

                                   Bank One, Michigan
                                   611 Woodward Avenue
                                   Detroit, Michigan 48226

                                   Attention: Alison K. Dolin

                                   Phone:  (313) 225-3182
                                   Fax:  (313) 225-4533

Commitment                         DRESDNER BANK AG, NEW YORK
                                   AND GRAND CAYMAN BRANCHES

$100,000,000                       By: _______________________________
                                       Authorized Agent

                                   By: _______________________________
                                       Authorized Agent

                                   Address for Notices:

                                   Dresdner Bank AG, New York
                                   and Grand Cayman Branches
                                   190 South LaSalle,  Suite 2700
                                   Chicago, Illinois 60663

                                   Attention: Michael Petix
                                   Phone: (312) 444-1313
                                   Fax: (312) 444-1192

                    Receivables Interest Purchase Agreement
<PAGE>

Commitment                         LLOYDS TSB BANK PLC

$35,000,000                        By: ________________________________
                                       Authorized Agent

                                   Address for Notices:

                                   Lloyds TSB Bank Plc
                                   575 Fifth Avenue
                                   17th Floor
                                   New York, NY 10017

                                   Attention: Amy Vespasiano

                                   Phone: (212) 930-8931
                                   Fax: (212) 930-5098

Commitment                         CREDIT AGRICOLE INDOSUEZ

$30,000,000                        By: ________________________________
                                               Authorized Agent

                                   By: ________________________________
                                               Authorized Agent

                                   Address for Notices:

                                   Credit Agricole Indosuez
                                   55 East Monroe Street
                                   Suite 4700
                                   Chicago, IL 60603

                                   Attention: Eric Robison

                                   Phone: (312) 917-7532
                                   Fax: (312) 372-3455

                    Receivables Interest Purchase Agreement
<PAGE>

Commitment                         BANQUE NATIONALE DE PARIS

$25,000,000                        By: ________________________________
                                           Authorized Agent

                                   Address for Notices:

                                   Banque Nationale de Paris
                                   209 South La Salle
                                   5th Floor
                                   Chicago, IL 60603

                                   Attention: Rosalie Hawley

                                   Phone: (312) 977-2203
                                   Fax: (312) 977-1380

Commitment                         THE BANK OF NEW YORK

$25,000,000                        By:________________________________
                                           Authorized Agent

                                   Address for Notices:

                                   The Bank of New York
                                   1 Wall Street
                                   22nd Floor
                                   New York, NY 10286

                                   Attention: William Barnum

                                   Phone: (212) 635-1019
                                   Fax: (212) 635-6434

                    Receivables Interest Purchase Agreement
<PAGE>

         Commitment                THE BANK OF NOVA SCOTIA

         $25,000,000               By:________________________________

                                   Address for Notices:

                                   The Bank of Nova Scotia
                                   600 Peachtree Street, N.E.
                                   Suite 2700
                                   Atlanta, Georgia 30308

                                   Attention: Demetria January

                                   Phone: (404) 877-1578
                                   Fax: (404) 888-8998

ISC Investors:

         Commitment                BANK ONE, MICHIGAN

         $200,000,000              By:_______________________________
                                       Name:
                                       Title:

                                   Address for Notices:

                                   Bank One, Michigan
                                   611 Woodward Avenue
                                   Detroit, Michigan 48226

                                   Attention: Alison K. Dolin

                                   Phone:  (313) 225-3182
                                   Fax:  (313) 225-4533

                    Receivables Interest Purchase Agreement
<PAGE>

                                                                       Exhibit A

                             Form of Purchase Notice

                                     [Date]

The First National Bank of Chicago,
     as Agent for the Purchasers parties
     to the Receivables Purchase Agreement
     referred to below
One First National Plaza
Mail Code Il1-0079
Chicago, Illinois  60670
Attention:  Asset-Backed Finance

Gentlemen:

     The undersigned,  Federal-Mogul Funding Corporation,  refers to the Amended
and Restated Receivables  Interest Purchase Agreement,  dated as of July 1, 1999
(the  "Receivables  Purchase  Agreement",  the terms defined  therein being used
herein as therein defined),  among the undersigned,  Federal-Mogul  Corporation,
Falcon Asset Securitization Corporation ("FALCON"), International Securitization
Corporation  ("ISC"),  certain financial  institutions from time to time parties
thereto,  as Investors,  and The First  National  Bank of Chicago,  as Agent for
FALCON,  ISC and such  financial  institutions,  and  hereby  gives you  notice,
irrevocably, pursuant to Section 2.02 of the Receivables Purchase Agreement that
the undersigned  hereby  requests a purchase of Receivables  Interests under the
Receivables  Purchase  Agreement,  and in that  connection  sets forth below the
information  relating to such purchase (the "Proposed  Purchase") as required by
Section 2.02 of the Receivables Purchase Agreement:

          (i) The  Business  Day of the  Proposed  Purchase is  _______________,
     19__.

          (ii) The requested  Purchase Price in respect of the Proposed Purchase
     is $___________.

          (iii) The requested  Purchaser[s] in respect of the Proposed  Purchase
     [is FALCON $ amount] [ISC $ amount] [are the Investors].

          (iv) The  duration  of the  initial  Tranche  Period for the  Proposed
     Purchase is ____________ [days] [months].

          (v) The  Discount  Rate  related  to such  initial  Tranche  Period is
     requested to be the [LIBOR] [Base] Rate. (If Purchasers are the Investors).
<PAGE>

     The undersigned hereby certifies that the following  statements are true on
the date hereof,  and will be true on the date of the Proposed  Purchase (before
and after giving effect to the Proposed Purchase):

     (A) the  representations  and  warranties  set forth in Section 4.01 of the
Receivables  Purchase  Agreement  are correct on and as of such date,  as though
made on and as of such date;

     (B) no event has occurred,  or would result from the Proposed Purchase that
will  constitute  an  Amortization  Event,  and no  event  has  occurred  and is
continuing, or would result from such Proposed Purchase, that would constitute a
Potential Amortization Event; and

     (C) the Facility  Termination  Date has not have  occurred,  the  aggregate
Capital of all  Receivable  Interests  does not and will not exceed the Purchase
Limit and the aggregate Receivable Interests do not and will not exceed 100%.

                                        Very truly yours,

                                        FEDERAL-MOGUL FUNDING CORPORATION

                                        By:  __________________________________
                                             Name:
                                             Title:

                    Receivavbles Interest Purchase Agreement
<PAGE>

                                                                       EXHIBIT B

                           Form of Collection Account
                                    Agreement

                [Letterhead of Federal-Mogul Funding Corporation]

                                                     _____________, 19__

                                     [Date]

[Collection Bank Name and Address]

Attention:  ________________

         Re:      Federal-Mogul Funding Corporation
                  Federal-Mogul Corporation

Ladies and Gentlemen:

     You have exclusive control of P.O. Box ___________,  [city],  [state] [zip]
(the  "Lock-Box")  for the purpose of  receiving  mail and  processing  payments
therefrom   pursuant  to  that  certain   lock-box   services   agreement  dated
____________,  19__ between you and Federal-Mogul Corporation (the "Agreement").
You hereby  confirm your  agreement to perform the services  described  therein.
Among the services  you have agreed to perform  therein is to endorse all checks
and other evidences of payment, and credit such payments to checking account no.
_________  maintained  with you in the name of  Federal-Mogul  Corporation  (the
"Existing Account").

     _________________________  (the "Originator")  hereby transfers and assigns
all of its right,  title and  interest in and to, and  exclusive  ownership  and
control  over,  the  Lock-Box  to  Federal-Mogul  Funding  Corporation  ("SPC").
Originator and SPC hereby request that from and after July 1, 1999, the Existing
Account  be  retitled  in the name of  "Federal-Mogul  Funding  Corporation  (so
retitled,  the  "Lock-Box  Account")  for the  purposes  of certain  Amended and
Restated  Receivables Interest Purchase Agreement dated as of July 1, 1999 among
SPC,  as  seller,   Federal-Mogul   Corporation,   as  servicer,   Falcon  Asset
Securitization   Corporation,   as  a  conduit,   International   Securitization
Corporation as a conduit,  the financial  institutions from time to time a party
thereto, as investors, and The First National Bank of Chicago, as agent.

     SPC hereby  irrevocably  instructs  you,  and you hereby  agree,  that upon
receiving notice from The First National Bank of Chicago, as Agent (the "Agent")
in the form  attached  hereto as Annex A: (i) the name of the  Lock-Box  Account
will be  changed  to "The  First  National
<PAGE>

Bank of Chicago,  as Agent" (or any  designee of the Agent),  and the Agent will
have  exclusive  ownership of and access to such Lock-Box  Account,  and neither
Originator,  SPC nor any of their respective affiliates will have any control of
such Lock-Box  Account or any access  thereto,  (ii) you will either continue to
send the funds from the Lock-Box to the Lock-Box  Account,  or will redirect the
funds as the Agent may  otherwise  request,  (iii) you will  transfer  monies on
deposit in the Lock-Box Account, at any time, as directed by the Agent, (iv) all
services to be performed by you under the Agreement  will be performed on behalf
of the Agent, and (v) all  correspondence or other mail which you have agreed to
send to  either  Originator  or SPC will be sent to the  Agent at the  following
address:

                  The First National Bank of Chicago, as Agent
                  Mail Code IL1-0079
                  One First National Plaza
                  Chicago, Illinois  60670-0079
                  Attention:  Garrett Ahitow

     Moreover,  upon such  notice,  the Agent will have all rights and  remedies
given to  Originator  or SPC under the  Agreement.  Each of  Originator  and SPC
agrees,  however,  to  continue  to pay  all  fees  and  other  assessments  due
thereunder at any time.

     You hereby acknowledge that monies deposited in the Lock-Box Account or any
other  account  established  with you by the Agent for the purpose of  receiving
funds from the  Lock-Box are subject to the liens of the Agent for itself and as
agent  under the  Receivables  Purchase  Agreement,  and will not be  subject to
deduction,  set-off, banker's lien or any other right you or any other party may
have against  Originator or SPC, except that you may debit the Lock-Box  Account
for any items deposited therein that are returned or otherwise not collected and
for all charges,  fees,  commissions  and expenses  incurred by you in providing
services  hereunder,  all in accordance  with your  customary  practices for the
charge back of returned items and expenses.

     This  letter  agreement  and the  rights  and  obligations  of the  parties
hereunder will be governed by and construed and  interpreted in accordance  with
the laws of the State of Illinois.  This letter agreement may be executed in any
number of  counterparts  and all of such  counterparts  taken  together  will be
deemed to constitute one and the same instrument.

     This letter agreement  contains the entire  agreement  between the parties,
and may not be altered, modified,  terminated or amended in any respect, nor may
any right,  power or privilege  of any party  hereunder be waived or released or
discharged,  except upon execution by all parties hereto of a written instrument
so  providing.  In the event that any  provision in this letter  agreement is in
conflict with, or inconsistent with, any provision of the Agreement, this letter
agreement  will  exclusively  govern and control.  Each party agrees to take all
actions  reasonably  requested  by any other party to carry out the  purposes of
this  letter  agreement  or to  preserve  and  protect  the rights of each party
hereunder.

                    Receivavbles Interest Purchase Agreement
<PAGE>

     Please  indicate  your  agreement to the terms of this letter  agreement by
signing in the space provided below. This letter agreement will become effective
immediately  upon  execution of a  counterpart  of this letter  agreement by all
parties hereto.

                                       Very truly yours,

                                       FEDERAL-MOGUL CORPORATION

                                       By: ____________________________________
                                              Name:
                                              Title:

                                       FEDERAL-MOGUL FUNDING CORPORATION

                                       By: ____________________________________
                                              Name:
                                              Title:

Acknowledged and agreed to this _______ day of ___________, 199_:

[COLLECTION BANK]

By:  ___________________________________
         Name:
         Title:

_________________________, as Agent

By_____________________________________
         Authorized Agent

                    Receivavbles Interest Purchase Agreement
<PAGE>

                                     ANNEX A
                            FORM OF COLLECTION NOTICE

                          [On letterhead of the Agent]

                                     [Date]

[Collection Bank Name and Address]

Attention:  ________________

         Re:      Federal-Mogul Funding Corporation
                  Federal-Mogul Corporation

Ladies and Gentlemen:

     We hereby  notify you that we are  exercising  our rights  pursuant to that
certain letter agreement among Federal-Mogul Corporation,  Federal-Mogul Funding
Corporation,  you and us, to have the name of, and to have  exclusive  ownership
and  control  of,  account  number  ________________  (the  "Lock-Box  Account")
maintained with you, transferred to "_________________________,  as Agent." [The
Lock-Box Account will henceforth be a zero-balance  account, and funds deposited
in  the   Lock-Box   Account   should  be  sent  at  the  end  of  each  day  to
_________________].  You have further  agreed to perform all other  services you
are performing  under that certain agreement dated  ___________ between  you and
Federal-Mogul Corporation on our behalf.

                 We appreciate your cooperation in this matter.

                                            Very truly yours,

                                            THE FIRST NATIONAL BANK OF CHICAGO
                                            as Agent

                                            By:  _______________________________
                                                       Authorized Agent

                    Receivavbles Interest Purchase Agreement
<PAGE>

                                                                       EXHIBIT C

                        Form of Settlement Date Statement

Month Ended

I.     Receivables Rollforward

       Beginning Balance
           + New Receivables
           - Cash Collections
           - Credit Memos
           - Gross Chargeoffs
           +/- Adjustments
           +/- Unreconciled Balance
       Ending Balance                             ____________

II.    Receivables Aging
                                                  Amount            Percent
                                                  ------            -------
       Total
       Current
       0-30 days past due
       31-60 days past due
       61-90 days past due
       91-120 days
       past due 120+ days past due
       Placed accounts

III.   Calculation of Funding (see Schedule A)

       Pool Balance

       Less Ineligibles:
           Balances MORE THAN  90 dpd
           APS Deferred Balance                                               -
           Contra Accounts LESS THAN 91 dpd
           Cross-agings LESS THAN 91 dpd
           Terms over 90 but less than 180 LESS THAN
                91 dpd
           Less Intercompany Receivables
            Less Other Ineligible Receivables     ____________
       Eligible Receivables                       ____________

                    Receivavbles Interest Purchase Agreement
<PAGE>

       Excess Concentrations                      ____________
           Net Receivables Balance

       Contractual Dilution                       ____________
           Available Receivables

       Aggregate Reserve Percentage
       Aggregate Reserves                         ____________
           Available Funding Amount
           (max $450 MM)

IV.    Early Amortization Events

       Delinquency Ratio Trigger
           - greater than or equal to 7.00% for two consecutive months

                                                                        Prior
                                                       Current          Month
                                                       -------          -----
           MORE THAN 60 dpd/Total

---------------------------------------------------
           Early Amortization?                   No
---------------------------------------------------

Loss-to-Liquidation Ratio Trigger
       - 3-month rolling average greater than or equal to 5.50%

                                                   Prior     2 months    3-month
                                     Current       Month      Prior      Average
                                     -------       -----      -----      -------
       61-90 days past due
       change in placed accounts
       cash collections
       Loss/Liquidation Ratio
---------------------------------------------------
           Early Amortization?
---------------------------------------------------

Dilution Ratio Trigger
       - 3-month rolling average greater than or equal to 4.50%

                                                   Prior     2 months    3-month
                                     Current       Month      Prior      Average
                                     -------       -----      -----      -------
       NAA Credit Memos
       OEM Credit Memos
       Dilutive adjustments
       Pool Balance
       Dilution Ratio
---------------------------------------------------
           Early Amortization?
---------------------------------------------------

                    Receivavbles Interest Purchase Agreement
<PAGE>

Coverage Amount
       =Capital minus Available Funding Amount

       Capital Outstanding
       Available Funding Amount
       Coverage Amount to be paid on               __________
       Distribution Date

Minimum Enhancement Amount
       Contractual Dilution
       Aggregate Reserve
       Minimum Enhancement Amount

V.     Calculation of Capital
       Available Funding Amount
       Outstanding Capital
       Required principal paydown
       Available Increase

       Requested Increase
       Optional Repayment
       Fees/CP Costs due

       Net credit to FMFC Concentration Account
       Net paydown due Falcon
       Net paydown due ISC

VII.   Wiring Instructions

Wiring instructions to pay interest and fees:

                  Amount:

                  To:      Falcon Asset Securitization Corporation, account
                           # 51-14810 at FNBC, ABA #071-000-013, reference:
                           Federal-Mogul Funding Corp.

                  To:      International Securitization Corporation, account
                           # ________________ at ____________, ABA
                           #______________________ reference Federal-Mogul
                           Funding Corp.

                    Receivavbles Interest Purchase Agreement
<PAGE>

Other wiring instructions:
         [insert]

The undersigned  hereby represents and warrants that the foregoing is a true and
accurate  accounting  in  accordance  with the Amended and  Restated  Receivable
Interest  Purchase  Agreement  dated as of July 1, 1999,  as amended,  modified,
supplemented  or  restated  from  time to time  (the  "Agreement")  and that all
representations  and warranties  are restated and reaffirmed  with the exception
that,  information pertaining to months prior to May 1999 may contain good faith
estimates and proforma numbers, which the undersigned believes to be accurate in
all material  respects  for the purposes of  calculating  the  financial  ratios
required under the Agreement.

_________________________________
Thomas Martin

Assistant Treasurer

                    Receivavbles Interest Purchase Agreement
<PAGE>

                                                                       EXHIBIT D

                  Principal Places of Business, chief executive
                  office, offices for records, federal employee
                              IDENTIFICATION number

Principal Place of Business,
Chief Executive Office,
and Offices for Records

26555 North Western Highway
Southfield, MI  48034

Federal Employee Identification Number:  38-3055838
<PAGE>

                                                                       EXHIBIT E

                    COLLECTION BANKS AND COLLECTION ACCOUNTS

Bank/Lox Box Location                    Account #                Box #

Comerica Bank                       1000013027                148901 and 30401
P.O. Box
Detroit, MI 48275-3265

BANK ONE CORPORATION                200011003677              771327
Dept. 771327
A E Goetze Inc.
P.O. Box 77000
Detroit, MI 48277-1327

BANK ONE CORPORATION                182953                    771128
Dept. 771128
Supermet Inc.
P.O. Box 77000
Detroit, MI 48277-1128

First National Bank of Chicago      59-36047                  730113
PO Box 730113
Dallas, TX 75373-0113

First National Bank of Chicago      55-56872                  73696
P.O. Box 73696
Chicago, IL 60673-7696

First Maryland National Bank        171-8376-9                N/A
25 S Charles
Baltimore, MD 21201

First Maryland National Bank        184-8841-1                64899
AE Goetze LaGrange
P.O. Box 64899
Baltimore, MD 21264-4899

First Maryland National Bank        179-8459-5                64011
Deva Engineered Bearings
P.O. Box 64011
Baltimore, MD 21264-4011
<PAGE>

Bank of America                     7304749                   96347
Comtech Manufacturing Co.
96347 Collection Center Dr.
Chicago, IL 60693

Bank of America                     7311095                   99543
Glacier Clevite Heavywall Bearings
99543 Collections Center Drive
Chicago IL 60693

Comerica                            185068964                 108901
Glacier Clevite Heavywall Bearings
P. O. Box 6700.
Detroit, MI 48267-1089

Bank of America                     7710925                   98966
Weyburn Bartel Inc
98966 Collections Center Dr.
Chicago IL 60693

Comerica                            185068964                 109001
Department 109001
Weyburn Bartel Inc
P. O. Box 6700
Detroit, MI 48267-1090

Nations BankUS                      3750324114                100220
P.O. Box 100220
Atlanta, GA 30384-0220

Nations BankUS                      3750324114                277964
P.O. Box 277964
Atlanta, GA 30384-7964

Nations BankUS                      3750324114                277969
P.O. Box 277969
Atlanta, GA 30384-7969

Royal Bank of Canada                to be provided            to be provided
to be provided

                    Receivavbles Interest Purchase Agreement
<PAGE>

                                                                       EXHIBIT F

                         FORM OF COMPLIANCE CERTIFICATE

To: The First National Bank of Chicago, as Agent

     This Compliance  Certificate is furnished  pursuant to that certain Amended
and Restated  Receivables  Interest Purchase Agreement dated as of July 1, 1999,
among   Federal-Mogul   Funding   Corporation   (the  "Seller"),   Federal-Mogul
Corporation,  the  Purchasers  party  thereto,  and The First  National  Bank of
Chicago,  as agent for such  Purchasers (as amended,  modified,  supplemented or
restated from time to time, the "Agreement").

     THE UNDERSIGNED HEREBY CERTIFIES THAT:

     1. I am the duly elected ____________ of the Seller;

     2. I have  reviewed  the terms of the  Agreement  and I have made,  or have
caused to be made under my supervision,  a detailed  review of the  transactions
and  conditions  of the  Seller  during  the  accounting  period  covered by the
attached financial statements;

     3. The examinations  described in paragraph 2 did not disclose,  and I have
no knowledge of, the existence of any  condition or event which  constitutes  an
Amortization Event or potential Amortization Event, as each such term is defined
under the Agreement,  during or at the end of the  accounting  period covered by
the attached financial statements or as of the date of this Certificate,  except
as set forth below.

     Described below are the exceptions,  if any, to paragraph 3 by listing,  in
detail,  the nature of the  condition or event,  the period  during which it has
existed  and the action  which the Seller has taken,  is taking,  or proposes to
take with respect to each such condition or event:

     The foregoing  certifications,  together with the computations set forth in
Schedule I hereto and the financial  statements  delivered with this Certificate
in support hereof, are made and delivered this ____ day of _____________, 19__.

                                             FEDERAL-MOGUL FUNDING CORPORATION

                                             By  _____________________________
                                                 Name:
                                                 Title:
<PAGE>

                         SCHEDULE I TO COMPLIANCE REPORT

A.   Schedule of Compliance of Federal-Mogul Funding Corporation, Sections _____
     and _____ of the Agreement. Unless otherwise defined herein, the terms used
     in this Compliance  Certificate  have the meanings  ascribed thereto in the
     Purchase Agreement.

This schedule relates to the month ended: _____________________
<PAGE>

                                                                       EXHIBIT G

                                 Credit Policies

CUSTOMER CREDIT

Purpose
This policy outlines requirements for creation and monitoring customer credit.

Customer Credit Limits
The  establishment and monitoring of a limit or maximum level of credit sales to
each individual  customer serves to reduce the risk of a significant loss due to
uncollectible  accounts.  A credit  limit  represents  the level of credit sales
(including  previous  outstanding  accounts  receivable)  above which additional
credit will not be extended.

Credit limits should be established after  consideration is given to the payment
history  of  each  customer  and  an  assessment  of  the  customer's  financial
condition. Independent outside sources of credit history available locally (e.g.
Dun &  Bradstreet  in the U.S.),  credit  references  and or customer  financial
statements  should be  evaluated  to establish  customer  credit  limits and for
updating credit limits on a periodic basis.

Credit Hold Routines
Routines  should be established to preclude  shipping  product to customers that
exceeds  the  customer   credit  limit.   Specific   approval  by  a  designated
finance/customer  credit  individual  of  any  deviation  from  the  established
routines.
<PAGE>

INTRODUCTION

CENTRALIZED SOUTHFIELD ENVIRONMENT

-        Supporting the Following
--       OEM--United States
--       Aftermarket--United States
--       Aftermarket--Canada

-        Specific Responsibilities
--       Credit approval
--       Collection
--       Receivable management
--       Billing--NAA only
--       Dispute resolution

-        Department Organization Chart
--       85 total employees
--       5 part-time/associate
--       80 full-time company employees (74% 4-year degrees)

-        Software Utilized
--       CARMS--receivable management
--       Lotus Notes--communication and dispute management
--       Maxretriever--document management
--       UPS--proof of deliveries
--       PRC--scanner utilization
--       Internally developed--AMS, MAPS, STRAP

-        Aggressive Reengineering Initiative
--       Relentless pursuit of superior customer service
--       Eliminate deductions
--       Continuous investigation of electronic options in our daily operations
--       Review of document delivery  options for invoices  and  statements
--       Resolve customer inquiries with one call methodology
--       Investigation of order to cash possibilities at manufacturing plants

                                       3
<PAGE>

CREDIT POLICY AND PROCEDURE

-    Determination of Credit Limits
     --   Credit limits are set at approximately 2.5 times estimated month sales
          for new accounts.
     --   Existing  account  credit  limits are  adjusted  according  to payment
          habits and  financial  stability.  An account  that shows a pattern of
          paying their  account  past due will have their credit limit  adjusted
          downward to 1 - 1 1/2 times monthly sales.

-    New Account Procedure
     --   The following information is requested for new open accounts:
          -    3-trade credit references
          -    1 bank credit reference
          -    Credit reporting agency report (optional)
          -    Verbal  credit  references  from  industry  credit group  members
               (optional)
     --   Requests for  additional  credit are  evaluated  by reviewing  payment
          history (prompt  %/discount % vs. late %), review of current financial
          statements and amount of additional  credit requested  compared to the
          current year high credit.

-    Levels of Credit Granting Approval
     --   Two step process for new credit  approval,  after Sales has  requested
          the account be given open account status.  Review and  approval/reject
          is given first by the Credit Analyst, then by the Area Credit Manager.
     --   Increases in credit for current  customers  are reviewed by the Credit
          Analyst.

-    Use of Security Documents and Personal Guarantees
     --   Personal guarantees are included in the customer's Credit Application.
          While a personal guarantee is not required for all new accounts, it is
          required in cases of higher than usual financial risk.
     --   UCC-1's, UCC-3's, and Purchase Money Security Agreements are taken (or
          continued) on customers with large  projected or current sales volumes
          (MORE THAN $150,000) or when a customer's financial condition is
          deteriorating.

                                       4
<PAGE>

-    Training of Credit Granting Personnel
     --   Each Credit Analyst undergoes a 5 day training  schedule,  reviewing a
          formal training agenda with each of the Credit Analysts. Items covered
          include:
          -    A/R management software and systems (CARMS, MAPS & STRAP)
          -    New account/account maintenance procedures
          -    Special payment terms request approval and rejection
          -    Security documents
          -    Credit and collection procedures

-    Credit Files
     --   A file is kept for each customer account. An example of information in
          this file is:
          -    Original credit application
          -    Notes from phone conversations and meeting with customers
          -    Copies of written correspondence
          -    Information from creditor discussion groups
          -    Personal guarantee (optional)
     --   These files are kept in a central  location in the Customer  Financial
          Services Department
     --   Additionally,  notes are kept  concerning  Credit Analyst  discussions
          with the customer on CARMS. Examples of this information are:
          -    Customer commitments to send checks
          -    Date customers are put on hold
          -    Miscellaneous comments noted by the Credit Analyst that may be of
               value in future credit decisions

                                       5
<PAGE>

-    Payment Terms
     --   Standard terms for OEM customers are either net 10th and net 25th prox
          or net 30 days on the  date in the  month  in  which  the  product  is
          shipped.  For net 10th and net 25th prox, if the product is shipped in
          the first 15 days of the month,  payment is due by the 10th day of the
          following month. If shipped later in the month,  payment is due by the
          25th day of the following  month.  Customers are sent an invoice or an
          ASN for each shipment.
     --   Standard  terms  for the FM  Aftermarket  and  Retail  are  based on a
          shipping  month of the 26th to the 25th and  qualify  for a 2%  prompt
          payment  discount if the invoice is paid by the 10th of the  following
          month, otherwise,  full payment for the Aftermarket is due by the 25th
          of the following month and for Retail, full payment is due the 25th of
          the 2nd month following.  Gasket, ignition, chassis and brake terms in
          general  are 2% 2nd  10th  net  25th  prox.  In  addition,  there  are
          negotiated  terms for Retailers  and selected  buying groups which can
          range from 2% 2nd 10th to net 90 days.

-    Determinants of Price
     --   Prices for the Aftermarket are published on product line price sheets.
     --   Prices for Retail and OEM accounts are  negotiated  and specified on a
          pricing  agreement  for a given period of time and are  supported by a
          purchase order or vendor agreement.

-    Cash In Advance/Cash On Account
     --   Used at the Credit Analyst's discretion in the following situations:
          -    Account  consistently  pays past due and is judged to be a credit
               risk
          -    Bankruptcy
          -    New account with credit references judged unsatisfactory

-    Notes Receivable
     --   Used at the Credit  Analyst's  discretion  and  reviewed  monthly  for
          payment. As of May, 1999 month end, there were 4 open Notes Receivable
          for a total of $463,604.45.

                                       6
<PAGE>

CREDIT AND COLLECTION

-    Account Maintenance
     --   The Credit and Accounts Receivable  Management System (CARMS) produces
          an action list on a daily  basis,  which lists  accounts  that require
          attention  due to a change  in  status  (account  over  credit  limit,
          account past due, etc).
     --   Action lists are reviewed by credit analysts for resolution.
     --   Summary  past due reports  are  generated  on a monthly  basis and are
          reviewed by the analysts for credit  restriction.  >> Credit  analysts
          continue follow up by making timely  collection  calls to customers on
          past due invoices until payment is received.
     --   Sales is contacted to assist with collection of past due items and the
          resolution of customer disputes.
     --   If payment is not received or a mutual payment  arrangement  cannot be
          made,  the customer is sent a final demand  notice,  which details the
          debt and allows  the  customer  ten  working  days to make  acceptable
          payment arrangements.
     --   If payment is still not  received  and no payment  agreement  has been
          made,  the account is referred to the Area Credit  Manager for further
          disposition.

-    Collection Agencies / Bankruptcies
     --   Accounts  which are  seriously  past due may be referred to FM's legal
          counsel  for  action  or placed  with an  outside  collection  agency.
          Accounts are moved to a separate credit manager code for follow-up.
     --   Accounts that have filed for bankruptcy are moved to a separate credit
          manager code for follow-up and are written off quarterly.

                                       7
<PAGE>

AFTERMARKET - CUSTOMER BASE OVERVIEW

-    Number of Aftermarket and Retail Accounts
     --   5,548 active Aftermarket accounts
     --   187 active Retail accounts

-    Product Portfolio
     --   Powertrain Systems - power cylinder systems, engine bearings, pistons,
          piston rings, piston pins, piston liners,  connecting rods,  bushings,
          washers,  spark plugs, ignition wires and cables,  ignition coils, and
          ceramic insulators.
     --   Sealing Systems - total engine sealing,  total  transmission  sealing,
          total axle sealing, cylinder head gaskets,  ancillary gaskets, dynamic
          seals,  bonded  pistons,  wiper  products,  heat  shields,  noise  and
          vibration sealing systems.
     --   General  Products - camshafts,  brake and friction  products,  chassis
          products,  driveline  products,  fuel  pumps,  carburetors,   emission
          control products,  strobes,  marker lights,  reflective tape, sintered
          products, and systems protection products.

-    Method of Order Placement and Shipment
     --   Orders can be placed electronically via EDI or through Federal-Mogul's
          Customer Service/Order Entry via phone or fax.
     --   Aftermarket orders are usually shipped from one of our Service Centers
          located in the U.S. and Canada.  Larger orders may be shipped from one
          of three  main  Distribution  Centers  located  in  Jacksonville,  AL,
          Maysville, KY and Skokie, IL.

-    Customer Operations
     --   Aftermarket  customers  consist mainly of warehouse  distributors that
          buy product for downstream  sales to  independent  or warehouse  owned
          auto parts stores. Examples are NAPA, MAWDI and Pittsburgh Crankshaft.
     --   Retail  customers  buy product  for resale in their own company  owned
          store. Examples are CSK Automotive, Advance and AutoZone.

                                       8
<PAGE>

ORIGINAL EQUIPMENT MARKET AND EXPORT OVERVIEW

-    OE Export Customer Base
     --   1,344 active OEM accounts
     --   208 active Export accounts

-    Customer Operations
     --   OE & Export  customers  consist  primarily of  automotive,  heavy duty
          vehicle, farm equipment and industrial equipment manufacturers.
     --   Major customers include Ford, General Motors and Chrysler.

-    Product Portfolio
     --   Powertrain Systems - power cylinder systems, engine bearings, pistons,
          piston rings, piston pins, piston liners,  connecting rods,  bushings,
          washers,  spark plugs, ignition wires and cables,  ignition coils, and
          ceramic insulators.
     --   Sealing Systems - total engine sealing,  total  transmission  sealing,
          total axle sealing, cylinder head gaskets,  ancillary gaskets, dynamic
          seals,  bonded  pistons,  wiper  products,  heat  shields,  noise  and
          vibration sealing systems.
     --   General  Products - camshafts,  brake and friction  products,  chassis
          products,  driveline  products,  fuel  pumps,  carburetors,   emission
          control products,  strobes,  marker lights,  reflective tape, sintered
          products, and system protection products.

-    Order Process
     --   Decentralized customer service - one at each of our plant locations.
     --   Orders are scheduled in advance by large OEM Customers  (such as Ford,
          GM,  Chrysler)  and the  accum's  are  adjusted as product is shipped,
          material release forecasts updated weekly.
     --   Smaller  OEM's send  purchase  orders in advance  with date  required.
          Purchase orders reviewed at plant before orders are scheduled.

                                       9
<PAGE>

ACCOUNTS RECEIVABLE DILUTIONS

-    Cash Discount
     --   1.8% of NAA Sales

-    Doubtful Accounts
     --   Written off quarterly as approved by the department manager
     --   Continual follow up until financial conclusion

- Credit Memos
     --   Stocklift returns
     --   Obsolescence returns
     --   30 day returns
     --   Warranty
     --   Price
     --   Policy allowance

-    Checks Issued
     --   Rebates for volume incentives

-    Invoices/Statements
     --   The  invoices  generated  from a  plant  sale  can be  mailed  or sent
          electronically through EDI.
     --   The Aftermarket invoices that are not sent via EDI are mailed at least
          weekly.
     --   Monthly  statements  are  sent  to  customers  based  on the  25th  or
          month-end cutoff based on the customer.

-    Reconciliations
     --   A monthly  reconciliation  is completed of CARMS to the General Ledger
          balance.
     --   Typical  reconciliation items can be cash or billings due to different
          closing schedules.

                                       10
<PAGE>

                                                                       Exhibit H

                            Form of REDUCTION Notice

                                     [Date]

The First National Bank of Chicago,
     as Agent for the Purchasers parties
     to the Receivables Purchase Agreement
     referred to below
Mail IL1-0079
One First National Plaza
Chicago, Illinois  60670

Attention:  Asset-Backed Finance

Gentlemen:

     The undersigned,  Federal-Mogul Funding Corporation,  refers to the Amended
and Restated Receivables  Interest Purchase Agreement,  dated as of July 1, 1999
(the  "Receivables  Purchase  Agreement",  the terms defined  therein being used
herein as therein defined),  among the undersigned,  Federal-Mogul  Corporation,
Falcon Asset Securitization Corporation ("FALCON"), International Securitization
Corporation  ("ISC"),  certain financial  institutions from time to time parties
thereto,  as  Investors  and The First  National  Bank of Chicago,  as Agent for
FALCON,  ISC and such  financial  institutions,  and  hereby  gives you  notice,
irrevocably, pursuant to Section 2.03 of the Receivables Purchase Agreement that
the  undersigned  hereby  requests a reduction of Capital under the  Receivables
Purchase  Agreement,  and in that  connection  sets forth below the  information
relating to such  reduction  (the  "Proposed  Reduction") as required by Section
2.03 of the Receivables Purchase Agreement:

          (vi) The Proposed Reduction Date is _________, ____.

          (vii) The Aggregate  Reduction is  $____________.  The Falcon share of
     the Aggregate Reduction is $______________.  The ISC share of the Aggregate
     Reduction is $____________.

     The undersigned hereby certifies that the following  statements are true on
the date hereof,  and will be true on the date of the Proposed Reduction (before
and after giving effect to the Proposed Reduction):

     (A) the  representations  and  warranties  set forth in Section 4.01 of the
Receivables  Purchase  Agreement  are correct on and as of such date,  as though
made on and as of such date;
<PAGE>

     (B) no event has occurred, or would result from the Proposed Reduction that
will  constitute  an  Amortization  Event,  and no  event  has  occurred  and is
continuing,  or would result from such Proposed Reduction, that would constitute
a Potential Amortization Event; and

     (C) the Facility  Termination  Date has not have  occurred,  the  aggregate
Capital of all  Receivable  Interests  does not and will not exceed the Purchase
Limit and the aggregate Receivable Interests do not and will not exceed 100%.

                                          Very truly yours,

                                          FEDERAL-MOGUL FUNDING CORPORATION

                                          By: _________________________________
                                              Name:
                                              Title:

                                       2
<PAGE>

                                   SCHEDULE A

                            LIST OF CLOSING DOCUMENTS

                              List of Participants

             Participant                                          Abbreviation
             -----------                                          ------------
Federal-Mogul Corporation                                     FMC
Federal-Mogul Canada Limited                                  FM Canada
Federal-Mogul Piston Rings, Inc.                              FM Piston
Federal-Mogul Flowery Branch, LLC                             FM Flowery
Federal-Mogul Powertrain, Inc.                                FM Powertrain
Federal-Mogul Sealing Systems, Inc.                           FM Sealing
Federal-Mogul Carolina, Inc.                                  FM Carolina
Federal-Mogul South Bend, Inc.                                FM South Bend
Federal-Mogul LaGrange, Inc.                                  FM LaGrange
Federal-Mogul Sintered Products, Inc.                         FM Sintered
Federal-Mogul Sintered Products - Waupun, Inc.                FM Waupun
Federal-Mogul System Protection Group, Inc.                   FM System
Federal-Mogul Engineered Bearings, Inc.                       FM Engineered
Federal-Mogul Camshafts, Inc.                                 FM Camshafts
Federal-Mogul Aviation, Inc.                                  FM Aviation
Federal-Mogul Ignition Company "Blazer"                       FM Blazer
Federal-Mogul Products, Inc. "Moog"                           FM Moog
Federal-Mogul Funding Corporation                             FMFC
Falcon Asset Securitization Corporation                       Falcon
International Securitization Corporation                      ISC
Financial Institutions                                        Investors
First National Bank of Chicago                                Agent
Baker & McKenzie                                              B&M
Brown & Wood                                                  B&W
Latham & Watkins                                              L&W
<PAGE>

                           Index of Closing Documents

<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
                    STEP I - Sale from the Originators to FMC

Receivables Purchase Agreement                                                   1.1                      B&W
Subordinated Note executed by FMC in favor of each
Originator (other than FMC)                                                      2.1                      B&W

Secretary's Certificate for each Originator (other than
FMC), as to                                                                      3.0                      B&W
organizational document certified by, and good standing certificate
issued by, Secretary of State of the State of incorporation, By-Laws,
resolutions and specimen signatures:
         FM Canada                                                               3.1                      B&W
         FM Piston                                                               3.2                      B&W
         FM Flowery                                                              3.3                      B&W
         FM Powertrain                                                           3.4                      B&W
         FM Sealing                                                              3.5                      B&W
         FM Carolina                                                             3.6                      B&W
         FM South Bend                                                           3.7                      B&W
         FM LaGrange                                                             3.8                      B&W
         FM Sintered                                                             3.9                      B&W
         FM Waupun                                                               3.10                     B&W
         FM System                                                               3.11                     B&W
         FM Engineered                                                           3.12                     B&W
         FM Camshafts                                                            3.13                     B&W
         FM Aviation                                                             3.14                     B&W
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
         FM Blazer                                                               3.15                     B&W
         FM Moog                                                                 3.16                     B&W
Officer's Certificate of each Originator (other than FMC), dated as of           4.0                      B&W
July 1, 1999 Re: No Event of Purchase and Sale Termination or
Potential Event of Purchase and Sale Termination, and absence of
Material Adverse Effect since March 31, 1999.
         FM Canada                                                               4.1                      B&W
         FM Piston                                                               4.2                      B&W
         FM Flowery                                                              4.3                      B&W
         FM Powertrain                                                           4.4                      B&W
         FM Sealing                                                              4.5                      B&W
         FM Carolina                                                             4.6                      B&W
         FM South Bend                                                           4.7                      B&W
         FM LaGrange                                                             4.8                      B&W
         FM Sintered                                                             4.9                      B&W
         FM Waupun                                                               4.10                     B&W
         FM System                                                               4.11                     B&W
         FM Engineered                                                           4.12                     B&W
         FM Camshafts                                                            4.13                     B&W
         FM Aviation                                                             4.14                     B&W
         FM Blazer                                                               4.15                     B&W
         FM Moog                                                                 4.16                     B&W
</TABLE>

                                       3
<PAGE>

<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
UCC-1 Financing Statement to be filed in connection with Receivables             5.0                      L&W
Purchase Agreement, each Originator (other than FMC) as debtor, FMC as
secured party and FMFC as assignee:
         FM Canada                                                               5.1                      L&W
         - Ontario
         FM Piston                                                               5.2                      L&W
         - Secretary of State of Michigan
         - Secretary of State of Wisconsin
         FM Flowery                                                              5.3                      L&W
         - Hall County (Georgia)
         FM Powertrain                                                           5.4                      L&W
         - Secretary of State of Minnesota
         - Secretary of State of Ohio
         - Morgan County
         FM Sealing                                                              5.5                      L&W
         - Secretary of State of Alabama
         FM Carolina                                                             5.6                      L&W
         - Secretary of State of South Carolina
         FM South Bend                                                           5.7                      L&W
         - Secretary of State of Indiana
         FM LaGrange                                                             5.8                      L&W
         - Troup County (Georgia)
         FM Sintered                                                             5.9                      L&W
         - Secretary of State of Ohio
         - Montgomery County
         FM Waupun                                                               5.10                     L&W
         - Secretary of State of Wisconsin
         FM System                                                               5.11                     L&W
         - Secretary of State of Pennsylvania
         - Chester County
</TABLE>

                                       4
<PAGE>

<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
         FM Engineered                                                           5.12                     L&W
         - Secretary of State of Ohio
         - Stark County
         - Summit County
         FM Camshafts                                                            5.13                     L&W
         - Secretary of State of Michigan
         FM Aviation                                                             5.14                     L&W
         - Secretary of State of South Carolina
         FM Blazer                                                               5.15                     L&W
         - Secretary of State of Illinois
         FM Moog                                                                 5.16                     L&W
         - Secretary of State of Missouri
         - St. Louis City
UCC-3 Financing Statement FMFC as secured party and
Agent as assignee                                                                6.0                      L&W
         FM Canada                                                               6.1                      L&W
         - Ontario
         FM Piston                                                               6.2                      L&W
         - Secretary of State of Michigan
         - Secretary of State of Wisconsin
         FM Flowery                                                              6.3                      L&W
         - Hall County (Georgia)
         FM Powertrain                                                           6.4                      L&W
         - Secretary of State of Minnesota
         - Secretary of State of Ohio
         - Morgan County
         FM Sealing                                                              6.5                      L&W
         - Secretary of State of Alabama
         FM Carolina                                                             6.6                      L&W
         - Secretary of State of South Carolina
</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
         FM South Bend                                                           6.7                      L&W
         - Secretary of State of Indiana
         FM LaGrange                                                             6.8                      L&W
         - Troup County (Georgia)
         FM Sintered                                                             6.9                      L&W
         - Secretary of State of Ohio
         - Montgomery County
         FM Waupun                                                               6.10                     L&W
         - Secretary of State of Wisconsin
         FM System                                                               6.11                     L&W
         - Secretary of State of Pennsylvania
         - Chester County
         FM Engineered                                                           6.12                     L&W
         - Secretary of State of Ohio
         - Stark County
         - Summit County
         FM Camshafts                                                            6.13                     L&W
         - Secretary of State of Michigan
         FM Aviation                                                             6.14                     L&W
         - Secretary of State of South Carolina
         FM Blazer                                                               6.15                     L&W
         - Secretary of State of Illinois
         FM Moog                                                                 6.16                     L&W
         - Secretary of State of Missouri
         - St. Louis City
UCC Lien and Related Searches for each Originator
(other than FMC)                                                                 7.0                      B&W
         FM Canada                                                               7.1                      B&W
         - Ontario
</TABLE>

                                       6
<PAGE>

<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
         FM Piston                                                               7.2                      B&W
         - Secretary of State of Michigan
         - Kent County
         - Secretary of State of Wisconsin
         - Marathon County
         - Manitowoc County
         FM Flowery                                                              7.3                      B&W
         - Secretary of State of Georgia (Central Index)
         - Hall County
         FM Powertrain                                                           7.4                      B&W
         - Secretary of State of Minnesota
         - Wabasha County
         - Goodhue County
         - Secretary of State of Ohio
         - Morgan County
         FM Sealing                                                              7.5                      B&W
         - Secretary of State of Alabama
         - Limestone County
         FM Carolina                                                             7.6                      B&W
         - Secretary of State of South Carolina
         - Sumter County
         FM South Bend                                                           7.7                      B&W
         - Secretary of State of Indiana
         - St. Joseph County
         FM LaGrange                                                             7.8                      B&W
         - Secretary of State of Georgia (Central Index)
         - Troup County
         FM Sintered                                                             7.9                      B&W
         - Secretary of State of Ohio
         - Montgomery County
         FM Waupun                                                               7.10                     B&W
         - Secretary of State of Wisconsin
         - Dodge County
         - Fond du Lac County
</TABLE>
<PAGE>

                                       7
<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
         FM System                                                               7.11                     B&W
         - Secretary of State of Pennsylvania
         - Chester County
         FM Engineered                                                           7.12                     B&W
         - Secretary of State of Ohio
         - Stark County
         - Summit County
         FM Camshafts                                                            7.13                     B&W
         - Secretary of State of Michigan
         - Ottawa County
         FM Aviation                                                             7.14                     B&W
         - Secretary of State of South Carolina
         - Pickens County
         FM Blazer                                                               7.15                     B&W
         - Secretary of State of Illinois
         - Cook County
         FM Moog                                                                 7.16                     B&W
         - Secretary of State of Missouri
         - St. Louis County
         - St. Louis City
                                            STEP II - Sale from FMC to FMFC

Amended and Restated Receivables Sale and Contribution Agreement                 8.1                      L&W
("Receivables Sale Agreement").

Stockholder and Subscription Agreement                                           9.1                      L&W

Subordinated Note executed by FMC                                                10.1                     L&W

Secretary's Certificate of FMC, as to good standing certificate issued           11.1                     B&W
by, and Certificate of Incorporation certified by, Secretary of State
of Michigan, By-Laws, resolutions and specimen signatures.
</TABLE>

                                       8
<PAGE>

<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
Officer's Certificate of FMC Re:  No Event of Purchase and Sale                  12.1                     B&W
Termination or Potential Event of Purchase and Sale Termination, and
absence of Material Adverse Effect since March 31, 1999.

UCC-3 Financing Statement to be filed in connection with Receivables             13.1                     L&W
Sale Agreement, FMC as debtor and FMFC as secured party and Agent, as
Assignee:

         - Secretary of State of Michigan

UCC Lien and Related Searches for the FMC                                        14.1                     B&W

         - Secretary of State of Michigan
         - Oakland County
                               STEP III - Sale from FMFC to Falcon, ISC and the Investors

Amended and Restated Receivables Interest Purchase Agreement (the                15.1                     L&W
"Receivables Interest Purchase Agreement")

Fee Letter                                                                       16.1                     L&W

Investor Fee Letter                                                              17.1                     L&W

Secretary's Certificate of FMFC, as to good standing certificate                 18.1                     B&W
issued by, and Certificate of Incorporation certified by, Secretary of
State of Michigan, By-Laws, resolutions and specimen signatures.

Officer's Certificate of FMFC Re:  No Amortization Event or Potential            19.1                     B&W
Amortization Event, and absence of Material Adverse Effect since March 31, 1999.

Certificate Re:  B&W True Sale/Nonconsolidation Opinion signed by each           20.1                     B&W
of the Originators (other than FMC) (Step I)

FMC Certificate Re:  B&W True Sale/Nonconsolidation Opinion (Step II)            22.1                     B&W
</TABLE>

                                       9
<PAGE>

<TABLE>
<CAPTION>
                               Document                                        Tab No.              Responsibility
                               --------                                        -------              --------------
<S>                                                                              <C>                      <C>
FMFC Certificate Re: B&W True Sale/Nonconsolidation Opinion (Step II)            21.1                     B&W

True Sale/Nonconsolidation Opinion of B&W (Step I and Step II).                  22.1                     B&W

Corporate Opinion of B&W (including perfection and priority), counsel            23.1                     B&W
to Originators, FMC and FMFC (Step I, Step II and Step III)

Corporate Opinion of in-house (including perfection and priority),               24.1                     B&W
counsel to Originators, FMC and FMFC (Step I, Step II and Step III)

Corporate Opinion of B&M, Canadian counsel for FM Canada (Step I)                25.1                   B&W/B&M

UCC-3 Financing Statement to be filed in connection with Receivables             26.1                     L&W
Interest Purchase Agreement, FMFC as debtor and Agent as secured party:

         - Secretary of State of Michigan

UCC Lien and Related Searches for FMFC                                           27.1                     B&W

         - Secretary of State of Michigan
         - Oakland County

Collection Account Agreements:                                                   28.0

Comerica Bank                                                                    28.1                L&W/Agent/B&W

Bank One Corporation  Acct.                                                      28.2                L&W/Agent/B&W

First National Bank of Chicago  Acct.                                            28.3                L&W/Agent/B&W

First Maryland National Bank Acct.                                               28.4                L&W/Agent/B&W

Bank of America  Acct.                                                           28.5                L&W/Agent/B&W

Nations BankUS  Acct.                                                            28.6                L&W/Agent/B&W

Royal Bank of Canada                                                             28.7                L&W/Agent/B&W
</TABLE>

                                       10

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