Exhibit 10.2





     CREDIT AGREEMENT


     by and among


     BREED TECHNOLOGIES, INC. AND CERTAIN SUBSIDIARIES as Borrowers,


     NATIONSBANK, NATIONAL ASSOCIATION, as Agent and as Lender,





     and


     THE LENDERS PARTY HERETO FROM TIME TO TIME



     October 30, 1997













                                                                 

<PAGE>



     TABLE OF CONTENTS

                                                                            Page

     ARTICLE I

         Definitions and Terms
1.1.     Definitions. ........................................................ 2
1.2.     Rules of Interpretation.  ...........................................29

     ARTICLE II

         The Credit Facilities

2.1.     Loans................................................................31
2.2.     Payment of Interest.  ...............................................37
2.3.     Payment of Principal. ...............................................37
2.4.     Non-Conforming Payments.  ...........................................39
2.5.     Notes.  .............................................................40
2.6.     Pro Rata Payments.  .................................................40
2.7.     Voluntary Commitment Reductions.  ...................................40
2.8.     Conversions and Elections of Subsequent Interest Periods.  ..........40
2.9.     Increase and Decrease in Amounts.  ..................................41
2.10.    Commitment Fee.......................................................41
2.11.    Deficiency Advances.  ...............................................42
2.12.    Use of Proceeds.  ...................................................42
2.13.    Designation of Borrowing Subsidiaries................................42

     ARTICLE III

         Letters of Credit

3.1.     Letters of Credit. ..................................................43
3.2.     Reimbursement........................................................43
3.3.     Letter of Credit Facility Fees.  ....................................47

     ARTICLE IV

         Security

4.1.     Guaranty.  ..........................................................48
4.2.     Stock Pledge. .......................................................48
4.3.     Security Interests.  ................................................48
4.4.     Lease Assignments.  .................................................49
4.5.     Mortgages.  .........................................................49
4.6.     Landlord Waivers.  ..................................................49
4.7.     Intellectual Property................................................49
4.8.     Pledge and Subordination of Intercompany Notes.  ....................50
4.9.     Pledge of Partnership and Joint Venture Interests. ..................50
4.10.    Collateral Assignment of Trademark License Agreement.................50
4.11.    Further Assurances.  ................................................50


                                                               

<PAGE>



     ARTICLE V

         Change in Circumstances

5.1.     Increased Cost and Reduced Return.  .................................51
5.2.     Limitation on Types of Loans.  ......................................52
5.3.     Illegality.  ........................................................52
5.4.     Treatment of Affected Loans.  .......................................53
5.5.     Compensation.  ......................................................53
5.6.     Taxes.  .............................................................54
5.7.     Lending Office.  ....................................................55
5.8.     Syndication Costs.  .................................................55
5.9.     Replacement Banks.  .................................................56

     ARTICLE VI

         Conditions to Making Loans and Issuing Letters of Credit

6.1.     Conditions of Term Loan and Initial Advance..........................57
6.2.     Conditions of all Loans and Letters of Credit.  .....................61

     ARTICLE VII

         Representations and Warranties

7.1.     Organization and Authority...........................................63
7.2.     Loan Documents.  ....................................................63
7.3.     Solvency.............................................................64
7.4.     Subsidiaries and Stockholders.  .....................................64
7.5.     Ownership Interests.  ...............................................64
7.6.     Financial Condition. ................................................64
7.7.     Title to Properties.  ...............................................65
7.8.     Taxes.  .............................................................65
7.9.     Other Agreements.  ..................................................65
7.10.    Litigation.  ........................................................66
7.11.    Margin Stock.  ......................................................66
7.12.    Investment Company...................................................66
7.13.    Patents, Etc.  ......................................................66
7.14.    No Untrue Statement.  ...............................................66
7.15.    No Consents, Etc.....................................................67
7.16.    Employee Benefit Plans...............................................67
7.17.    No Default...........................................................68
7.18.    Environmental Matters.  .............................................68
7.19.    Employment Matters.  ................................................68
7.20.    RICO.  ..............................................................69
7.21.    Allied Acquisition Representations.  ................................69
7.22.    Allied Acquisition.  ................................................69
7.23.    Perfected Security Instruments.......................................69


                                                                 

<PAGE>



     ARTICLE VIII

         Affirmative Covenants

8.1.     Financial Reports, Etc.  ............................................71
8.2.     Maintain Properties.  ...............................................72
8.3.     Existence, Qualification, Etc.  .....................................73
8.4.     Regulations and Taxes.  .............................................73
8.5.     Insurance.  .........................................................73
8.6.     True Books.  ........................................................73
8.7.     Right of Inspection.  ...............................................73
8.8.     Observe all Laws.  ..................................................73
8.9.     Governmental Licenses.  .............................................74
8.10.    Covenants Extending to Other Persons.  ..............................74
8.11.    Officer's Knowledge of Default.  ....................................74
8.12.    Suits or Other Proceedings.  ........................................74
8.13.    Notice of Environmental Complaint or Condition. .....................74
8.14.    Environmental Compliance.  ..........................................74
8.15.    Indemnification.  ...................................................75
8.16.    Further Assurances.  ................................................75
8.17.    Employee Benefit Plans...............................................75
8.18.    Continued Operations.  ..............................................76
8.19.    Additional Support Documents.  ......................................76
8.20.    Operating Plan.  ....................................................77
8.21.    Allied Acquisition Audit.  ..........................................77
8.22.    Diligent Pursuit of Waiver.  ........................................78
8.23.    Swap Agreements.  ...................................................78
8.24.    Subsidiary Support of Permitted Indebtedness.  ......................78

     ARTICLE IX

         Negative Covenants

9.1.     Financial Covenants..................................................79
9.2.     Acquisitions.  ......................................................80
9.3.     Liens.  .............................................................80
9.4.     Indebtedness.  ......................................................81
9.5.     Transfer of Assets. .................................................82
9.6.     Investments.  .......................................................82
9.7.     Merger or Consolidation.  ...........................................83
9.8.     Restricted Payments.  ...............................................83
9.9.     Transactions with Affiliates.  ......................................83
9.10.    Compliance with ERISA, the Code and Foreign Benefit Laws.  ..........84
9.11.    Accounting Changes.  ................................................85
9.12.    Dissolution, etc.  ..................................................85
9.13.    Limitations on Sales and Leasebacks.  ...............................85
9.14.    Change in Control.  .................................................85
9.15.    Limitation on Guaranties.  ..........................................85
9.16.    Negative Pledge Clauses..............................................85
9.17.    Prepayments, Etc. of Indebtedness.  .................................85

                                                                 

<PAGE>



9.18.     Restrictive Agreements.  ...........................................85

     ARTICLE X

          Events of Default and Acceleration

10.1.     Events of Default.  ................................................86
10.2.     Agent to Act.  .....................................................89
10.3.     Cumulative Rights.  ................................................89
10.4.     No Waiver.  ........................................................89
10.5.     Allocation of Proceeds.  ...........................................89
10.6.     Judgment Currency.  ................................................90

     ARTICLE XI

          The Agent

11.1.     Appointment, Powers, and Immunities.  ..............................91
11.2.     Reliance by Agent.  ................................................91
11.3.     Defaults.  .........................................................92
11.4.     Rights as Lender.  .................................................92
11.5.     Indemnification.  ..................................................92
11.6.     Non-Reliance on Agent and Other Lenders.  ..........................93
11.7.     Resignation of Agent.  .............................................93
11.8.     Fees................................................................93

     ARTICLE XII

          Miscellaneous

12.1.     Assignments and Participations.  ...................................94
12.2.     Notices.  ..........................................................95
12.3.     Right of Set-off; Adjustments.  ....................................96
12.4.     Survival.  .........................................................97
12.5.     Expenses.  .........................................................97
12.6.     Amendments and Waivers.  ...........................................98
12.7.     Counterparts.  .....................................................98
12.8.     Termination.  ......................................................98
12.9.     Indemnification.  ..................................................99
12.10.    Severability.  .....................................................99
12.11.    Entire Agreement.  ................................................100
12.12.    Agreement Controls.  ..............................................100
12.13.    Usury Savings Clause.  ............................................100
12.14.    Governing Law; Waiver of Jury Trial................................100

EXHIBIT A         Applicable Commitment Percentages..........................A-1
EXHIBIT B-1       Form of Assignment and Acceptance..........................B-1
EXHIBIT C         Notice of Appointment (or Revocation) of Authorized
                    Representative...........................................C-1
EXHIBIT D         Form of Borrowing Notice.................................D-1-1
EXHIBIT E         Form of Collateral Assignment of Trademark License
                    Agreement................................................E-1
EXHIBIT F         Form of Collateral Assignment of Partnership Interests.....F-1
EXHIBIT G         Form of Guaranty...........................................G-2

                                                                 

<PAGE>



EXHIBIT H         Form of Intellectual Property Security Agreement...........H-1
EXHIBIT I         Form of Intercompany Notes.................................I-1
EXHIBIT J         Form of Subordination Agreement............................J-1
EXHIBIT K         Form of Interest Rate Selection Notice.....................K-1
EXHIBIT L         Form of Landlord Waiver....................................L-1
EXHIBIT M         Form of LC Account Agreement...............................M-1
EXHIBIT N         Form of Lease Assignment...................................N-1
EXHIBIT O-1       Form of Term Note........................................O-1-1
EXHIBIT O-2       Form of Revolving Note...................................O-2-1
EXHIBIT P-1       Form of Stock Pledge Agreement (Borrower)................P-1-1
EXHIBIT P-2       Form of Stock Pledge Agreement (US Subsidiaries).........P-2-1
EXHIBIT P-3       Form of Stock Pledge Agreement (Breeds)..................P-3-1
EXHIBIT Q         Form of Intercompany Note Pledge Agreement.................Q-1
EXHIBIT R         Form of Security Agreement.................................R-1
EXHIBIT S-1       Form of Opinion of US Counsel............................S-1-1
EXHIBIT S-2       Form of Opinion of Intellectual Property Counsel.........S-2-1
EXHIBIT S-3       Form of Opinion of Foreign Counsel.......................S-3-1
EXHIBIT T         Compliance Certificate.....................................T-1
EXHIBIT U         Form of Assumption Letter..................................U-1

Schedule 1.1(a)   Borrowing Subsidiaries.....................................S-1
Schedule 1.1(b)   Initial Advance Allocation  ...............................S-2
Schedule 7.4      Subsidiaries and Investments in Other Persons..............S-3
Schedule 7.6      Indebtedness...............................................S-4
Schedule 7.7      Liens......................................................S-5
Schedule 7.10     Litigation.................................................S-6
Schedule 7.19     Employment Matters.........................................S-7
Schedule 7.23     Financing Statements and Other Filings.....................S-8
Schedule 8.5      Insurance..................................................S-9


                                                                

<PAGE>



     CREDIT AGREEMENT


     THIS CREDIT AGREEMENT,  dated as of October 30, 1997 (the "Agreement"),  is
made by and among BREED  TECHNOLOGIES,  INC., a Delaware  corporation having its
principal  place of  business  in  Lakeland,  Florida (  "BREED"),  and  certain
Subsidiaries   of  BREED   designated  as  Borrowers   herein  (BREED  and  such
Subsidiaries  individually  a  "Borrower"  and  being  collectively  called  the
"Borrowers") NATIONSBANK,  NATIONAL ASSOCIATION,  a national banking association
organized and existing under the laws of the United States, in its capacity as a
Lender ("NationsBank"), and each other financial institution which may hereafter
execute and deliver an instrument of assignment  with respect to this  Agreement
pursuant  to  Section  12.1  (hereinafter  such  financial  institutions  may be
referred to individually  as a "Lender" or  collectively as the "Lenders"),  and
NATIONSBANK,  NATIONAL ASSOCIATION, a national banking association organized and
existing under the laws of the United  States,  in its capacity as agent for the
Lenders (in such capacity,  and together with any successor  agent  appointed in
accordance with the terms of Section 11.7, the "Agent");

     W I T N E S S E T H:

     WHEREAS,  BREED and certain of its wholly-owned  Subsidiaries  have entered
into  that  certain  Asset  Purchase   Agreement  dated  August  27,  1997  with
AlliedSignal Inc., a Delaware corporation  ("AlliedSignal"),  and certain of its
subsidiaries (the "Asset Purchase Agreement") pursuant to which BREED has agreed
to purchase or cause certain of its  Subsidiaries to purchase certain assets and
liabilities  of  AlliedSignal  and such  subsidiaries  including the business of
designing,  manufacturing, and selling automotive restraint products and systems
(the "Acquired Business");

     WHEREAS,  the Borrowers  have  requested that the Lenders make available to
the Borrowers certain credit facilities of up to $900,000,000,  which facilities
shall consist of a term loan facility to BREED of  $600,000,000  and a revolving
credit facility to the Borrowers of up to $300,000,000, the latter of which will
include a $25,000,000 sublimit for the issuance of standby letters of credit and
a $75,000,000 sublimit for multi-currency  borrowings, the proceeds of which are
to be used as provided in Section 2.12 hereof; and

     WHEREAS,  the Lenders are willing to make such revolving  credit and letter
of credit  facilities  available to the Borrowers  upon the terms and conditions
set forth herein;

     NOW,  THEREFORE,  the Borrowers,  the Lenders and the Agent hereby agree as
follows:

     ARTICLE I

     Definitions and Terms

     1.1  Definitions.  For the purposes of this  Agreement,  in addition to the
definitions  set forth  above,  the  following  terms shall have the  respective
meanings set forth below:

     "Acquisition" means the acquisition of (i) a controlling equity interest in
another Person  (including the purchase of an option,  warrant or convertible or
similar  type  security to acquire  such a  controlling  interest at the time it
becomes  exercisable by the holder thereof),  whether by purchase of such equity
interest  or upon  exercise  of an option  or  warrant  for,  or  conversion  of
securities  into, such equity  interest,  or (ii) assets of another Person which
constitute all or substantially all of the assets of such Person or of a line or
lines of business  conducted by such  Person.  The term  "controlling  interest"
means the  possession,  directly or indirectly,  of the power to direct or cause
the  direction  of the  management  and  policies of a Person,  whether  through
ownership of Voting Sock, by contract or otherwise.

     "Acquisition  Documents"  means the Asset Purchase  Agreement and all other
documents required to be delivered

                                                                 

<PAGE>



     by AlliedSignal and its Subsidiaries to BREED and its Subsidiaries pursuant
to the Asset Purchase Agreement.

     "Advance" means a borrowing under the Revolving Credit Facility  consisting
of a Base Rate Loan or a Eurodollar Rate Loan.

     "Advance Date Exchange Rate" means,  with respect to a specified Advance or
Loan in an  Alternative  Currency,  the Spot Rate of Exchange as of the date two
Business Days preceding the date such Advance is originally made, provided that,
if such  Advance  or Loan is  Continued  for a  subsequent  Interest  Period  or
Converted  pursuant to Section 2.8, the Advance Date  Exchange Rate with respect
to such Loan shall be the Spot Rate of Exchange two Business Days  preceding the
effective date of the latest Continuation or Conversion of such Advance or Loan,
and the Dollar  Value of such  Advance or Loan shall be adjusted as set forth in
Section 2.1(b).

     "Affiliate"  means any Person (i) which directly or indirectly  through one
or more intermediaries controls, or is controlled by, or is under common control
with BREED; or (ii) which  beneficially owns or holds 5% or more of any class of
the  outstanding  Voting  Stock  (or in the  case  of a  Person  which  is not a
corporation,  5% or more of the equity  interest)  of BREED or 5% or more of any
class of the outstanding Voting Stock (or in the case of a Person which is not a
corporation,  5% or more of the equity interest) of which is beneficially  owned
or held  by  BREED.  The  term  "control"  means  the  possession,  directly  or
indirectly,  of the power to direct or cause the direction of the management and
policies of a Person,  whether through ownership of Voting Stock, by contract or
otherwise;  provided  that  Integrated  Sensor  Solutions,  Inc.,  a  California
corporation,  shall not be deemed an Affiliate of BREED for the purposes of this
Agreement.

     "Allied  Acquisition"  means the  acquisition  by BREED and  certain of its
Subsidiaries of the Acquired Business  pursuant to the Asset Purchase  Agreement
for  an  aggregate  purchase  price  not  to  exceed  $710,000,000,  subject  to
adjustment as provided in the Asset Purchase Agreement.

     "Alternative Currency" means Pounds Sterling,  French Francs, Italian Lire,
Deutsch  Marks,  Spanish  Pesetas,  and with the prior  written  consent  of all
Lenders and the Agent,  any other lawful  currency  other than Dollars  which is
readily  transferable and convertible into Dollars in the United States currency
market;  provided,  however,  that an  Alternative  Currency  (other  than those
specified  above)  shall only be available to a Borrower to the extent that each
Lender shall have determined (which  determination  shall be conclusive) that it
has access to such Alternative  Currency on terms reasonably  acceptable to such
Lender and that the Alternative  Currency is freely transferable and convertible
into Dollars.

     "Alternative  Currency Equivalent Amount" means with respect to a specified
Alternative  Currency  and  a  specified  Dollar  amount,  the  amount  of  such
Alternative Currency into which such Dollar amount would be Converted,  based on
the applicable Advance Date Exchange Rate.

     "Applicable  Commitment Percentage" means, with respect to each Lender that
portion of the Total Credit  Commitment,  Total Revolving  Credit  Commitment or
Total Term Loan Commitment,  as the case may be,  (including its  Participations
and its  obligations  hereunder to the Issuing  Bank to acquire  Participations)
allocable to such Lender (i) with respect to Lenders as of the Closing  Date, as
set forth in Exhibit A and (ii) with  respect to any Person who becomes a Lender
hereafter,  as reflected in each  Assignment and Acceptance to which such Lender
is a party Assignee;  provided that the Applicable Commitment Percentage of each
Lender shall be increased or decreased to reflect any  assignments to or by such
Lender effected in accordance with Section 12.1.

     "Applicable  Lending  Office"  means,  for each Lender and for each Type of
Loan,  the Lending  Office" of such Lender (or of an  affiliate  of such Lender)
designated  for such Type of Loan on the  signature  pages  hereof or such other
office of such Lender (or an  affiliate  of such Lender) as such Lender may from
time to time specify to the Agent and BREED by written notice in accordance with
the terms  hereof  as the  office by which its Loans of such Type are to be made
and maintained.

                                                                

<PAGE>



     "Applicable  Margin" means for each  Eurodollar Rate Loan or Base Rate Loan
that percent per annum as set forth below,  which shall be based upon the length
of time the Revolving Credit Facility is in existence as specified below:

<TABLE>
<CAPTION>

   Phase                   Dates                                 Applicable Margin for      Applicable Margin for
                                                               Eurodollar Rate Loans         Base Rate Loans
<S>                                                                    <C>                        <C>
     I       Closing Date through January 27, 1998                     3.00%                      2.00%
    II       January 28, 1998 through February 26,                     3.75%                      2.75%
             1998
    III      February 27, 1998 through April 27, 1998                  4.50%                      3.50%
    IV       April 28, 1998 and thereafter                             6.00%                      5.00%
</TABLE>

     "Applications  and Agreements  for Letters of Credit" means,  collectively,
the Applications and Agreements for Letters of Credit, or similar documentation,
executed by a Borrower  from time to time and  delivered  to the Issuing Bank to
support the issuance of Letters of Credit.

     "Approved  Fund"  means,  with  respect to any  Lender  that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed by the same  investment  advisor as such Lender or by an Affiliate of
such investment advisor.

     "Asset Disposition" means any voluntary disposition, whether by sale, lease
or transfer of (a) any or all of the assets,  excluding cash,  cash  equivalents
and  inventory,  of BREED or its  Subsidiaries,  where the Net Proceeds from any
such sale,  lease or transfer exceed $50,000,  and (b) any of the capital stock,
or securities and investments interchangeable, exercisable or convertible for or
into, or otherwise entitling the holder to receive,  any of the capital stock of
any Subsidiary  (other than a disposition to BREED or a Guarantor in the case of
(a) and (b)).

     "Assigned  Interests"  has the meaning given to such term in any Collateral
Assignment  of  Partnership  and  Joint  Venture   Interests.   "Assignment  and
Acceptance"  shall mean an  Assignment  and  Acceptance in the form of Exhibit B
(with blanks appropriately filled in) executed and delivered to the Agent by the
parties thereto in connection with an assignment of a Lender's interest under
this Agreement pursuant to Section 12.1.

     "Authorized  Representative"  means  any of the  Chief  Executive  Officer,
President, any Executive or Senior Vice President or Treasurer of BREED or, with
respect to financial matters, the chief financial officer or Treasurer of BREED,
or any other Person expressly  designated by the Board of Directors of BREED (or
the appropriate committee thereof) as an Authorized  Representative of BREED, as
set forth from time to time in a certificate in the form of Exhibit C.

     "Base Rate"  means the sum of (i) for any day,  the rate per annum equal to
the  higher of (a) the  Federal  Funds  Rate for such day plus  one-half  of one
percent  (0.5%)  or (b) the  Prime  Rate for  such  day and (ii) the  Applicable
Margin.  Any  change in the Base  Rate due to a change in the Prime  Rate or the
Federal  Funds Rate shall be effective on the  effective  date of such change in
the Prime Rate or Federal Funds Rate.

     "Base Rate Loan" means a Dollar  denominated  Loan or a Dollar  denominated
Segment of the Term

                                                                

<PAGE>



     Loan for which the rate of interest is  determined by reference to the Base
Rate.

     "Base  Rate  Refunding  Loan"  means  a Base  Rate  Loan  made  to  satisfy
Reimbursement Obligations arising from a drawing under a Letter of Credit.

     "Base Rate Segment" means a Segment bearing interest or to bear interest at
the Base Rate.

     "Board" means the Board of Governors of the Federal  Reserve System (or any
successor body).

     "Borrowers'  Account" means a demand deposit  account number  3750894026 or
any  successor  account with the Agent,  which may be  maintained at one or more
offices of the Agent or an agent of the Agent.

     "Borrowing   Notice"   means  the  notice   delivered   by  an   Authorized
Representative in connection with an Advance under the Revolving Credit Facility
in the form of Exhibit D hereto.

     "Borrowing  Subsidiary" means those Subsidiaries  listed on Schedule 1.1(a)
as a  Borrower  under the  Revolving  Credit  Facility  and such  other  Foreign
Subsidiaries of BREED that are so designated pursuant to Section 2.13 hereof.

     "Business Day" means, (i) with respect to any Base Rate Loan, any day which
is not a Saturday,  Sunday or a day on which banks in the States of New York and
North  Carolina  are  authorized  or  obligated  by  law,   executive  order  or
governmental  decree to be closed,  and (ii) with respect to any Eurodollar Rate
Loan,  any day which is a Business  Day, as  described  above,  and on which the
relevant  international  financial  markets  are  open  for the  transaction  of
business  contemplated by this Agreement in London,  England, New York, New York
and Charlotte, North Carolina.

     "Capital  Expenditures"  means, with respect to BREED and its Subsidiaries,
for any period the sum of (without  duplication) (i) all  expenditures  (whether
paid in cash or accrued as liabilities)  by BREED or any Subsidiary  during such
period for items that would be classified  as "property,  plant or equipment" or
comparable   items  on  the   consolidated   balance  sheet  of  BREED  and  its
Subsidiaries,  including without limitation all transactional  costs incurred in
connection  with such  expenditures  provided  the same  have been  capitalized,
excluding,  however,  the  amount  of any  Capital  Expenditures  paid  for with
proceeds of casualty  insurance  as  evidenced  in writing and  submitted to the
Agent together with any  compliance  certificate  delivered  pursuant to Section
8.1(a) or (b), and (ii) with respect to any Capital  Lease entered into by BREED
or its Subsidiaries  during such period, the present value of the lease payments
due under such  Capital  Lease over the term of such  Capital  Lease  applying a
discount  rate equal to the interest  rate provided in such Capital Lease (or in
the absence of a stated  interest rate, that rate used in the preparation of the
financial  statements  described  in  Section  8.1(a)),  all  the  foregoing  in
accordance with GAAP applied on a Consistent Basis.

     "Capital  Leases" means all leases which have been or should be capitalized
in accordance  with GAAP as in effect from time to time including  Statement No.
13 of the Financial Accounting Standards Board and any successor thereof.

     "Certificate and Receipt of Registrar" means,  collectively or individually
as the  context  may  indicate  (i) that  certain  Certificate  and  Receipt  of
Registrar dated as of the Closing Date between certain Subsidiaries and

                                                                 

<PAGE>



     the Agent in the form attached to the Collateral  Assignment of Partnership
and Joint Venture  Interests as Schedule I and (ii) any  additional  Certificate
and Receipt of Registrar delivered to the Agent pursuant to Section 8.19, as any
of the foregoing may be hereafter amended, supplemented or restated from time to
time.

     "Change of Control" means, at any time:

     (i) any "person" or "group" (each as used in Sections 13(d)(3) and 14(d)(2)
of the Exchange Act), other than Allen K. Breed,  Johnnie C. Breed,  Siemens AG,
A. Breed, Ltd., a Texas limited partnership,  or J. Breed, Ltd., a Texas limited
partnership, either (A) becomes the "beneficial owner" (as defined in Rule 13d-3
of the  Exchange  Act ),  directly or  indirectly,  of Voting Stock of BREED (or
securities  convertible into or exchangeable for such Voting Stock) representing
30% or more of the  combined  voting  power of all  Voting  Stock of BREED (on a
fully diluted  basis) or (B) otherwise has the ability,  directly or indirectly,
to elect a majority of the board of directors of BREED; provided,  however, that
this  subsection  shall apply only to any  "person" or "group"  (each as used in
Sections  13(d)(3)  and  14(d)(2)  of the  Exchange  Act) who is not  identified
hereunder.

     (ii) during any period of up to 12  consecutive  months,  commencing on the
Closing Date,  individuals  who at the  beginning of such  12-month  period were
directors of BREED shall cease for any reason (other than the death,  disability
or  retirement of an officer of BREED that is serving as a director at such time
so long as another  officer of BREED  replaces  such  Person as a  director)  to
constitute a majority of the board of directors of BREED; or

     (iii)  any  Person  or  two or  more  Persons  (other  than  those  Persons
identified  in clause (i) above or existing  directors)  acting in concert shall
have  acquired by  contract,  or shall have entered into a contract or agreement
and satisfied any conditions to effectiveness,  that, upon consummation thereof,
will result in its or their  acquisition  of the power to exercise,  directly or
indirectly,  more than 50% of the  combined  voting power of all Voting Stock of
BREED (on a fully diluted basis).

     "Closing Date" means the date as of which this Agreement is executed by the
Borrowers,  the Lenders and the Agent and on which the  conditions  set forth in
Section 6.1 have been satisfied.

     "Code"  means  the  Internal  Revenue  Code of 1986,  as  amended,  and any
regulations promulgated thereunder.

     "Collateral" means the collateral described in the Security Instruments.

     "Collateral  Assignment of Trademark License  Agreement" means that certain
Collateral  Assignment of Trademark  License  Agreement  dated as of the Closing
Date  by  BREED  in  favor  of  the  Agent  and  consented  to  by  AlliedSignal
substantially  in the form of Exhibit E hereto and  pursuant  to which BREED and
BREED  Automotive  Technology,  Inc.  have  collaterally  assigned,  pledged and
granted a Lien in all of its  rights and under that  certain  Trademark  License
Agreement  dated  October 30, 1997 between  BREED and Allied Signal to the Agent
for the benefit of the Lenders, as amended,  modified,  or restated from time to
time.

     "Collateral  Assignment of Partnership Interests" means, (i) the Collateral
Assignment of Partnership  Interests dated as of the Closing Date between BREED,
certain Subsidiaries and the Agent and (ii) each

                                                                

<PAGE>



     Collateral Assignment of Partnership Interests substantially in the form of
Exhibit F  delivered  to the  Agent  pursuant  to  Section  8.19,  as any of the
foregoing may be hereafter amended, supplemented or restated from time to time.

     "Commitment Fee" means one half percent (0.50%) per annum.

     "Consistent  Basis"  in  reference  to the  application  of GAAP  means the
accounting  principles  observed in the period referred to are comparable in all
material  respects to those applied in the preparation of the audited  financial
statements of BREED referred to in Section 7.6(a).

     "Consolidated EBITDA" means, with respect to BREED and its Subsidiaries for
any period of computation ending on the date of computation thereof, (A) the sum
of, without duplication, (i) Consolidated Net Income, (ii) Consolidated Interest
Expense,  (iii) taxes on income,  (iv) amortization and (v) depreciation,  minus
(B) (a) net  gains or losses on the sale,  conversion  or other  disposition  of
capital assets, (b) net gains or losses on the acquisition,  retirement, sale or
other  disposition  of  capital  stock  and  other  securities  of  BREED or its
Subsidiaries,  (c) net gains on the collection of proceeds of the life insurance
policies,  (d) any write-up of any asset other than as  permitted in  accordance
with Statement No. 16 of the Financial  Accounting  Standards Board, and (e) any
other net gain or loss or credit of an  extraordinary  nature as  determined  in
accordance with GAAP applied on a Consistent Basis.

     "Consolidated  Interest  Expense"  means,  with  respect  to any  period of
computation  thereof,  the gross interest expense of BREED and its Subsidiaries,
including without limitation (i) the current amortized portion of debt discounts
to the extent  included in gross interest  expense,  (ii) the current  amortized
portion of all fees (including fees payable in respect of any Swap Agreement and
Letters of Credit)  payable in connection with the incurrence of Indebtedness to
the extent  included  in gross  interest  expense  and (iii) the  portion of any
payments made in connection with Capital Leases  allocable to interest  expense,
in each of the foregoing cases determined on a consolidated  basis in accordance
with GAAP applied on a Consistent Basis.

     "Consolidated Net Income" means, for any period of computation thereof, the
gross revenues from operations of BREED and its Subsidiaries (including payments
received  by  BREED  and its  Subsidiaries  of (i)  interest  income,  and  (ii)
dividends and  distributions  made in the ordinary course of their businesses by
Persons in which  investment  is permitted  pursuant to this  Agreement  and not
related  to an  extraordinary  event),  less  all  operating  and  non-operating
expenses of BREED and its Subsidiaries including taxes on income, all determined
on a consolidated basis in accordance with GAAP applied on a Consistent Basis.

     "Consolidated  Shareholders'  Equity"  means,  as of any date on which  the
amount thereof is to be determined, the sum of the following in respect of BREED
and its  Subsidiaries  (determined on a consolidated  basis):  (i) the amount of
issued and outstanding share capital, plus (ii) the amount of additional paid-in
capital and retained earnings (or, in the case of a deficit, minus the amount of
such  deficit),  plus  (iii) the  amount  of any  foreign  currency  translation
adjustment (if positive,  or, if negative,  minus the amount of such translation
adjustment),  minus (iv) the amount of any treasury stock,  all as determined in
accordance with GAAP applied on a Consistent Basis.

     "Consolidated  Total  Assets"  means,  as of the date on which  the  amount
thereof is to be  determined,  the net book value of all assets of BREED and its
Subsidiaries as determined on a consolidated basis in accordance

                                                                 

<PAGE>



with GAAP applied on a Consistent Basis.

     "Contingent  Obligation"  of any Person  means all  contingent  liabilities
required (or which, upon the creation or incurring  thereof,  would be required)
to be included in the financial  statements  (including  footnotes but excluding
any actual or  threatened  litigation)  of such Person in  accordance  with GAAP
applied  on a  Consistent  Basis,  including  Statement  No. 5 of the  Financial
Accounting  Standards Board, all Rate Hedging  Obligations and any obligation of
such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or
other  obligation  of any other  Person (the  "primary  obligor") in any manner,
whether  directly or  indirectly,  including  obligations of such Person however
incurred:

     (1) to purchase such  Indebtedness  or other  obligation or any property or
assets constituting security therefor;

     (2) to  advance  or supply  funds in any  manner  (i) for the  purchase  or
payment of such Indebtedness or other obligation,  or (ii) to maintain a minimum
working  capital,  net worth or other  balance  sheet  condition  or any  income
statement condition of the primary obligor;

     (3) to grant or convey any lien, security interest, pledge, charge or other
encumbrance  on any property or assets of such Person to secure  payment of such
Indebtedness or other obligation of the primary obligor;

     (4) to lease  property  or to  purchase  securities  or other  property  or
services  primarily  for the  purpose  of  assuring  the owner or holder of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of such Indebtedness or other obligation; or

     (5) otherwise to assure the owner of the Indebtedness or such obligation of
the primary obligor against loss in respect thereof;

     excluding, however, Contingent Obligations (other than Guaranties) incurred
in the ordinary  course of business  which,  in the  aggregate,  will not have a
Material Adverse Effect.

     "Continue", "Continuation", and "Continued" shall refer to the continuation
pursuant  to  Section  2.8  hereof  of a  Eurodollar  Rate Loan of one Type as a
Eurodollar  Rate  Loan of the same  Type  from one  Interest  Period to the next
Interest Period.

     "Convert",  "Conversion",  and  "Converted"  shall  refer  to a  conversion
pursuant to Section 2.8 or Article IV of one Type of Loan into  another  Type of
Loan.

     "Convertible  Debentures" means the __% Convertible Subordinated Debentures
due 2027 in an aggregate  principal  amount of at least  $200,000,000  issued by
BREED to BTI Capital Trust in  consideration  of the issuance of the Convertible
Preferred Securities and payment of the net proceeds thereof to BREED.

     "Convertible   Preferred   Securities"   means  at  least  4,000,000  ____%
Convertible  Trust  Preferred  Securities  issued by BTI Capital Trust (the "BTI
Trust"),  a trust created or to be created solely for the purpose of issuing the
Convertible  Preferred  Securities for so long as such preferred  securities are
not accounted for

                                                                 

<PAGE>



     under  stockholder's  equity in the  consolidated  financial  statements of
BREED;  provided that such Convertible  Preferred Securities shall be subject to
the following conditions: (i) the BTI Trust, at the direction of BREED, shall be
entitled in its discretion to defer payment of  distributions on the Convertible
Preferred  Securities for up to twenty (20) consecutive  quarters (the "Deferral
Period");  provided that no such deferral may extend beyond the maturity date of
the Convertible Preferred Securities;

     (ii) at least five (5) quarters  shall  remain in the Deferral  Period when
the BTI Trust elects to defer payment of distributions; and

     (iii)  the  Convertible  Preferred  Securities  shall not be  treated  as a
liability on the Consolidated  Financial  Statements of BREED in accordance with
GAAP;

     "Convertible  Preferred  Securities  Issuance"  means (a) completion of the
Offering  Memorandum,  (b) the  consummation  of the  sale  of the  Converrtible
Preferred   Securities   contemplated  thereby  and  (c)  the  issuance  of  the
Convertible Debentures and receipt of net proceeds thereof by BREED;

     "Credit  Commitment"  means, with respect to each Lender, the obligation of
such Lender to make Loans to the Borrowers up to an aggregate  principal  amount
at any one  time  outstanding  equal  to  such  Lender's  Applicable  Commitment
Percentage of the Total Credit Commitment.

     "Credit  Parties" means any or all of the Borrowers and the Guarantors,  as
the case may be.

     "Debt Offering" means the incurrence of any Indebtedness for Money Borrowed
permitted hereunder in connection with a public offering or private placement of
debt securities of BREED or any Subsidiary (other than debt securities issued to
BREED or a Guarantor) or otherwise.

     "Default" means any event or condition which, with the giving or receipt of
notice or lapse of time or both, would constitute an Event of Default hereunder.

     "Default Rate" means (i) with respect to each Eurodollar  Rate Loan,  until
the end of the Interest Period  applicable  thereto,  a rate of two percent (2%)
above the Eurodollar  Rate  applicable to such Loan, and thereafter at a rate of
interest  per annum which shall be two  percent  (2%) above the Base Rate,  (ii)
with respect to Base Rate Loans,  at a rate of interest per annum which shall be
two percent  (2%) above the Base Rate,  and (iii) in any case,  the maximum rate
permitted by applicable law, if lower.

     "Deutsch Marks" means the official currency of Germany.

     "Direct  Foreign  Subsidiary"  means any Foreign  Subsidiary  a majority of
whose outstanding Voting Stock is owned by BREED or a Domestic Subsidiary.

     "Dollar Equivalent  Amount" means, with respect to a specified  Alternative
Currency  amount,  the amount of Dollars  into  which the  Alternative  Currency
amount would be converted, based on the applicable Advance Date Exchange Rate.


                                                                 

<PAGE>



     "Dollar Value" of an Advance or a Loan in an Alternative Currency means the
Dollar  Equivalent  Amount of the principal amount of such Advance or Loan based
on the Advance  Date  Exchange  Rate with  respect to such  Advance or Loan,  as
recorded in the Agent's records pursuant to Section 2.1.

     "Dollars"  and the symbol "$" means dollars  constituting  legal tender for
the payment of public and private debts in the United States of America.

     "Domestic  Subsidiary"  means any Subsidiary of BREED  organized  under the
laws of the United States of America or a state or territory thereof, except the
Excluded Subsidiary.

     "Eligible  Assignee" means (i) a Lender; (ii) an affiliate or Approved Fund
of a Lender;  and (iii) any other  Person  approved by the Agent and,  unless an
Event of Default has occurred and is  continuing  at the time any  assignment is
effected in  accordance  with  Section  11.1,  BREED,  such  approval  not to be
unreasonably  withheld  or  delayed  by BREED,  it being  agreed  that BREED may
withhold its approval if as a result of such assignment  BREED incurs  increased
cost under Section 5.6; provided,  however,  that neither BREED nor an affiliate
of BREED shall qualify as an Eligible Assignee.

     "Eligible  Securities"  means  the  following  obligations  and  any  other
obligations previously approved in writing by the Agent:

     (a) Government Securities;

     (b) obligations of any corporation organized under the laws of any state of
the United States of America or under the laws of any other  nation,  payable in
the  United  States  of  America,  expressed  to mature  not later  than 92 days
following the date of issuance  thereof and rated in an investment  grade rating
category by S&P and Moody's;

     (c)  interest  bearing  demand or time  deposits  issued  by any  Lender or
certificates  of  deposit  maturing  within  one year from the date of  issuance
thereof and issued by a bank or trust  company  organized  under the laws of the
United  States or of any state  thereof  having  capital  surplus and  undivided
profits aggregating at least $400,000,000 and being rated "A-3" or better by S&P
or "A" or better by Moody's;

     (d) Repurchase Agreements;

     (e) Municipal Obligations;

     (f) Pre-Refunded Municipal Obligations;

     (g)  shares of  mutual  funds  which  invest in  obligations  described  in
paragraphs  (a) through (f) above,  the shares of which  mutual funds are at all
times rated "AAA" by S&P;

     (h)  tax-exempt  or taxable  adjustable  rate  preferred  stock issued by a
Person having a rating of its long term  unsecured  debt of "A" or better by S&P
or "A-1" or better by Moody's; and

     (i) asset-backed  remarketed  certificates of participation  representing a
fractional undivided interest

                                                                 

<PAGE>



     in the assets of a trust,  which  certificates  are rated at least "A-1" by
S&P and "P-1" by Moody's.

     "Employee Benefit Plan" means (i) any employee benefit plan,  including any
Pension  Plan,  within  the  meaning  of  Section  3(3) of  ERISA  which  (A) is
maintained  for  employees  of  BREED,  any  of  its  ERISA  Affiliates,  or any
Subsidiary  or is  assumed  by  BREED,  any  of  its  ERISA  Affiliates,  or any
Subsidiary  in  connection  with any  Acquisition  or (B) has at any  time  been
maintained for the employees of BREED, any current or former ERISA Affiliate, or
any  Subsidiary  and  (ii)  any  plan,  arrangement,   understanding  or  scheme
maintained  by  BREED  or any  Subsidiary  that  provides  retirement,  deferred
compensation,  employee or retiree medical or life insurance, severance benefits
or any other  benefit  covering  any  employee or former  employee  and which is
administered  under any Foreign  Benefit Law or  regulated  by any  Governmental
Authority other than the United States of America.

     "Environmental  Laws" means any federal,  state,  local or foreign statute,
law,  ordinance,  code,  rule,  regulation,  order,  decree,  permit or  license
regulating,   relating  to,  or  imposing  liability  or  standards  of  conduct
concerning, any environmental matters or conditions, environmental protection or
conservation,  including without  limitation,  the  Comprehensive  Environmental
Response,  Compensation  and Liability  Act of 1980,  as amended;  the Superfund
Amendments  and   Reauthorization   Act  of  1986,  as  amended;   the  Resource
Conservation and Recovery Act, as amended;  the Toxic Substances Control Act, as
amended;  the Clean Air Act,  as  amended;  the Clean  Water  Act,  as  amended;
together with all regulations promulgated thereunder,  and any other "Superfund"
or "Superlien" law."

     "Equity  Offering" means a public or private offering of equity  securities
(including,   without  limitation,  any  security  or  investment  exchangeable,
exercisable  or  convertible  for or into, or otherwise  entitling the holder to
receive,  equity  securities) of BREED or any Subsidiary  (other than securities
issued to BREED or another Subsidiary); provided, however, that the term "Equity
Offering" shall not include (i) any issuance of equity  securities in connection
with the exercise of stock options  granted to, or purchase of restricted  stock
by, eligible participants under the Stock Option Plans, (ii) the issuance of any
stock issued as dividends or distributions to Siemens, AG (or its Subsidiary) in
accordance with the Siemens Stock Purchase Agreement,  (iii) the issuance of the
Convertible  Preferred   Securities,   (iv)  the  issuance  of  the  Convertible
Debentures  or any equity  securities  upon the  conversion  of any  Convertible
Debentures, or (v) the issuance of the Series B Preference Shares.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended  from  time to  time,  and any  successor  statute  and  all  rules  and
regulations promulgated thereunder.

     "ERISA  Affiliate",  as  applied  to BREED,  means  any  Person or trade or
business  which is a member of a group which is under common control with BREED,
who together with BREED,  is treated as a single  employer within the meaning of
Section 414(b), (c), (m) or (o) of the Code.

     "Eurodollar  Rate Loan"  means a Loan or Segment of the Term Loan for which
the rate of interest is determined by reference to the Eurodollar Rate.

     "Eurodollar Rate" means the interest rate per annum calculated according to
the following formula:

 Eurodollar   =    Interbank Offered Rate               +             Applicable
 Rate              1 - Reserve Requirement                                Margin


                                                                 

<PAGE>



     "Eurodollar  Rate  Segment"  means a Segment  bearing  interest  or to bear
interest at the Eurodollar Rate.

     "Event  of  Default"  means  any of the  occurrences  set  forth as such in
Section 10.1.

     "Exchange Act" means the Securities  Exchange Act of 1934, as amended,  and
the regulations promulgated thereunder.

     "Excluded  Subsidiary" means,  collectively,  BREED International,  Inc., a
U.S. Virgin Islands corporation and BTI Trust, a Delaware _______ trust.

     "Facility  Termination  Date"  means the date on which  both the  Revolving
Credit  Termination Date and the Term Loan Termination Date shall have occurred,
no Letters of Credit shall remain outstanding or all the Letters of Credit shall
have been cash collateralized, all Swap Agreements shall have been terminated or
cash  collateralized  and the  Borrowers  shall have fully paid and satisfied in
full all Obligations.

     "Federal  Funds  Rate"  means,  for any day,  the rate per  annum  (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve  System  arranged by Federal  funds brokers on such day, as published by
the Federal Reserve Bank of New York (Statistical  Release H-15) on the Business
Day next  succeeding  such day;  provided that (a) if such day is not a Business
Day, the Federal Funds Rate for such day shall be such rate on such transactions
on the next  preceding  Business  Day as so  published  on the  next  succeeding
Business  Day, and (b) if no such rate is so  published on such next  succeeding
Business  Day,  the Federal  Funds Rate for such day shall be the  average  rate
charged  to the  Agent  (in  its  individual  capacity)  on  such  day  on  such
transactions  as determined  by the Agent.  "Fiscal Year" means the twelve month
fiscal period of BREED commencing on the July 1 of each calendar year and ending
on June 30 of the following calendar year.

     "Foreign Benefit Law" means any applicable statute,  law, ordinance,  code,
rule, regulation,  order or decree of any foreign nation or any province, state,
territory,  protectorate  or other  political  subdivision  thereof  regulating,
relating  to, or imposing  liability or  standards  of conduct  concerning,  any
Employee Benefit Plan.

     "Foreign  Subsidiary"  means any Subsidiary of BREED that is not a Domestic
Subsidiary.

     "Four-Quarter  Period"  means a  period  of four  full  consecutive  fiscal
quarters of BREED and its Subsidiaries, taken together as one accounting period.

     "French Francs" means the official currency of France.

     "Funding Bank" means any banking institution  approved by the Agent located
within a country which country's currency has been approved by the Lenders as an
Alternative Currency.

     "GAAP"  or  "Generally  Accepted  Accounting  Principles"  means  generally
accepted accounting  principles,  being those principles of accounting set forth
in  pronouncements  of the Financial  Accounting  Standards  Board, the American
Institute  of  Certified  Public  Accountants  or which have  other  substantial
authoritative  support and are applicable in the circumstances as of the date of
a report.

                                                                 

<PAGE>



     "Government  Securities"  means direct  obligations  of, or obligations the
timely payment of principal and interest on which are fully and  unconditionally
guaranteed by, the United States of America.

     "Governmental Authority" shall mean any Federal, state, municipal, national
or other governmental  department,  commission,  board, bureau, court, agency or
instrumentality  or  political  subdivision  thereof  or any  entity or  officer
exercising  executive,  legislative,   judicial,  regulatory  or  administrative
functions of or pertaining to any government or any court,  in each case whether
associated  with a state of the United States,  the United States,  or a foreign
entity or government  including,  but not limited to, the  governments of Italy,
Germany,  France,  Spain,  Mexico,  the United  Kingdom,  Ireland,  Finland  and
Hungary.

     "Guaranties"  means all obligations of BREED or any Subsidiary  directly or
indirectly  guaranteeing,  or in effect guaranteeing,  any Indebtedness or other
obligation of any other Person.

     "Guarantors" means, at any date, the Domestic Subsidiaries.

     "Guarantors'  Obligations"  has the  meaning  ascribed  to such term in the
Guaranty.

     "Guaranty" means each Guaranty Agreement between one or more Guarantors and
the Agent for the benefit of the  Lenders,  delivered as of the Closing Date and
otherwise pursuant to Section 8.19 substantially in the form of Exhibit G hereto
as the same may be amended, supplemented or restated.

     "Hazardous  Material"  means and includes any  pollutant,  contaminant,  or
hazardous,  toxic or dangerous waste,  substance or material  (including without
limitation  petroleum  products,  asbestos-containing  materials and lead),  the
generation,  handling, storage,  transportation,  disposal,  treatment, release,
discharge or emission of which is subject to any Environmental Law.

     "Indebtedness" means with respect to any Person,  without duplication,  all
Indebtedness  for  Money  Borrowed,  all  indebtedness  of such  Person  for the
acquisition  of  property  or  arising  under  Rate  Hedging  Obligations,   all
indebtedness  secured by any Lien on the property of such Person  whether or not
such  indebtedness  is  assumed,   all  liability  of  such  Person  by  way  of
endorsements  (other than for  collection  or deposit in the ordinary  course of
business),  all Contingent  Obligations,  including  letters of credit and other
items which in accordance  with GAAP is required to be classified as a liability
on a balance  sheet;  but  excluding  all  accounts  payable and accruals in the
ordinary course of business so long as payment  therefor is due within one year;
provided  that in no event  shall  the term  Indebtedness  include  surplus  and
retained  earnings,  lease obligations  (other than pursuant to Capital Leases),
reserves  for deferred  income  taxes and  investment  credits,  other  deferred
credits or reserves and, so long as there is no Indenture Event of Default, both
the Convertible Preferred Securities and the Convertible  Debentures (so long as
the Convertible Debentures are held by the BTI Trust).

     "Indebtedness for Money Borrowed" means with respect to any Person, without
duplication,  all indebtedness in respect of money borrowed,  including  without
limitation all Capital Leases and the deferred purchase price of any property or
asset,  evidenced  by a promissory  note,  bond,  debenture  or similar  written
obligation  for the  payment of money  (including  conditional  sales or similar
title retention  agreements),  other than trade payables and short-term accounts
payable incurred in the ordinary course of business.


                                                                 
<PAGE>



     "Indenture Event of Default" means the occurrence of an Event of Default as
defined in the  Indenture  between the  Borrower and a Trustee for the holder of
the  Convertible   Debentures   pursuant  to  which  Indenture  the  Convertible
Debentures shall be issued.

     "Intellectual  Property  Assignments"  means those certain  Assignments  of
Patents,  Trademarks,  Copyrights  and  Licenses  in the  form  attached  to the
Intellectual  Property  Security  Agreement  as  Exhibit  A,  to be  filed  upon
acceleration  of the  Obligations  hereunder,  as from  time  to  time  amended,
supplemented or restated.

     "Intellectual   Property  Security   Agreement"  means   collectively  each
Intellectual  Property Security Agreement executed by BREED and Breed Automotive
Technology,  Inc.  (whether of even date herewith or delivered after the Closing
Date  pursuant  to Section  8.19  hereof and whether  executed  individually  or
jointly  and  severally  with  other  Subsidiaries)  in  favor  of the  Agent to
collaterally  secure  payment  and  performance  of its  respective  obligations
hereunder and under the Guaranty,  as applicable,  substantially  in the form of
Exhibit H attached hereto and  incorporated  herein by reference as from time to
time amended, supplemented or restated.

     "Interbank  Offered Rate" means, for any Eurodollar Rate Loan or Eurodollar
Rate  Segment for any  Interest  Period  therefor,  the rate per annum  (rounded
upwards,  if  necessary,  to the nearest 1/100 of 1%) appearing on Telerate Page
3750 (or any successor page) as the London  interbank  offered rate for deposits
in Dollars at approximately  11:00 a.m. (London time) two Business Days prior to
the first day of such  Interest  Period for a term  comparable  to such Interest
Period. If for any reason such rate is not available, the term "Eurodollar Rate"
shall mean, for any Eurodollar Rate Loan for any Interest Period  therefor,  the
rate per annum  (rounded  upwards,  if  necessary,  to the nearest  1/100 of 1%)
appearing on Reuters Screen LIBO Page as the London  interbank  offered rate for
deposits in Dollars at approximately  11:00 a.m. (London time) two Business Days
prior to the first day of such  Interest  Period for a term  comparable  to such
Interest  Period;  provided,  however,  if more  than one rate is  specified  on
Reuters Screen LIBO Page, the  applicable  rate shall be the arithmetic  mean of
all such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).

     "Intercompany Advance" means a loan or advance heretofore or hereafter made
by an Intercompany  Note Holder to a Borrower or a Domestic  Subsidiary which is
evidenced  by an  Intercompany  Note  in  which  the  Agent  has a  valid,  duly
perfected,  first priority Lien under the Collateral  Assignment of Intercompany
Notes, and the repayment of which is subordinated to the rights of the Agent and
the Lenders under the Loan  Documents in accordance to the  provisions set forth
in the Intercompany Notes or in the Intercompany Note Subordination Agreement.

     "Intercompany Notes" means,  collectively,  the promissory notes heretofore
issued and described on Schedule A to the Intercompany Note Pledge Agreement and
promissory notes hereafter issued in the form attached as Exhibit I hereto (with
appropriate   insertions)   outstanding   from  time  to  time   evidencing  the
Intercompany Advances.

     "Intercompany  Note  Holder"  means,  at any  date,  any  Borrower  and any
Domestic  Subsidiary  who has  extended  any  Intercompany  Advance that remains
outstanding at such date.

     "Intercompany   Note  Pledge  Agreement"   means,   collectively  (i)  each
Intercompany  Note Pledge Agreement of even date herewith between a Borrower and
the Agent and (ii) each Intercompany Note Pledge

                                                                 

<PAGE>



     Agreement  between each  Intercompany Note Holder other than a Borrower and
the Agent,  substantially  in the form of Exhibit Q, pursuant to which the Agent
is  granted a Lien in the  Intercompany  Notes  held by such  Intercompany  Note
Holder,  in each case as the same may be amended,  supplemented or restated from
time to time.

     "Intercompany   Note   Subordination    Agreement"   means   that   certain
Subordination  Agreement  dated as of the Closing Date between the  Intercompany
Note  Holders and the Agent  substantially  in the form of Exhibit J hereto,  as
amended, supplemented, or restated from time to time.

     "Interest  Period" means,  for each Eurodollar Rate Loan or Eurodollar Rate
Segment, a period commencing on the date such Eurodollar Rate Loan or Eurodollar
Rate Segment is made or Converted and ending,  at the Borrower's  option, on the
date one,  two,  or three  months  thereafter  as  notified  to the Agent by the
Authorized Representative three (3) Business Days prior to the beginning of such
Interest Period; provided, that,

     (i) if the  Authorized  Representative  fails to  notify  the  Agent of the
length of an Interest  Period three (3) Business  Days prior to the first day of
such Interest Period,  the Loan or Segment for which such Interest Period was to
be determined  shall be deemed to be a Base Rate Loan or Base Rate Segment as of
the first day thereof;

     (ii) if an Interest  Period for a Eurodollar  Rate Loan or Eurodollar  Rate
Segment would end on a day which is not a Business  Day,  such  Interest  Period
shall be extended to the next  Business Day (unless such  extension  would cause
the applicable Interest Period to end in the succeeding calendar month, in which
case such Interest Period shall end on the next preceding Business Day);

     (iii)  any  Interest  Period  which  begins on the last  Business  Day of a
calendar month (or on a day for which there is no numerically  corresponding day
in the calendar month at the end of such Interest  Period) shall end on the last
Business Day of a calendar month;

     (iv) no Interest Period shall extend past the Stated Termination Date; and

     (v) there shall not be more than ten (10) Interest Periods in effect on any
day.

     "Interest Rate Selection  Notice" means the written notice  delivered by an
Authorized  Representative  in  connection  with the  election  of a  subsequent
Interest  Period for any Eurodollar  Rate Loan or Eurodollar Rate Segment or the
Conversion of any  Eurodollar  Rate Loan or Eurodollar  Rate Segment into a Base
Rate Loan or Base Rate Segment or the  Conversion  of any Base Rate Loan or Base
Rate Segment into a Eurodollar Rate Loan or Eurodollar Rate Segment, in the form
of Exhibit K.

     "Initial  Advance  Allocation"  means the  allocation set forth on Schedule
1.1(b) of the initial Advance made hereunder among the Borrowers.

     "Issuing Bank" means initially  NationsBank and thereafter any Lender which
is successor to NationsBank as issuer of Letters of Credit under Article III.

     "Italian Lire" means the official currency of Italy.

                                                                 

<PAGE>



     "Landlord  Waivers"  means,  collectively,  each  of the  Landlord  Waivers
required by the Agent to be delivered by the landlord of each facility leased by
BREED or any Domestic Subsidiary or arising after the Closing Date and delivered
by BREED or a Domestic  Subsidiary,  as  applicable,  pursuant  to Article IV or
Section 8.19 hereof,  substantially in the form of Exhibit L hereto,  as amended
supplemented or restated from time to time.

     "LC Account  Agreement" means the LC Account Agreement dated as of the date
hereof among the Borrowers and the Agent  substantially in the form of Exhibit M
hereto, as amended, supplemented or restated from time to time.

     "Lease Assignments" means, collectively, Assignment of Lessee's Interest in
Leases  assigning  to the Agent each  facility  lease of BREED and any  Domestic
Subsidiary  heretofore  entered  into or entered into after the Closing Date and
delivered  by BREED or a Domestic  Subsidiary  pursuant to Article IV or Section
8.19  hereof  to  collaterally   secure  the  Borrowers'   Obligations  and  the
Guarantors' Obligations under the Guaranty, substantially in the form of Exhibit
N hereto, as amended, supplemented or restated from time to time.

     "Letter of Credit"  means a standby  letter of credit issued by the Issuing
Bank for the  account of a  Borrower  in favor of a Person  advancing  credit or
securing an obligation on behalf of a Borrower.

     "Letter of Credit  Commitment"  means,  with  respect to each  Lender,  the
obligation  of such  Lender to acquire  Participations  in respect of Letters of
Credit and  Reimbursement  Obligations up to an aggregate amount at any one time
outstanding equal to such Lender's Applicable Commitment Percentage of the Total
Letter of Credit  Commitment as the same may be increased or decreased from time
to time pursuant to this Agreement.

     "Letter of Credit  Facility"  means the  facility  described in Article III
hereof  providing for the issuance by the Issuing Bank for the account of one or
more of the Borrowers of Letters of Credit in an aggregate  stated amount at any
time outstanding not exceeding the Total Letter of Credit Commitment.

     "Letter of Credit Outstandings" means, as of any date of determination, the
aggregate   amount   remaining   undrawn   under  all  Letters  of  Credit  plus
Reimbursement Obligations then outstanding.

     "Lien" means any interest in property securing any obligation owed to, or a
claim by, a Person other than the owner of the  property,  whether such interest
is based on the common law,  statute or contract,  and including but not limited
to the lien or security interest arising from a mortgage,  encumbrance,  pledge,
security agreement, conditional sale or trust receipt or a lease, consignment or
bailment for security  purposes.  For the purposes of this Agreement,  BREED and
any  Subsidiary  shall be deemed to be the  owner of any  property  which it has
acquired or holds subject to a conditional  sale agreement,  financing lease, or
other  arrangement  pursuant to which title to the property has been retained by
or vested in some other Person for security purposes.

     "Loan"  means any of the  Revolving  Loans or the Term Loan made  under the
Revolving Credit Facility or the Term Loan Facility, respectively.

     "Loan  Documents"  means this Agreement,  the Notes,  the  Guaranties,  the
Security Instruments,  the Applications and Agreements for Letter of Credit, and
all  other  instruments  and  documents  heretofore  or  hereafter  executed  or
delivered to or in favor of any Lender or the Agent in connection with the Loans
made and

                                                                 
<PAGE>



     transactions contemplated under this Agreement, as the same may be amended,
supplemented or restated from time to time.

     "Loan  Parties"  means the  Borrowers,  the Guarantors and any other Person
(other than the Lenders) party to any of the Loan Documents.

     "Managers"   means   collectively  (or  individually  as  the  context  may
indicate), Charles J. Speranzella, Jr., Fred J. Musone, and Robert M. Rapone.

     "Material  Adverse  Effect"  means a  material  adverse  effect  on (i) the
business, properties,  operations or condition, financial or otherwise, of BREED
and its  Subsidiaries,  taken as a whole,  (ii) the ability of the Loan  Parties
taken as a whole to pay or perform the obligations, liabilities and indebtedness
under  the  Loan  Documents  as  such  payment  or  performance  becomes  due in
accordance with the terms thereof,  or (iii) the rights,  powers and remedies of
the Agent or any Lender  under any Loan  Document or the  validity,  legality or
enforceability thereof.

     "Material  Contract"  means any contract or agreement,  written or oral, of
any Borrower or any of its  Subsidiaries  the failure to comply with which could
reasonably be expected to have a Material Adverse Effect.

     "Moody's" means Moody's Investors Service, Inc.

     "Mortgaged  Property"  means,  collectively (or individually as the context
may  indicate)  the real  property  and  improvements  thereon  described in the
Mortgages.

     "Mortgages"  means,  collectively  (or  individually  as  the  context  may
indicate), each Credit-Line Deed of Trust, Mortgage,  Open-End Mortgage, Deed of
Trust, Deed to Secure Debt,  Leasehold  Mortgage,  Open-End Leasehold  Mortgage,
Leasehold  Deed of Trust,  Leasehold  Deed to Secure Debt,  Security  Agreement,
Fixture  Financing  Statement,  Assignment  of Leases  and  Rents and  Financing
Statement or similar  mortgage  instrument of BREED and its  Subsidiaries now or
hereafter  entered  into  in  connection  with  this  Agreement  to  secure  the
Obligations or the Guarantors' Obligations,  such term to include the Collateral
Assignment of Rents and Leases executed by a Subsidiary of BREED,  BTI Michigan,
Inc., to secure its  obligations  under its  Guaranty,  and as from time to time
amended, supplemented or restated.

     "Multiemployer  Plan"  means a  "multiemployer  plan" as defined in Section
4001(a)(3)  of ERISA to which  BREED or any ERISA  Affiliate  is  making,  or is
accruing an obligation to make,  contributions or has made, or been obligated to
make, contributions within the preceding six (6) Fiscal Years.

     "Municipal  Obligations" means general obligations issued by, and supported
by the full taxing authority of, any state of the United States of America or of
any municipal  corporation or other public body organized  under the laws of any
such state which are rated in the highest investment rating category by both S&P
and Moody's.

     "NationsBank" means NationsBank, National Association and its successors.

     "NMSI" means NationsBanc Montgomery Securities, Inc. and its successors.

                                                                

<PAGE>



     "Net  Proceeds"  means (a) from any Equity  Offering or Debt  Offering cash
payments received by BREED or any Subsidiary therefrom as and when received, net
of  all  legal,   accounting,   banking  and  underwriting  fees  and  expenses,
commissions,  discounts  and other  issuance  expenses  incurred  in  connection
therewith and all taxes  required to be paid or accrued as a consequence of such
issuance and (b) from any Asset  Disposition cash payments  received by BREED or
any Subsidiary  therefrom  (including any cash payments received pursuant to any
note or other debt security  received in connection with any Asset  Disposition)
as and when received,  net of (i) all legal fees and expenses and other fees and
expenses paid to third parties and incurred in  connection  therewith,  (ii) all
taxes  required  to be paid or accrued  as a  consequence  of such  sale,  (iii)
amounts  applied to  repayment  of  Indebtedness  (other  than the  Obligations)
secured  by a Lien on the  asset  or  property  disposed,  and  (iv)  any  other
necessary costs incurred in connection with the sale.

     "Notes"  means,  collectively,  the  Term  Notes  and the  Revolving  Notes
executed and delivered to the Lenders  substantially  in the form of Exhibit O-1
and O-2, respectively.

     "Obligations"  means the  obligations,  liabilities and Indebtedness of the
Borrowers or any of them with respect to (i) the  principal  and interest on the
Loans  as  evidenced  by the  Notes,  (ii)  the  Reimbursement  Obligations  and
otherwise  in respect of the  Letters of Credit,  (iii) all  liabilities  of the
Borrowers or any of them to any Lender which arise under a Swap  Agreement,  and
(iii) the payment and  performance  of all other  obligations,  liabilities  and
Indebtedness  of the Borrowers or any of them to the Lenders,  the Agent or NMSI
hereunder,  under any one or more of the other Loan Documents or with respect to
the Loans.

     "Offering  Memorandum" means the offering memorandum prepared in connection
with the issuance of the Convertible Preferred Securities.

     "Operating  Documents"  means  with  respect  to any  corporation,  limited
liability  company,   partnership,   limited   partnership,   limited  liability
partnership,  or other legally authorized incorporated or unincorporated entity,
the bylaws,  operating  agreement,  partnership  agreement,  limited partnership
agreement or other applicable documents relating to the operation, governance or
management of such entity.

     "Operating  Plan"  means the five (5) year  consolidated  business  plan of
BREED and its Subsidiaries prepared by the management of BREED, giving effect to
the Allied  Acquisition,  which plan (a) is to include  (i)  proforma  projected
balance  sheets,  statements  of income and  statements of cash flow (to include
separate forecasts for Consolidated Capital Expenditures and Consolidated EBITDA
by each major line of business) on a quarterly basis for the forthcoming  Fiscal
Year and on an annual  basis for the next  succeeding  four Fiscal  Years,  (ii)
detailed  descriptions  of all underlying  assumptions,  projected cost savings,
expense reductions,  and synergies realized from the Allied  Acquisition,  (iii)
detailed  descriptions of the long range plan for each major  Subsidiary and for
operations  which  have  been  or will  be  discontinued  and  (iv)  such  other
calculations  and descriptions as the Agent shall  reasonably  request,  and (b)
shall  otherwise  be  reasonably  acceptable  to the Agent;  provided,  that the
portion  of  the  Operating   Plan  related  to   discontinued   operations  and
restructuring  charges  shall have been  reviewed by Ernst & Young,  LLP and the
five (5) year  statements  referred  to in item  (a)(i)  above  shall  have been
prepared by the Borrower in accordance with procedures  agreed upon with Ernst &
Young,  LLP the  compliance  with and  accuracy  of which  shall have tested for
conformity with such procedures by Ernst & Young, LLP.

     "Organizational  Action"  means with  respect to any  corporation,  limited
liability company, partnership,

                                                                 

<PAGE>



     limited  partnership,   limited  liability  partnership  or  other  legally
authorized incorporated or unincorporated entity, any corporate, organizational,
partnership  action  (including  any  required  stakeholder,  member or  partner
action) or other similar official action, as applicable, taken by such entity.

     "Organizational  Documents" means with respect to any corporation,  limited
liability  company,   partnership,   limited   partnership,   limited  liability
partnership or other legally authorized  incorporated or unincorporated  entity,
the  articles  of  incorporation,  certificate  of  incorporation,  articles  of
organization,   certificate   of  limited   partnership   or  other   applicable
organizational or charter documents relating to the creation of such entity.

     "Outstandings"  means,  collectively,  at any  date,  the  Letter of Credit
Outstandings,  the Revolving Credit Outstandings, and the Term Loan Outstandings
on such date.

     "Participation"  means,  with respect to any Lender (other than the Issuing
Bank)  and a Letter of  Credit,  the  extension  of  credit  represented  by the
participation  of such Lender  hereunder in the liability of the Issuing Bank in
respect  of a Letter of Credit and any  Reimbursement  Obligation  arising  with
respect thereto issued by the Issuing Bank in accordance with the terms hereof.

     "PBGC" means the Pension  Benefit  Guaranty  Corporation  and any successor
thereto.

     "Pension Plan" means any employee  pension  benefit plan within the meaning
of Section 3(2) of ERISA,  other than a Multiemployer  Plan, which is subject to
the  provisions of Title IV of ERISA or Section 412 of the Code and which (i) is
maintained  for employees of BREED or any of its ERISA  Affiliates or is assumed
by BREED or any of its ERISA  Affiliates in connection  with any  Acquisition or
(ii) has at any time been  maintained  for the employees of BREED or any current
or former ERISA Affiliate.

     "Permitted  Indebtedness"  has the meaning assigned to such term in Section
9.4 hereof.

     "Permitted  Liens" has the  meaning  assigned  to such term in Section  9.3
hereof.

     "Person"  means an individual,  partnership,  corporation,  trust,  limited
liability company, unincorporated organization,  association, joint venture or a
government or agency or political subdivision thereof.

     "Pledge  Agreement" means , collectively or individually as the context may
indicate (i) that certain  Stock Pledge  Agreement  dated as of the Closing Date
between  BREED and the Agent  substantially  in the form of Exhibit  P-1 hereto,
(ii) that certain  Stock Pledge  Agreement  dated as of the Closing Date between
certain Domestic Subsidiaries and the Agent substantially in the form of Exhibit
P-2 hereto,  (iii) that certain Stock Pledge  Agreement  dated as of the Closing
Date among Allen K. Breed,  Johnnie C. Breed,  A. Breed,  Ltd., a Texas  limited
partnership,  J.  Breed,  Ltd.,  a  Texas  limited  partnership  and  the  Agent
substantially  in the form of Exhibit  P-3  hereto,  (iv) any Pledge  Agreement,
Share  Charge,  Debenture or similar  instrument  whereby a Borrower or Domestic
Subsidiary  creates a security  interest  in favor of the Agent of not less than
65% of the outstanding capital stock of a Direct Foreign Subsidiary, and (v) any
additional Pledge Agreement  delivered to the Agent pursuant to Section 8.19, as
any of the foregoing  may be hereafter  amended,  supplemented  or restated from
time to time.


                                                                 

<PAGE>



     "Pledged Stock" has the meaning given to such term in any Pledge Agreement.

     "Pounds Sterling" means the official currency of the United Kingdom.

     "Pre-Refunded  Municipal Obligations" means obligations of any state of the
United  States of America or of any municipal  corporation  or other public body
organized under the laws of any such state which are rated, based on the escrow,
in the highest investment rating category by both S&P and Moody's and which have
been irrevocably  called for redemption and advance refunded through the deposit
in escrow of Government  Securities or other debt  securities  which are (i) not
callable at the option of the issuer thereof prior to maturity, (ii) irrevocably
pledged solely to the payment of all principal and interest on such  obligations
as the same becomes  due, and (iii) in a principal  amount and bear such rate or
rates of  interest  as  shall be  sufficient  to pay in full all  principal  of,
interest,  and premium,  if any, on such  obligations as the same becomes due as
verified by a nationally recognized firm of certified public accountants.

     "Prime Rate" means the per annum rate of interest  established from time to
time by NationsBank as its prime rate,  which rate may not be the lowest rate of
interest charged by NationsBank to its customers.

     "Principal  Office" means the principal  office of  NationsBank,  presently
located at, Independence Center, 15th Floor, NC1 001-15-04, Charlotte, North
Carolina 28255, Attention: Agency Services.

     "Prudential" means Prudential Securities Credit Corp.

     "Prudential  Stock Purchase" means the purchase by Prudential of the Series
B Preference Shares pursuant to the Prudential Stock Purchase Agreement.

     "Prudential  Stock Purchase  Agreement" means that certain  Preferred Stock
Purchase  Agreement  dated as of October 30, 1997 between  Prudential and BREED,
pursuant to which Prudential has agreed to purchase 4,000,000 shares of Series B
Preference Shares of BREED for an aggregate purchase price of $200,000,000.

     "Prudential  Stock Purchase  Documents" means the Prudential Stock Purchase
Agreement,  the Certificate of Designation  (as defined in the Prudential  Stock
Purchase Agreement) and all registration  rights agreements,  opinions and other
material  principal  documents  entered into in connection  with the transaction
contemplated thereby.

     "Rate Hedging  Obligations"  means any and all  obligations of BREED or any
Subsidiary, whether absolute or contingent and howsoever and whensoever created,
arising,   evidenced  or  acquired  (including  all  renewals,   extensions  and
modifications  thereof  and  substitutions  therefor),  under  (i)  any  and all
agreements,  devices  or  arrangements  designed  to protect at least one of the
parties  thereto from the  fluctuations  of interest  rates,  exchange  rates or
forward  rates  applicable  to such  party's  assets,  liabilities  or  exchange
transactions,   including,   but   not   limited   to,   Dollar-denominated   or
cross-currency  interest rate exchange  agreements,  forward  currency  exchange
agreements,  interest  rate cap or collar  protection  agreements,  forward rate
currency or interest rate options,  puts,  warrants and those  commonly known as
interest rate "swap" agreements;  and (ii) any and all cancellations,  buybacks,
reversals, terminations or assignments of any of the foregoing.

     "Regulation  D" means  Regulation D of the Board as the same may be amended
or supplemented from

                                                               

<PAGE>



time to time.

     "Reimbursement Obligation" shall mean at any time, the obligation of one or
more of the  Borrowers  with  respect to any Letter of Credit to  reimburse  the
Issuing  Bank and the Lenders to the extent of their  respective  Participations
(including  by the receipt by the Issuing Bank of proceeds of Loans  pursuant to
Section  3.2) for amounts  theretofore  paid by the Issuing  Bank  pursuant to a
drawing under such Letter of Credit.

     "Repurchase  Agreement" means a repurchase  agreement entered into with any
financial  institution  whose debt obligations or commercial paper are rated "A"
by either of S&P or Moody's or "A-1" by S&P or "P- 1" by Moody's.

     "Required  Lenders"  means,  as of any date,  Lenders  on such date  having
Credit  Exposures  (as  defined  below)  aggregating  in  excess  of  50% of the
aggregate Credit Exposures of all Lenders on such date; provided,  however, that
to the extent  NationsBank  has more than fifty  percent  (50%) of the aggregate
Credit  Exposures,  Required  Lenders  means  Lenders on such date having Credit
Exposures of 66 2/3% of the  aggregate  Credit  Exposures  of all  Lenders.  For
purposes of the preceding sentence,  the amount of the "Credit Exposure" of each
Lender shall be equal to the aggregate  principal  amount of the Revolving Loans
owing to such  Lender plus the  aggregate  unutilized  amounts of such  Lender's
Revolving  Credit  Commitment  plus  the  amount  of  such  Lender's  Applicable
Commitment  Percentage of Letter of Credit  Outstandings plus the amount of such
Lender's  Applicable  Commitment  Percentage  of  the  Term  Loan  Outstandings;
provided that, (i) if any Lender with a Revolving  Credit  Commitment shall have
failed to pay to the Issuing Bank its  Applicable  Commitment  Percentage of any
drawing  under any Letter of Credit  resulting in an  outstanding  Reimbursement
Obligation,  such Lender's Credit Exposure attributable to Letters of Credit and
Reimbursement  Obligations  shall be deemed to be held by the  Issuing  Bank for
purposes of this definition.

     "Reserve  Requirement"  means,  at any  time,  the  maximum  rate at  which
reserves (including, without limitation, any marginal, special, supplemental, or
emergency  reserves) are required to be maintained under regulations issued from
time to time by the Board of  Governors  of the Federal  Reserve  System (or any
successor) by member banks of the Federal  Reserve System against in the case of
Eurodollar  Rate  Loans,  "Eurocurrency  liabilities"  (as such  term is used in
Regulation  D).  Without  limiting  the  effect of the  foregoing,  the  Reserve
Requirement  shall reflect any other reserves  required to be maintained by such
member  banks with  respect to (i) any category of  liabilities  which  includes
deposits by reference to which the Eurodollar Rate is to be determined,  or (ii)
any category of extensions  of credit or other assets which  include  Eurodollar
Rate Loans. The Eurodollar Rate shall be adjusted automatically on and as of the
effective date of any change in the Reserve Requirement.

     "Restricted  Payment" means (a) any dividend or other distribution,  direct
or indirect, on account of any shares of any class of stock or equity securities
of BREED  (including  the  Convertible  Debentures)  or any of its  Subsidiaries
(other than those payable or distributable solely to BREED or by a Subsidiary to
its parent) now or hereafter  outstanding,  except a dividend  payable solely in
shares of a class of stock to the  holders of that  class;  (b) any  redemption,
conversion,   exchange,   retirement  or  similar  payment,  purchase  or  other
acquisition for value,  direct or indirect,  of any shares of any class of stock
of BREED or any of its  Subsidiaries or other equity  securities of BREED (other
than  those  payable  or  distributable   solely  to  BREED)  now  or  hereafter
outstanding;  (c) any payment made to retire, or to obtain the surrender of, any
outstanding warrants,  options or other rights to acquire shares of any class of
stock of BREED or any of its Subsidiaries or other equity securities of BREED

                                                                 

<PAGE>



     now or  hereafter  outstanding;  and (d) any  issuance  and sale of capital
stock of any  Subsidiary  of BREED (or any  option,  warrant or right to acquire
such  stock  or other  equity  securities  of  BREED)  other  than to BREED or a
Domestic Subsidiary or Guarantor.

     "Revolving  Credit  Commitment"  means,  with respect to each  Lender,  the
obligation  of such Lender to make  Revolving  Loans to the  Borrowers  up to an
aggregate  principal amount at any one time  outstanding  equal to such Lender's
Applicable Commitment Percentage of the Total Revolving Credit Commitment.

     "Revolving Credit Facility" means the facility  described in Section 2.1(a)
hereof  providing  for Loans to the  Borrowers  by the Lenders in the  aggregate
principal amount of the Total Revolving Credit Commitment.

     "Revolving Credit Outstandings" means, as of any date of determination, the
aggregate  principal  amount of all  Revolving  Loans then  outstanding  and all
interest accrued thereon.

     "Revolving Credit  Termination Date" means (i) the Stated  Termination Date
or (ii) such earlier date of  termination  of Lenders'  obligations  pursuant to
Section 10.1 upon the  occurrence of an Event of Default,  or (iii) such date as
the Borrowers may  voluntarily and  permanently  terminate the Revolving  Credit
Facility by payment in full of all Revolving  Credit  Outstandings and Letter of
Credit  Outstandings,  termination  of the Revolving  Credit  Commitment and the
Letter of Credit  Commitment and cancellation  (or, pursuant to the terms of the
LC Account Agreement, the cash collateralization) of all Letters of Credit.

     "Revolving  Loan"  means any  borrowing  pursuant  to an Advance  under the
Revolving Credit Facility.

     "Revolving  Notes"  means,  collectively,   the  promissory  notes  of  the
Borrowers  evidencing  Revolving  Loans executed and delivered to the Lenders as
provided  in  Section  2.5(b)  substantially  in the form of Exhibit  O-1,  with
appropriate insertions as to amounts, dates, and names of Lenders.

     "S&P" means Standard & Poor's Ratings Group, a division of The  McGraw-Hill
Companies, Inc.

     "Security  Agreement"  means,  collectively (or individually as the context
may  indicate),  (i) the  Security  Agreement  dated as of the date hereof among
Borrowers,  the  Guarantors  and the  Agent,  and (ii) any  additional  Security
Agreement  delivered to the Agent pursuant to Section  8.19(a)  hereof,  in each
case,  substantially  in the form attached hereto as Exhibit R, as such Security
Agreement may be amended, supplemented or restated from time to time.

     "Security  Instruments"  means the  Security  Agreement,  the  Intellectual
Property Security Agreement,  the Pledge Agreement, the Collateral Assignment of
Partnership Interests, the Collateral Assignment of Trademark License Agreement,
the Mortgages,  the Intercompany Note Pledge Agreement,  the Lease  Assignments,
the Landlord Waivers,  the Intellectual  Property  Assignment,  the Intercompany
Note Subordination  Agreement,  the LC Account Agreement and all other documents
and  agreements  executed and delivered in connection  herewith  granting to the
Lenders Liens on any assets of the Borrowers, any Guarantor, or any other Person
collaterally  to secure  payment  and  performance  of the  Obligations  and the
Guarantors' Obligations under the Guaranty.

     "Segment" means a portion of the Term Loan (or all thereof) with respect to
which a particular interest rate is (or is proposed to be) applicable.

                                                                 

<PAGE>



     "Series A  Preference  Shares"  means  BREED's  1997  Series A  Convertible
Non-Voting Preferred Shares, par value $.001 per share.

     "Series B  Preference  Shares"  means  BREED's  1997  Series B  Convertible
Preferred Stock, par value $.001 per share.

     "Siemens" means Siemens Aktiengesell-Schaft, a German company.

     "Siemens  Stock  Purchase"  means the  purchase  by Siemens of the Series A
Preference Shares pursuant to the Siemens Stock Purchase Agreement.

     "Siemens  Stock  Purchase  Agreement"  means that  certain  Stock  Purchase
Agreement  dated as of October 14, 1997 between  Siemens and BREED,  pursuant to
which  Siemens has agreed to purchase  4,883,227  shares of Series A  Preference
Shares of BREED for an aggregate purchase price of $115,000,000.

     "Siemens  Stock  Purchase  Documents"  means  the  Siemens  Stock  Purchase
Agreement and all shareholder  agreements,  make-whole agreements,  registration
rights agreements,  opinions and other material principal documents entered into
in connection with the transaction contemplated thereby.

     "Single  Employer Plan" means any employee  pension benefit plan covered by
Title IV of ERISA in respect of which BREED or any  Subsidiary  is an "employer"
as described in Section 4001(b) of ERISA and which is not a Multiemployer Plan.

     "Solvent" means, when used with respect to any Person,  that at the time of
determination:

     (i) the fair value of its  assets  (both at fair  valuation  and at present
fair saleable value on an orderly basis) is in excess of the total amount of its
liabilities, including Contingent Obligations; and

     (ii) it is then  able  and  expects  to be  able to pay its  debts  as they
mature; and

     (iii) it has capital  sufficient  to carry on its business as conducted and
as proposed to be conducted.

     "Spanish Pesetas" means the official currency of Spain.

     "Spot Rate of  Exchange"  means (i) in  determining  the Dollar  Equivalent
Amount of a  specified  Alternative  Currency  amount  as of any date,  the spot
exchange rate  determined by the Agent in accordance  with its usual  procedures
for the  purchase  by the Agent of Dollars  with such  Alternative  Currency  at
approximately 10:00 A.M. on the Business Day that is two (2) Business Days prior
to such date, and (ii) in determining the Alternative Currency Equivalent Amount
of a specified  Dollar amount on any date, the spot exchange rate  determined by
the Agent in accordance with its usual  procedures for the purchase by the Agent
of such  Alternative  Currency with Dollars at  approximately  10:00 A.M. on the
Business Day that is two (2) Business Days prior to such date.

     "Stated Termination Date" means October 31, 1998.


                                                                 

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     "Stock Option Plans" means, collectively, the BREED Technologies, Inc. 1992
Stock Option Plan, the BREED Technologies,  Inc 1992 Director Stock Option Plan,
the BREED  Technologies,  Inc 1992  Employee  Stock  Purchase Plan and the BREED
Technologies, Inc 1994 Stock Incentive Plan.

     "Subordinated  Indebtedness" means all Indebtedness that is subordinated to
the  Revolving  Credit  Facility  under  its own  terms  or under  any  separate
agreement of subordination, in each case upon terms satisfactory to the Agent.

     "Subsidiary"  means any corporation or other entity in which 50% or more of
its  outstanding  voting  stock or 50% or more of all equity  interests is owned
directly or indirectly by BREED and/or by one or more of BREED's Subsidiaries or
is otherwise required under GAAP to have its financial  statements  consolidated
with those of BREED and its Subsidiaries.

     "Swap Agreement" means one or more agreements between the Borrowers and any
Lender with respect to  Indebtedness  evidenced  by any or all of the Notes,  on
terms mutually acceptable to Borrowers and such Lender,  which agreements create
Rate Hedging Obligations.

     "Term Loan" means the loan made pursuant to the Term Loan Facility.

     "Term Loan Commitment"  means, with respect to each Lender,  the obligation
of such  Lender to make the Term Loan to BREED in a  principal  amount  equal to
such Lender's Applicable Commitment Percentage of the Total Term Loan
Commitment.

     "Term  Loan  Facility"  means the  facility  described  in  Section  2.1(b)
providing  for a Term Loan to BREED by the  Lenders  in the  original  principal
amount of the Total Term Loan Commitment.

     "Term  Loan  Outstandings"  means,  as of any  date of  determination,  the
aggregate  principal  amount of the Term Loan then  outstanding and all interest
accrued thereon.

     "Term Loan Termination Date" means (i) the Stated  Termination Date or (ii)
such earlier date of  termination  of Lenders'  obligations  pursuant to Section
10.1 upon the occurrence of an Event of Default, or (iii) such date as BREED may
voluntarily and permanently  terminate the Term Loan Facility by payment in full
of all Obligations incurred in connection with the Term Loan.

     "Term Notes" means, collectively,  the promissory notes of BREED evidencing
Term Loans  executed and delivered to the Lenders as provided in Section  2.5(a)
substantially  in the form of Exhibit O-2,  with  appropriate  insertions  as to
amounts, dates and names of Lenders.

     "Termination  Event" means:  (i) a "Reportable  Event" described in Section
4043  of  ERISA  and  the  regulations  issued  thereunder  (unless  the  notice
requirement has been waived by applicable regulation); or (ii) the withdrawal of
BREED or any ERISA  Affiliate from a Pension Plan during a plan year in which it
was a  "substantial  employer" as defined in Section  4001(a)(2) of ERISA or was
deemed  such under  Section  4068(f)  of ERISA;  or (iii) the  termination  of a
Pension  Plan,  the filing of a notice of intent to  terminate a Pension Plan or
the treatment of a Pension Plan amendment as a termination under Section 4041 of
ERISA; or (iv) the institution of proceedings to terminate a Pension Plan by the
PBGC; or (v) any other event or condition which

                                                                 

<PAGE>



     would constitute grounds under Section 4042(a) of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan; or (vi) the
partial  or  complete  withdrawal  of  BREED  or  any  ERISA  Affiliate  from  a
Multiemployer Plan; or (vii) the imposition of a Lien pursuant to Section 412 of
the Code or Section 302 of ERISA; or (viii) any event or condition which results
in the  reorganization or insolvency of a Multiemployer  Plan under Section 4241
or Section 4245 of ERISA,  respectively;  or (ix) any event or  condition  which
results in the termination of a Multiemployer  Plan under Section 4041A of ERISA
or the institution by the PBGC of proceedings to terminate a Multiemployer  Plan
under Section 4042 of ERISA;  or (x) any event or condition  with respect to any
Employee Benefit Plan which is regulated by any Foreign Benefit Law that results
in such Employee  Benefit  Plan's  termination or the revocation of the Employee
Benefit Plan's authority to operate under the applicable Foreign Benefit Law.

     "Total Alternative Currency Sublimit" means $75,000,000.

     "Total  Credit  Commitment"  means a  principal  amount  equal to the Total
Revolving Credit Commitment plus the Total Term Loan Commitment.

     "Total  Letter  of  Credit  Commitment"  means  an  amount  not  to  exceed
$25,000,000.

     "Total  Revolving  Credit  Commitment"  means a principal  amount  equal to
$300,000,000, as reduced from time to time in accordance with Section 2.7.

     "Total  Term  Loan   Commitment"   means  a  principal   amount   equal  to
$600,000,000.

     "Type" shall mean any type of Loan (i.e.,  a Base Rate Loan or a Eurodollar
Rate Loan).

     "Voting  Stock" means shares of capital stock issued by a  corporation,  or
equivalent  interests in any other Person,  the holders of which are ordinarily,
in the absence of contingencies,  entitled to vote for the election of directors
(or persons performing  similar functions) of such Person,  even if the right so
to vote has been suspended by the happening of such a contingency.

     1.2. Rules of  Interpretation.  (a) All accounting  terms not  specifically
defined  herein  shall  have the  meanings  assigned  to such terms and shall be
interpreted in accordance with GAAP applied on a Consistent Basis.

     (b) Each term defined in Article 1 or 9 of the Florida  Uniform  Commercial
Code shall have the meaning  given  therein  unless  otherwise  defined  herein,
except to the extent that the Uniform Commercial Code of another jurisdiction is
controlling,  in which  case such  terms  shall  have the  meaning  given in the
Uniform Commercial Code of the applicable jurisdiction.

     (c) The headings,  subheadings  and table of contents used herein or in any
other Loan  Document  are  solely for  convenience  of  reference  and shall not
constitute a part of any such  document or affect the meaning,  construction  or
effect of any provision thereof.

     (d) Except as otherwise expressly provided,  references herein to articles,
sections, paragraphs,  clauses, annexes, appendices,  exhibits and schedules are
references to articles, sections, paragraphs, clauses,

                                                                 

<PAGE>



     annexes, appendices, exhibits and schedules in or to this Agreement.

     (e) All  definitions  set forth herein or in any other Loan Document  shall
apply to the singular as well as the plural form of such defined  term,  and all
references  to the masculine  gender shall include  reference to the feminine or
neuter gender, and vice versa, as the context may require.

     (f)  When  used  herein  or in any  other  Loan  Document,  words  such  as
"hereunder",  "hereto",  "hereof"  and  "herein"  and other words of like import
shall, unless the context clearly indicates to the contrary,  refer to the whole
of  the  applicable  document  and  not  to  any  particular  article,  section,
subsection, paragraph or clause thereof.

     (g)  References  to  "including"   means  including  without  limiting  the
generality of any  description  preceding such term, and for purposes hereof the
rule of ejusdem  generis shall not be  applicable to limit a general  statement,
followed by or  referable  to an  enumeration  of specific  matters,  to matters
similar to those specifically mentioned.

     (h) All dates and times of day  specified  herein shall refer to such dates
and times at Charlotte, North Carolina.

     (i) Each of the  parties  to the Loan  Documents  and  their  counsel  have
reviewed and revised, or requested (or had the opportunity to request) revisions
to, the Loan Documents,  and any rule of construction that ambiguities are to be
resolved  against the drafting party shall be inapplicable in the construing and
interpretation of the Loan Documents and all exhibits,  schedules and appendices
thereto.

     (j) Any  reference  to an officer of BREED or any other Person by reference
to the title of such officer  shall be deemed to refer to each other  officer of
such  Person,  however  titled,  exercising  the same or  substantially  similar
functions.

     (k) All  references  to any  agreement or document as amended,  modified or
supplemented, or words of similar effect, shall mean such document or agreement,
as the case may be, as amended,  modified or supplemented from time to time only
as and to the extent permitted therein and in the Loan Documents.

     ARTICLE II

     The Credit Facilities

     2.1. Loans.

     (a) Revolving Loan.  Subject to the terms and conditions of this Agreement,
each  Lender  severally  agrees to make  Advances  in Dollars or an  Alternative
Currency (as specified in the  respective  Borrowing  Notice) to the  applicable
Borrower or Borrowers under the Revolving Credit Facility from time to time from
the Closing Date until the Revolving Credit Termination Date on a pro rata basis
as to the total borrowing  requested by the applicable  Borrower or Borrowers on
any day determined by such Lender's Applicable  Commitment  Percentage up to but
not  exceeding a Dollar Value equal to the Revolving  Credit  Commitment of such
Lender, provided,  however, that the Lenders will not be required and shall have
no obligation to make any such

                                                                

<PAGE>



     Advance (i) so long as a Default or an Event of Default has occurred and is
continuing or (ii) if the Agent has accelerated the maturity of any of the Notes
as a result of an Event of Default;  provided further, however, that immediately
after giving effect to each such Advance,  (u) the Dollar Value of the principal
amount of Revolving Credit Outstandings plus Letter of Credit Outstandings shall
not exceed the Total Revolving Credit Commitment and (v) the Dollar Value of the
principal amount of Loans in an Alternative  Currency shall not exceed the Total
Alternative  Currency  Sublimit.  Within such limits,  the Borrowers may borrow,
repay and reborrow  under the Revolving  Credit  Facility on a Business Day from
the Closing Date until, but (as to borrowings and  reborrowings)  not including,
the Revolving Credit Termination Date; provided, however, that (w) no Eurodollar
Rate Loan shall be made which has an  Interest  Period that  extends  beyond the
Stated  Termination  Date and (x) each Eurodollar Rate Loan may,  subject to the
provisions of Section 2.7, be repaid only on the last day of the Interest Period
with  respect  thereto  unless such  payment is  accompanied  by the  additional
payment, if any, required by Section 5.5. The Borrowers agree that (y) if at any
time the Dollar Value of Revolving Credit  Outstandings plus the Dollar Value of
Letter  of  Credit   Outstandings   shall  exceed  the  Total  Revolving  Credit
Commitment,  the Borrowers shall  immediately  reduce the outstanding  principal
amount of the  Revolving  Loans such that,  as a result of such  reduction,  the
Dollar Value of Revolving Credit Outstandings plus the Dollar Value of Letter of
Credit  Outstandings  shall not exceed the Total Revolving Credit Commitment and
(z) if at any time the Dollar Value of Loans in an Alternative  Currency  exceed
the Total Alternative Currency Sublimit by 105%, the Borrowers shall immediately
make a Rate Adjustment Payment as set forth below in Section 2.1(c).

     (b) Term Loan. Subject to the terms and conditions of this Agreement,  each
Lender  severally  agrees to make an  Advance  of the Term Loan in  Dollars  (as
specified in the Borrowing  Notice) to BREED under the Term Loan Facility on the
Closing  Date  on a pro  rata  basis  determined  by its  Applicable  Commitment
Percentage up to the Term Loan Commitment of such Lender. The Term Loan shall be
available  in a single draw on the Closing  Date and shall be due and payable on
the Stated  Termination  Date. The principal  amount of each Segment of the Term
Loan  outstanding  hereunder from time to time shall bear  interest,  at BREED's
election, at an interest rate per annum equal to the Base Rate or the Eurodollar
Rate;  provided,  that (x) no  Eurodollar  Rate  Segment  shall have an Interest
Period that extends beyond the Stated  Termination Date, and (y) each Eurodollar
Rate Segment may,  subject to the  provisions  of Section 2.7, be repaid only on
the last day of the Interest  Period with respect thereto unless such payment is
accompanied by the additional  payment,  if any,  required by Section 5.5. BREED
agrees  that if at any time the Term Loan  Outstandings  shall  exceed the Total
Term Loan  Commitment,  the Borrowers shall  immediately  reduce the outstanding
principal amount of the Term Loans such that, as a result of such reduction, the
Term Loan Outstandings shall not exceed the Total Term Loan Commitment.

     (c)  Amounts.  (i) Each request for an Advance in an  Alternative  Currency
under  a  Borrowing  Notice  shall  constitute  the  applicable   Borrower's  or
Borrowers'  request  for a Loan  of  the  Dollar  Value  of  the  amount  of the
Alternative  Currency specified in such Borrowing Notice and for such Loan to be
made  available  by the Lenders to the  applicable  Borrower or Borrowers in the
Alternative Currency Equivalent Amount of such Dollar Value (determined based on
the Advance Date Exchange Rate applicable to such Advance). The principal amount
outstanding on any Loan shall be recorded in the Agent's  records in Dollars (in
the case of an Advance in an  Alternative  Currency as if the Loan had initially
been made in  Dollars),  based on the amount of any Loan in  Dollars  and on the
Dollar Value of the initial Advance in an Alternative  Currency, as reduced from
time to time by the Dollar Equivalent Amount (based on the Advance Date Exchange
Rate applicable to such Advance) of any principal  payments with respect to such
Advance. Loans in an Alternative Currency shall be

                                                                 

<PAGE>



     limited to Revolving Loans which are Eurodollar  Rate Loans.  The Term Loan
shall at all times be in Dollars.

     In  the  event  a  Eurodollar  Rate  Loan  of an  Alternative  Currency  is
Continued,  such election to Continue the Eurodollar  Rate Loan shall be treated
as an Advance and the Agent shall  notify the  applicable  Borrower or Borrowers
and the Lenders of the  Advance  Date  Exchange  Rate,  Interest  Period and the
Eurodollar  Rate for such  Continued  Eurodollar  Rate Loan. In such event,  the
Lenders shall each be deemed to have made an Advance to the applicable  Borrower
or  Borrowers  of its  Applicable  Commitment  Percentage  of  such  Loan  of an
Alternative  Currency and the Agent shall apply the Advance Date  Exchange  Rate
for such new Interest Period to such Continued  Alternative  Currency Equivalent
Amount to determine the new Dollar Value of such  Eurodollar Rate Loan and shall
adjust its books and the  Outstandings.  In the event that such  adjustment with
respect to a Continued  Loan would  cause the total  Dollar  Value of  Revolving
Credit  Outstandings  plus the Dollar Value of Letter of Credit  Outstandings to
exceed the Total  Revolving  Credit  Commitment or the total Dollar Value of all
Loans in an  Alternative  Currency  to  exceed  the Total  Alternative  Currency
Sublimit by 105%, the Borrowers shall, immediately on the effective date of such
Continuation,  repay (a "Rate Adjustment Payment") the portion of such Continued
Loan (applying the new Advance Date Exchange Rate)  necessary to ensure that the
total Dollar Value of all Revolving Credit Outstandings plus the Dollar Value of
Letter  of Credit  Outstandings  does not  exceed  the  Total  Revolving  Credit
Commitment and the total Dollar Value of Loans in an  Alternative  Currency does
not exceed the Total Alternative Currency Sublimit by 105%. Such Rate Adjustment
Payments  shall be accompanied by payment of all amounts due pursuant to Section
5.5 hereof as a result of such Rate  Adjustment  Payment.  For the  purposes  of
determining the maximum amount of Revolving  Credit  Outstandings  and Letter of
Credit Outstandings and compliance with the Total Alternative  Currency Sublimit
hereunder,  it is intended by the parties that all Loans shall be the functional
equivalent  of Loans  made and  repaid  (based on the  applicable  Advance  Date
Exchange  Rate for each Advance) in Dollars.  It is recognized  that one or more
Lenders may elect to record  Loans in  Alternative  Currencies.  The Agent shall
maintain  records  sufficient  to  identify at any time,  (A) the  Advance  Date
Exchange  Rate with respect to each Advance and (B) the portion of the Revolving
Credit Outstandings attributable to each Advance.

     (ii) The aggregate unpaid principal amount (including with respect to Loans
of Alternative  Currencies  the total Dollar Value) of (A) the Revolving  Credit
Outstandings plus Letter of Credit Outstandings shall not exceed at any time the
Total Revolving  Credit  Commitment,  (B) the Term Loan  Outstandings  shall not
exceed  at any  time  the  Total  Term  Loan  Commitment,  and (C)  Loans  in an
Alternative  Currencies shall not exceed the Total Alternative Currency Sublimit
by 105%,  and, in the event there shall be outstanding any such excess in any of
the foregoing instances,  the Borrowers shall immediately make such payments and
prepayments  as shall be  necessary to comply with this  restriction.  Each Loan
hereunder,  other than Base Rate  Refunding  Loans,  and each  Conversion  under
Section 2.8, shall be (A) in the case of Loans made in Dollars,  in an amount of
at least  $5,000,000,  and, if greater than $5,000,000,  an integral multiple of
$1,000,000,  and (B) in the case of Loans made in an Alternative Currency, in an
amount of at least  $5,000,000 (or the Alternative  Currency  Equivalent  Amount
thereof),  and, if greater than $5,000,000,  an integral  multiple of $1,000,000
(or the Alternative Currency Equivalent Amount thereof).

     (d) Advances and Rate  Selection.  (i) An Authorized  Representative  shall
give the Agent (A) at least three (3) Business Days' irrevocable  written notice
by  telefacsimile  transmission of a Borrowing Notice or Interest Rate Selection
Notice (as applicable) with appropriate  insertions,  effective upon receipt, of
each  Eurodollar  Rate  Loan  (whether   representing  an  additional  borrowing
hereunder or the  Conversion of a borrowing  hereunder)  prior to 11:00 A.M. and
(B) irrevocable written notice by telefacsimile transmission of a

                                                                

<PAGE>



     Borrowing  Notice or Interest Rate Selection  Notice (as  applicable)  with
appropriate  insertions,  effective upon receipt,  of each Loan (other than Base
Rate Refunding Loans to the extent the same are effected without notice pursuant
to  Section  2.1(d)(iv))  that is a Base  Rate  Loan  (whether  representing  an
additional  borrowing hereunder or the Conversion of borrowing  hereunder) prior
to 11:00 A.M. on the day of such proposed Base Rate Loan. Each such notice shall
specify the amount of the borrowing,  whether Dollar or Alternative Currency (in
the case of a Revolving Loan), the Type of Loan (Base Rate or Eurodollar  Rate),
the date of borrowing and, if a Eurodollar  Rate Loan, the Interest Period to be
used in the computation of interest.  Notice of receipt of such Borrowing Notice
or Interest Rate Selection  Notice, as the case may be, together with the amount
of each  Lender's  portion of an Advance or  Segment  requested,  Continued,  or
Converted thereunder,  shall be promptly provided by the Agent to each Lender by
telefacsimile  transmission,  but  (provided  the Agent shall have received such
notice by 11:00  A.M.) not later than 1:00 P.M.  on the same day as the  Agent's
receipt of such  notice.  At  approximately  10:00 A.M.  two (2)  Business  Days
preceding the date  specified for an Advance,  Continuation  or Conversion of an
Alternative  Currency,  the Agent shall determine the Advance Date Exchange Rate
and the applicable  Eurodollar  Rate. Not later than 10:45 A.M. two (2) Business
Days preceding the date specified for each Advance,  Continuation  or Conversion
of an Alternative  Currency,  the Agent shall provide the applicable Borrower or
Borrowers and each Lender notice by  telefacsimile  transmission  of the Advance
Date Exchange Rate  applicable to such Advance,  Continuation  or Conversion and
the applicable  Alternative  Currency Equivalent Amount of the Revolving Loan or
Loans  required to be made by each Lender on such date,  and the Dollar Value of
such Revolving Loan or Loans and the applicable Eurodollar Rate.

     (ii) (A) In the case of Advances  in  Dollars,  not later than 2:00 P.M. on
the date specified for each borrowing under this Section 2.1, each Lender shall,
pursuant to the terms and subject to the conditions of this Agreement,  make the
amount of the Advance or Advances to be made by it on such day available by wire
transfer to the Agent in the amount of its pro rata share,  determined according
to such  Lender's  Applicable  Commitment  Percentage of the Loan or Loans to be
made on such  day.  Such wire  transfer  shall be  directed  to the Agent at the
Principal  Office and shall be in the form of Dollars  constituting  immediately
available funds. The amount so received by the Agent shall, subject to the terms
and conditions of this Agreement,  be made available to the applicable  Borrower
or Borrowers by delivery of the proceeds  thereof to the  Borrowers'  Account or
otherwise  as  shall be  directed  in the  applicable  Borrowing  Notice  by the
Authorized Representative and reasonably acceptable to the Agent.

     (B) In the case of  Advances  of an  Alternative  Currency,  not later than
10:00 A.M. on the date specified for each Advance,  each Lender shall,  pursuant
to the terms and subject to the conditions of this Agreement, make the amount of
the  Revolving  Loan or  Loans  to be made by it on such  day  available  to the
applicable  Borrower or  Borrowers  at the Funding  Bank,  to the account of the
Agent with the Funding  Bank.  The amount so received by the Funding Bank shall,
subject to the terms and conditions of the Loan  Documents and upon  instruction
from the Agent to the Funding Bank on the same day or immediately  preceding day
but no later than 10:00 A.M., be made  available to the  applicable  Borrower or
Borrowers  by  delivery of the  Alternative  Currency  Equivalent  Amount to the
Borrowers' account with the Funding Bank.

     (iii) The  Borrowers  shall  have the option to elect the  duration  of the
initial and any subsequent Interest Periods and to Continue or Convert the Loans
in accordance with Section 2.8. Eurodollar Rate Loans and Base Rate Loans may be
outstanding at the same time, provided,  however, there shall not be outstanding
at any one time  Eurodollar  Rate  Loans  having  more  than ten (10)  different
Interest  Periods.  If the  Agent  does not  receive  a  Borrowing  Notice or an
Interest Rate Selection Notice giving notice of election of the duration of an

                                                                 

<PAGE>



     Interest  Period or of Conversion of any Loan to or  Continuation of a Loan
as a Eurodollar  Rate Loan by the time  prescribed by Section 2.1(d) or 2.8, the
applicable Borrower or Borrowers shall be deemed to have elected to Convert such
Loans to (or  continue  such  Loan as) a Base Rate  Loan  until  the  applicable
Borrower or Borrowers notifies the Agent in accordance with Section 2.8.

     (iv)  Notwithstanding the foregoing,  if a drawing is made under any Letter
of Credit,  such  drawing is  honored  by the  Issuing  Bank prior to the Stated
Termination Date, and the applicable Borrower or Borrowers shall not immediately
fully  reimburse the Issuing Bank in respect of such drawing,  (A) provided that
the  conditions  to making a  Revolving  Loan as herein  provided  shall then be
satisfied,  the Reimbursement Obligation arising from such drawing shall be paid
to the Issuing Bank by the Agent  without the  requirement  of notice to or from
the applicable  Borrower or Borrowers  from  immediately  available  funds which
shall be  advanced  as a Base  Rate  Refunding  Loan by each  Lender  under  the
Revolving  Credit  Facility  in an  amount  equal  to such  Lender's  Applicable
Commitment  Percentage  of  such  Reimbursement  Obligation,   and  (B)  if  the
conditions  to  making a  Revolving  Loan as herein  provided  shall not then be
satisfied,  each of the  Lenders  shall  fund by  payment  to the Agent (for the
benefit of the Issuing Bank) in  immediately  available  funds the purchase from
the Issuing Bank of their respective Participations in the related Reimbursement
Obligation based on their respective  Applicable  Commitment  Percentages of the
Total Letter of Credit Commitment. If a drawing is presented under any Letter of
Credit  in  accordance  with the  terms  thereof  and the  Borrowers  shall  not
immediately  reimburse the Issuing Bank in respect thereof,  then notice of such
drawing or payment  shall be provided  promptly by the Issuing Bank to the Agent
and the Agent  shall  promptly  provide  notice to each Lender by  telephone  or
telefacsimile  transmission.  If notice to the  Lenders  of a drawing  under any
Letter of Credit is given by the Agent at or before 1:00 any Business  Day, each
Lender shall,  pursuant to the conditions  specified in this Section 2.1(d)(iv),
either make a Base Rate Refunding Loan or fund the purchase of its Participation
in the amount of such Lender's Applicable  Commitment Percentage of such drawing
or payment and shall pay such amount to the Agent for the account of the Issuing
Bank at the  Principal  Office in Dollars  and in  immediately  available  funds
before 2:00 P.M. on the same Business Day. If notice to the Lenders of a drawing
under a Letter of Credit is given by the Agent after 1:00 on any  Business  Day,
each  Lender  shall,  pursuant  to the  conditions  specified  in  this  Section
2.1(d)(iv),  either make a Base Rate  Refunding Loan or fund the purchase of its
Participation in the amount of such Lender's Applicable Commitment Percentage of
such  drawing or payment  and shall pay such amount to the Agent for the account
of the  Issuing  Bank at the  Principal  Office in  Dollars  and in  immediately
available  funds before 12:00 noon on the next following  Business Day. Any such
Base Rate  Refunding  Loan shall be advanced  as, and shall  continue as, a Base
Rate Loan unless and until the  applicable  Borrower or Borrowers  Converts such
Base Rate Loan in accordance with the terms of Section 2.8.

     (e)  Notwithstanding  any  other  provision  of this  Agreement,  except as
hereinafter  provided,  each Borrower  shall be jointly and severally  liable as
primary  obligor  and not  merely as surety  for  repayment  of all  Obligations
arising under the Loan Documents.  Such joint and several  liability shall apply
to each  Borrower  regardless  of whether (i) any Loan was only  requested by or
made to another  Borrower or the  proceeds of any Loan were used only by another
Borrower,  (ii) any Letter of Credit was  issued on the  application  of another
Borrower, (iii) any interest rate election was made only by another Borrower, or
(iv) any  indemnification  obligation  or any other  obligation  arose only as a
result of the actions of another Borrower; provided the liability of each of the
Borrowers  other than BREED under this  Agreement,  the Notes and the other Loan
Documents  shall be limited to the maximum amount of the  Obligations  under the
Revolving  Credit  Facility for which such other  Borrower may be liable without
violating  any  applicable   fraudulent   conveyance,   fraudulent  transfer  or
comparable  laws. Each Borrower shall retain any right of  contribution  arising
under applicable law against the

                                                                 

<PAGE>



     other  Borrowers  as the  result of the  satisfaction  of any  Obligations;
provided,  no Borrower shall assert such right of contribution against any other
Borrower  until the  Obligations  shall have been paid in full.  Notwithstanding
anything  herein to the  contrary,  a  Borrowing  Subsidiary  which is a Foreign
Subsidiary shall be liable hereunder only for Advances,  Loans and Reimbursement
Obligations  made  by it or on  its  behalf  hereunder  together  with  interest
relating thereto and fees and expenses arising hereunder.

     Without limiting the foregoing  provisions of this Section 2.1(e),  each of
the Borrowers,  other than a Borrowing Subsidiary which is a Foreign Subsidiary,
hereby  irrevocably,  absolutely  and  unconditionally  guarantees  the full and
punctual  payment  or  performance  when due,  whether  at stated  maturity,  by
required  prepayment,  declaration,  acceleration,  demand or otherwise,  of all
Obligations  of each other  Borrower  whether  owing to the Agent or any Lender.
This  guarantee  constitutes  a guaranty of payment and not of  collection.  The
liability of each of the Borrowers  other than BREED and a Borrowing  Subsidiary
which is a Foreign  Subsidiary  under the  immediately  preceding  two sentences
shall be limited to the  maximum  amount for which such  Borrower  may be liable
without violating any applicable fraudulent  conveyance,  fraudulent transfer or
comparable laws.

     It is the  intention of the parties that with respect to each  Borrower its
obligations  hereunder  and under the other Loan  Documents  shall be  absolute,
unconditional and irrevocable irrespective of:

     (i) any lack of validity, legality or enforceability of this Agreement, any
Note, any other Loan Document as to any other Borrowers;

     (ii) the failure of the Agent or any Lender:

     (A) to enforce any right or remedy  against any other Borrower or any other
Person under the provisions of this Agreement, any Note, any other Loan Document
or otherwise, or

     (B) to exercise any right or remedy against any guarantor of, or collateral
securing, any Obligations;

     (iii)  any  change in the time,  manner or place of  payment  of, or in any
other term of, all or any of the Obligations, or any other extension, compromise
or renewal of any Obligations with respect to any other Borrower;

     (iv)  any   reduction,   limitation,   impairment  or  termination  of  any
Obligations  with  respect  to any other  Borrower  or any other  Person for any
reason  including  any  claim  of  waiver,  release,  surrender,  alteration  or
compromise,  and shall not be subject to (and each  Borrower  hereby  waives any
right to or  claim  of) any  defense  or  setoff,  counterclaim,  recoupment  or
termination whatsoever by reason of the invalidity, illegality,  nongenuineness,
irregularity,   compromise  or  unenforceability  of,  or  any  other  event  or
occurrence affecting, any Obligations with respect to any other Borrower;

     (v) any addition,  exchange,  release,  surrender or  nonperfection  of any
collateral,  or any amendment to or waiver or release or addition of, or consent
to departure from , any guaranty, held by the Agent, any Lender or any holder of
any Note securing any of the Obligations; or


                                                               

<PAGE>



     (vi) any other  circumstance  which might  otherwise  constitute  a defense
available  to, or a legal or equitable  discharge  of, any other  Borrower,  any
surety or any guarantor.

     Each   Borrower   (except   Borrowing   Subsidiaries   which  are   Foreign
Subsidiaries)  agrees  that its  joint and  several  liability  hereunder  shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
any payment (in whole or in part) of any of the Obligations is rescinded or must
be  restored  by the  Agent,  any  Lender or any  holder  of any Note,  upon the
insolvency,  bankruptcy or  reorganization  of any other Borrower as though such
payment had not been made.

     Each  Borrower  hereby  expressly  waives:   (a)  notice  of  the  Lenders'
acceptance  of this  Agreement;  (b)  notice of the  existence  or  creation  or
non-payment of all or any of the Obligations; (c) presentment, demand, notice of
dishonor, protest, and all other notices whatsoever other than notices expressly
provided for in this  Agreement or by  applicable  law and (d) all  diligence in
collection or protection of or realization  upon the Obligations or any thereof,
any  obligation  hereunder,  or  any  security  for  or  guaranty  of any of the
foregoing.

     No delay on any of the  Lenders' or the Agent's part in the exercise of any
right or remedy  shall  operate  as a waiver  thereof,  and no single or partial
exercise  by any of the  Lenders  or the  Agent  of any  right or  remedy  shall
preclude  any other or further  exercise  thereof or the  exercise  of any other
right  or  remedy.  No  action  of the  Agent  or any of the  Lenders  permitted
hereunder  shall in any way affect or impair any of their rights or any of their
obligations to any of the Borrowers  under this  Agreement  (except as otherwise
waived, modified, or amended).

     2.2.  Payment of Interest.  (a) The applicable  Borrower or Borrowers shall
pay interest to the Agent for the account of each Lender on the  outstanding and
unpaid  principal  amount  of  each  Loan  made by such  Lender  for the  period
commencing on the date of such Loan until such Loan shall be due (i) in the case
of Loans made in Dollars,  at the then  applicable Base Rate for Base Rate Loans
or applicable  Eurodollar  Rate for Eurodollar  Rate Loans, as designated by the
Authorized  Representative  pursuant to Section 2.1, such payments to be made in
Dollars,  and (ii) in the case of Loans made in Alternative  Currencies,  at the
applicable  Eurodollar  Rate,  such  payments  to be  made  in  the  appropriate
Alternative  Currency;  provided,  however, that if any amount shall not be paid
when due (at maturity,  by acceleration or otherwise),  all amounts  outstanding
hereunder shall bear interest thereafter at the Default Rate.

     (b)  Interest  on each Loan shall be computed on the basis of a year of 360
days and calculated in each case for the actual number of days elapsed. Interest
on each Loan shall be paid (i)  quarterly in arrears on the last Business Day of
each March, June, September and December,  commencing December 31, 1997 for each
Base Rate Loan, (ii) on the last day of the applicable  Interest Period for each
Eurodollar  Rate Loan and (iii) upon payment in full of the principal  amount of
such Loan.

     2.3. Payment of Principal.

     (a)  Manner  of  Payment.  The  principal  amount of the  Revolving  Credit
Outstandings  shall be due and  payable  to the  Agent for the  benefit  of each
Lender  in  full  on the  Revolving  Credit  Termination  Date,  or  earlier  as
specifically provided herein. The principal amount of the Term Loan Outstandings
shall be due and  payable to the Agent for the benefit of each Lender in full on
the Stated  Termination  Date, or earlier as specifically  provided herein.  The
principal amount of all Outstandings shall be recorded in Dollars as set forth

                                                                 

<PAGE>



     in Section 2.1. The repayment of such principal amount shall be made in the
appropriate  Alternative  Currency as follows:  the portion of the  Outstandings
attributable  to each  specified  Advance  (or the  Continuation  or  Conversion
thereof) (as  determined  from the Agent's  records) shall be repaid in the same
Alternative Currency as such Advance. The principal amount of any Base Rate Loan
may be  prepaid  in  Dollars  in  whole  or in  part  at any  time.  Other  than
prepayments  made  pursuant  to  Section  2.3(b),  the  principal  amount of any
Eurodollar  Rate Loan may be prepaid only at the end of the applicable  Interest
Period unless the  applicable  Borrower or Borrowers  shall pay to the Agent for
the account of the Lenders the additional amount, if any, required under Section
5.5. All  prepayments  of Loans made by the Borrowers  shall be in the amount of
$1,000,000  (or the  Alternative  Currency  Equivalent  Amount  thereof) or such
greater amount which is an integral  multiple of $1,000,000 (or the  Alternative
Currency Equivalent Amount thereof), or the amount equal to all Outstandings, or
such other amount as necessary to comply with Section 2.1(c) or Section 2.8.

     (b) Mandatory Prepayments.  The Borrowers shall make the following required
prepayments,  each such  payment to be made to the Agent for the  benefit of the
Lenders within the time period  specified  below and with respect to any Loan in
an Alternative  Currency,  in the Alternative  Currency Equivalent Amount of the
amount due:

     (i) Equity  Offerings.  BREED  shall make,  or shall cause each  applicable
Subsidiary to make, a prepayment from the Net Proceeds of any Equity Offering in
an amount equal to one hundred  percent  (100%) of such Net Proceeds.  Each such
prepayment  shall be made within five (5)  Business  Days of receipt of such Net
Proceeds and upon not less than three (3) Business'  Days written  notice to the
Agent,  and shall include within one (1) Business Day of repayment a certificate
of  an  Authorized   Representative  setting  forth  in  reasonable  detail  the
calculations utilized in computing the amount of the Net Proceeds.

     (ii) Debt  Offerings.  BREED  shall make,  or shall  cause each  applicable
Subsidiary  to make, a prepayment  from the Net Proceeds of any Debt Offering in
an amount equal to one hundred  percent  (100%) of such Net Proceeds.  Each such
prepayment  shall be made within five (5)  Business  Days of receipt of such Net
Proceeds and upon not less than three (3) Business'  Days written  notice to the
Agent,  and shall include within one (1) Business Day of repayment a certificate
of  an  Authorized   Representative  setting  forth  in  reasonable  detail  the
calculations utilized in computing the amount of the Net Proceeds.

     (iii) Asset Dispositions.  BREED shall make, or shall cause each applicable
Subsidiary to make, a prepayment from the Net Proceeds of any Asset  Disposition
in an amount equal to one hundred percent (100%) of such Net Proceeds. Each such
prepayment  shall be made within five (5)  Business  Days of receipt of such Net
Proceeds and upon not less than three (3) Business'  Days written  notice to the
Agent, which notice shall include a certificate of an Authorized  Representative
setting forth in reasonable  detail the  calculations  utilized in computing the
amount of the Net Proceeds. Notwithstanding the foregoing, however, an aggregate
amount of up to $10,000,000  of the Net Proceeds from the sale of  nonproductive
foreign  assets may be excluded  from the payment  required  under this  Section
2.3(b)(iii)  to the extent  that such amount is used for  severance  payments to
former  employees of such foreign  assets who were released  from  employment in
connection  with such sale;  provided,  that upon receipt of the Operating Plan,
the Agent may,  but in no event  shall be required  to, in its sole  discretion,
increase the aggregate  amount so excluded as  appropriate;  provided,  further,
that any amount so excluded  shall be included in the  calculations  required by
the preceding sentence.

     (iv) Operating  Plan.  From and after the date of approval of the Operating
Plan, BREED shall

                                                                 

<PAGE>



     be entitled to retain an aggregate of $20,000,000 of Net Proceeds resulting
from Asset  Dispositions  received by it or its Subsidiaries  subsequent to such
date of approval.

     All mandatory  prepayments  made  pursuant to this Section  2.3(b) shall be
applied first to repay all Term Loans until the Term Loan Outstandings have been
paid  in  full  and  then to  permanently  reduce  the  Total  Revolving  Credit
Commitment.  Any prepayment of an Eurodollar  Rate Loan pursuant to this Section
2.3(b) other than on the last day of an Interest  Period shall be accompanied by
the additional payment, if any, required by Section 5.5 hereof.

     2.4. Non-Conforming  Payments. (a) Each payment of principal (including any
prepayment)  and payment of interest and fees, and any other amount  required to
be paid to the Lenders with respect to the Loans,  shall be made to the Agent at
the Principal Office,  for the account of each Lender, in Dollars in the case of
Loans made in Dollars and in the same Alternative  Currency in the case of Loans
made in Alternative Currencies, in immediately available funds before 12:30 P.M.
on the date such payment is due. The applicable Borrower or Borrowers shall give
the Agent  one (1)  Business  Days'  prior  written  notice  of any  payment  of
principal,  such notice to be given  prior to 11:00 A.M.  and to specify (i) the
date the payment will be made and (ii) the Loan to which  payment  relates.  The
Agent may, at the election of the  applicable  Borrower or Borrowers,  but shall
not be obligated  to, debit the amount of any such payment  which is not made by
such time to any ordinary  deposit  account,  if any, of the Borrowers  with the
Agent.

     (b) The Agent shall deem any payment made by or on behalf of the  Borrowers
hereunder  that is not made  both (i) in  Dollars  in the case of Loans  made in
Dollars and in the  required  Alternative  Currency in the case of Loans made in
Alternative  Currencies in immediately  available  funds and (ii) prior to 12:30
P.M. on the date payment is due to be a non-conforming payment. Any such payment
shall not be deemed to be  received  by the Agent until the later of (i)the time
such  funds  become   available   funds  and  (ii)the  next  Business  Day.  Any
non-conforming payment may constitute or become a Default or Event of Default at
the  determination  of the Agent.  The Agent  shall give  prompt  telephonic  or
telefacsimile notice to the applicable Borrower or Borrowers if a non-conforming
payment constitutes a Default or an Event of Default. Interest shall continue to
accrue on any principal as to which a  non-conforming  payment is made until the
later of (x) the date such funds become available funds or (y) the next Business
Day at the Default Rate from the date such amount was due and payable.

     (c) In the event that any payment  hereunder or under the Notes becomes due
and  payable  on a day other than a  Business  Day,  then such due date shall be
extended to the next  succeeding  Business Day unless  provided  otherwise under
clause (ii) of the definition of "Interest Period"; provided that interest shall
continue to accrue during the period of any such extension and provided further,
that in no  event  shall  any  such  due  date be  extended  beyond  the  Stated
Termination Date.

     2.5. Notes. (a) Term Loans made by each Lender shall be evidenced by a Note
in substantially  the form set forth as Exhibit O-1 payable to the order of such
Lender in the respective amount of its Applicable  Commitment  Percentage of the
Total Term Loan  Commitment,  which Note  shall be dated the  Closing  Date or a
later date pursuant to an Assignment and Acceptance and shall be duly completed,
executed and delivered by BREED.

     (b)  Revolving  Loans made by each Lender  shall be  evidenced by a Note in
substantially the form of Exhibit O-2 payable to the order of such Lender in the
respective amount of its Applicable Commitment

                                                                 

<PAGE>



     Percentage of the Total Revolving  Credit  Commitment,  which Note shall be
dated the Closing Date or a later date pursuant to an Assignment  and Acceptance
and shall be duly completed, executed and delivered by the Borrowers.

     2.6. Pro Rata  Payments.  Except as  otherwise  provided  herein,  (a) each
payment on account of the  principal  of and  interest on the Loans and the fees
described  in  Section  2.10  shall be made to the Agent for the  account of the
Lenders  pro rata  based on their  Applicable  Commitment  Percentages,  (b) all
payments to be made by the  Borrowers  for the account of each of the Lenders on
account of  principal,  interest  and fees,  shall be made  without  diminution,
setoff,  recoupment or counterclaim,  and (c) the Agent will promptly distribute
to the  Lenders  in  immediately  available  funds  payments  received  in fully
collected, immediately available funds from the Borrowers.

     2.7. Voluntary Commitment  Reductions.  The Borrowers shall, by notice from
an  Authorized  Representative,  have the  right  from time to time but not more
frequently than once each calendar month,  upon not less than three (3) Business
Days' written notice to the Agent,  effective upon receipt,  to repay Term Loans
or reduce  the Total  Revolving  Credit  Commitment.  The Agent  shall give each
Lender,  within one (1) Business  Day of receipt of such  notice,  telefacsimile
notice,  or telephonic notice  (confirmed in writing),  of such reduction.  Each
such  reduction  shall  be  in  the  aggregate  amount  of  $5,000,000  (or  the
Alternative  Currency Equivalent Amount thereof in the case of a Revolving Loan)
or such greater  amount which is in an integral  multiple of $5,000,000  (or the
Alternative Currency Equivalent Amount thereof in the case of a Revolving Loan),
or the entire remaining Total Revolving Credit Commitment, and shall permanently
reduce  the Total  Revolving  Credit  Commitment.  Each  reduction  of the Total
Revolving Credit  Commitment shall be accompanied by payment of the Loans to the
extent that the principal amount of Revolving Credit Outstandings plus Letter of
Credit  Outstandings  exceeds the Total Revolving Credit Commitment after giving
effect to such  reduction,  together  with  accrued  and unpaid  interest on the
amounts  prepaid.  No such repayment or reduction shall result in the payment of
any  Eurodollar  Rate Loan other than on the last day of the Interest  Period of
such  Eurodollar Rate Loan unless such prepayment is accompanied by amounts due,
if any, under Section 5.5.

     2.8.  Conversions and Elections of Subsequent Interest Periods.  Subject to
the  limitations  set forth below and in Article V, the  applicable  Borrower or
Borrowers may:

     (a) upon delivery, effective upon receipt, of a properly completed Interest
Rate Selection  Notice to the Agent on or before 11:00 A.M. on any Business Day,
Convert  all or a part of  Eurodollar  Rate Loans to Base Rate Loans on the last
day of the Interest Period for such Eurodollar Rate Loans; and

     (b) provided that no Default or Event of Default shall have occurred and be
continuing,  upon  delivery,  effective  upon receipt,  of a properly  completed
Interest Rate  Selection  Notice to the Agent on or before 11:00 A.M.  three (3)
Business Days' prior to the date of such election or Conversion:

     (i) elect a subsequent  Interest  Period for all or a portion of Eurodollar
Rate Loans to begin on the last day of the then current Interest Period for such
Eurodollar Rate Loans; and

     (ii) Convert Base Rate Loans to Eurodollar Rate Loans on any Business Day;

     (iii) elect that any Eurodollar  Rate Loan be converted from an Alternative
Currency into

                                                                

<PAGE>



     another Alternative Currency on the last day of the Interest Period for any
Eurodollar Rate Loan.

     Each election and Conversion  pursuant to this Section 2.8 shall be subject
to the  limitations  on  Eurodollar  Rate Loans set forth in the  definition  of
"Interest Period" herein and in Sections 2.1, 2.3 and Article V. The Agent shall
give  written  notice to each Lender of such  notice of  election or  Conversion
prior to 3:00 P.M. on the day such notice of election or Conversion is received.
All such  Continuations or Conversions of Loans shall be effected pro rata based
on the Applicable Commitment Percentages of the Lenders.

     2.9.  Increase and Decrease in Amounts.  The amount of the Total  Revolving
Credit Commitment which shall be available to the Borrowers as Advances shall be
reduced by the aggregate amount of Letters of Credit Outstandings.

     2.10.  Commitment  Fee.  For the period  beginning  on the Closing Date and
ending on the Revolving Credit  Termination  Date, the Borrowers agree to pay to
the Agent,  for the  prorata  benefit of the Lenders  based on their  Applicable
Commitment Percentages,  an unused fee equal to the Commitment Fee multiplied by
the average daily amount by which the Total Revolving Credit Commitment  exceeds
the  sum of (i)  Revolving  Credit  Outstandings  plus  (ii)  Letter  of  Credit
Outstandings. Such fees shall be due in arrears on the last Business Day of each
March,June,  September and December commencing December 31,1997 to the Revolving
Credit  Termination  Date (but  excluding  such day for the purpose of computing
such fee).  Notwithstanding  the foregoing,  so long as any Lender fails to make
available any portion of its Revolving  Credit  Commitment when requested,  such
Lender  shall not be entitled  to receive  payment of its pro rata share of such
fee until such  Lender  shall make  available  such  portion.  Such fee shall be
calculated  on the  basis of a year of 360 days for the  actual  number  of days
elapsed.

     2.11.  Deficiency Advances.  No Lender shall be responsible for any default
of any other  Lender in respect to such other  Lender's  obligation  to make any
Loan or fund its purchase of any Participation hereunder nor shall the Revolving
Credit  Commitment or Term Loan Commitment of any Lender  hereunder be increased
as a result of such default of any other Lender. Without limiting the generality
of the  foregoing,  in the event any Lender  shall fail to advance  funds to the
applicable  Borrower  or  Borrowers  as  herein  provided,  the Agent may in its
discretion,  but shall not be obligated to,  advance under the Note in its favor
as a Lender all or any portion of such amount or amounts  (each,  a  "deficiency
advance")  and shall  thereafter  be entitled to  payments of  principal  of and
interest on such deficiency  advance in the same manner and at the same interest
rate or rates to which such other  Lender  would have been  entitled had it made
such advance under its Note;  provided that, upon payment to the Agent from such
other Lender of the entire outstanding  amount of each such deficiency  advance,
together with accrued and unpaid interest thereon,  from the most recent date or
dates interest was paid to the Agent by the applicable  Borrower or Borrowers on
each Loan  comprising the deficiency  advance at the interest rate per annum for
overnight  borrowing  by the Agent  from the  Federal  Reserve  Bank,  then such
payment  shall be  credited  against  the  applicable  Note of the Agent in full
payment of such  deficiency  advance and the  applicable  Borrower or  Borrowers
shall be deemed to have borrowed the amount of such deficiency advance from such
other Lender as of the most recent date or dates, as the case may be, upon which
any  payments  of interest  were made by the  applicable  Borrower or  Borrowers
thereon.

     2.12.  Use of  Proceeds.  The  proceeds  of the Loans made  pursuant to the
Revolving  Credit  Facility  hereunder  shall  be used by the  Borrowers  (i) to
purchase the Acquired Business pursuant to the Asset Purchase Agreement, (ii) to
refinance  existing  Indebtedness  and the fees  and  expenses  related  to such
refinancing, and

                                                                 

<PAGE>



     (iii) for general working capital needs and other corporate purposes.

     2.13. Designation of Borrowing Subsidiaries. With the consent of the Agent,
BREED may from time to time designate any Foreign  Subsidiary of BREED which has
not  joined in the  execution  of this  Agreement  as a  "Borrowing  Subsidiary"
hereunder under the Revolving Credit Facility by causing such Foreign Subsidiary
to execute and deliver a duly completed  Assumption  Letter in the form attached
hereto as  Exhibit U to the  Agent,  with the  written  consent of BREED and the
Agent at the foot  thereof.  Upon such  execution,  delivery  and  consent  such
Foreign  Subsidiary  shall for all  purposes  be a party  hereto as a  Borrowing
Subsidiary as fully as if it had executed and delivered this Agreement.  So long
as all Obligations of any Borrowing  Subsidiary  under this Agreement shall have
been paid in full,  such  Borrowing  Subsidiary  may,  by not less than five (5)
Business  Days'  prior  notice to the Agent  (which  shall  promptly  notify the
Lenders thereof), terminate its status as a "Borrowing Subsidiary" hereunder.

     ARTICLE III

     Letters of Credit

     3.1. Letters of Credit.  (a) The Issuing Bank agrees,  subject to the terms
and  conditions  of this  Agreement,  upon request of a Borrower or Borrowers to
issue from time to time for the account of the Borrower or Borrowers  Letters of
Credit upon  delivery to the Issuing Bank of an  Application  and  Agreement for
Letter of Credit relating thereto in form and content  acceptable to the Issuing
Bank; provided,  that (i) the Letter of Credit Outstandings shall not exceed the
Total Letter of Credit  Commitment  and (ii) no Letter of Credit shall be issued
if,  after  giving  effect  thereto,  Letter  of  Credit  Outstandings  plus the
Revolving   Credit   Outstandings   shall  exceed  the  Total  Revolving  Credit
Commitment.  No Letter of Credit shall have an expiry date (including all rights
of a  Borrower  or any  beneficiary  named in such  Letter of Credit to  require
renewal) or payment date  occurring  later than the earlier to occur of one year
after the date of its  issuance  or the fifth  Business  Day prior to the Stated
Termination Date.

     (b) Upon  completion  of a proper  Application  and Agreement for Letter of
Credit,  NationsBank may issue upon request and for the account of an applicable
Borrower or Borrowers Letters of Credit payable in an Alternative Currency.  For
purposes  of  determining  Outstanding  Letters of Credit,  any Letter of Credit
issued in an Alternative  Currency  shall be recorded in the Agent's  account in
Dollars  based on the  Alternative  Currency  Equivalent  Amount  on the date of
issuance  of such  Letter of Credit;  provided,  however,  that the Agent  shall
determine  the Dollar  Equivalent  Amount of any  Letter of Credit  issued in an
Alternative Currency on the date of any Advance or Conversion for the purpose of
determining the amount of Revolving Credit  Outstandings and compliance with the
Total Alternative Currency Sublimit. Any draw on a Letter of Credit issued in an
Alternative Currency shall be repaid in the same Alternative Currency Equivalent
Amount  (determined  based on the Spot Rate of  Exchange  on the date of drawing
under the Letter of Credit).  In the event that the Agent shall determine at any
time that (i) the Dollar Value of outstanding  Loans and Outstanding  Letters of
Credit,  in each case  determined  on the date of each  Advance or issuance of a
Letter of Credit,  made or issued in  Alternative  Currencies  exceeds the Total
Alternative Currency Sublimit or (ii) that the sum of the Dollar Value described
in subclause (i) plus  outstanding  Revolving Loans and  Outstanding  Letters of
Credit made or issued in Dollars exceeds the Total Revolving Credit  Commitment,
then the Borrowers shall  immediately repay Revolving Loans so that after giving
effect to such payment the outstanding  Revolving Loans plus Outstanding Letters
of Credit do not  exceed the Total  Revolving  Credit  Commitment  and the Loans
advanced in an Alternative Currency plus

                                                                 

<PAGE>



     Outstanding  Letters of Credit  issued in and  Alternative  Currency do not
exceed the Total Alternative Currency Sublimit.

     3.2. Reimbursement.

     (a) The applicable Borrower or Borrowers hereby  unconditionally  agrees to
pay to the  Issuing  Bank  immediately  on demand at the  Principal  Office  all
amounts  required to pay all drafts  drawn or  purporting  to be drawn under the
Letters of Credit and all  reasonable  expenses  incurred by the Issuing Bank in
connection  with the Letters of Credit,  and in any event and without  demand to
place in possession of the Issuing Bank (which shall include  Advances under the
Revolving  Credit Facility if permitted by Section 2.1(a))  sufficient  funds to
pay all debts and  liabilities  arising under any Letter of Credit.  The Issuing
Bank agrees to give the  applicable  Borrower or Borrowers  prompt notice of any
request  for a draw  under a Letter of  Credit.  The  Issuing  Bank may,  at the
request  of the  applicable  Borrower  or  Borrowers,  charge  any  account  the
applicable  Borrower or  Borrowers  may have with it for any and all amounts the
Issuing Bank pays under a Letter of Credit, plus charges and reasonable expenses
as from time to time agreed to by the Issuing Bank and the  applicable  Borrower
or  Borrowers;  provided  that to the extent  permitted  by Section  2.1(d)(iv),
amounts shall be paid pursuant to Advances under the Revolving  Credit Facility.
The  Borrowers  agree to pay the  Issuing  Bank  interest  on any  Reimbursement
Obligations  not paid  when due  hereunder  at the Base  Rate  plus two  percent
(2.0%),  or the maximum rate permitted by applicable law, if lower, such rate to
be calculated on the basis of a year of 360 days for actual days elapsed.

     (b) In accordance with the provisions of Section  2.1(d),  the Issuing Bank
shall  notify  the  Agent of any  drawing  under any  Letter of Credit  promptly
following the receipt by the Issuing Bank of such drawing.

     (c) Each Lender (other than the Issuing Bank) shall  automatically  acquire
on the date of issuance thereof, a Participation in the liability of the Issuing
Bank in respect  of each  Letter of Credit in an amount  equal to such  Lender's
Applicable Commitment Percentage  (determined based on the Spot Rate of Exchange
on the date of drawing under the Letter of Credit) of such liability, and to the
extent  that the  applicable  Borrower or  Borrowers  are  obligated  to pay the
Issuing Bank under  Section  3.2(a),  each Lender  (other than the Issuing Bank)
thereby shall absolutely,  unconditionally  and irrevocably assume, and shall be
unconditionally  obligated to pay to the Issuing Bank as hereinafter  described,
its Applicable  Commitment Percentage of the liability of the Issuing Bank under
such Letter of Credit.

     (i) Each Lender  (including  the Issuing  Bank in its capacity as a Lender)
shall,  subject to the terms and  conditions of Article II, pay to the Agent for
the  account of the  Issuing  Bank at the  Principal  Office in  Dollars  and in
immediately  available  funds,  an  amount  equal to its  Applicable  Commitment
Percentage of any drawing under a Letter of Credit, such funds to be provided in
the manner described in Section 2.1(d)(iv).

     (ii)  Simultaneously  with the  making of each  payment  by a Lender to the
Issuing Bank pursuant to Section 2.1(d)(iv)(B), such Lender shall, automatically
and without any further  action on the part of the Issuing  Bank or such Lender,
acquire  a  Participation  in an amount  equal to such  payment  (excluding  the
portion thereof constituting  interest accrued prior to the date the Lender made
its payment) in the related Reimbursement  Obligation of the applicable Borrower
or  Borrowers.   The  Reimbursement   Obligations  of  the  Borrowers  shall  be
immediately  due and payable whether by Advances made in accordance with Section
2.1(d)(iv), or otherwise.

                                                                 

<PAGE>



     (iii) Each Lender's obligation to make payment to the Agent for the account
of the Issuing Bank pursuant to Section  2.1(d)(iv) and this Section 3.2(c), and
the right of the  Issuing  Bank to  receive  the  same,  shall be  absolute  and
unconditional, shall not be affected by any circumstance whatsoever and shall be
made without any offset, abatement,  withholding or reduction whatsoever. If any
Lender is obligated to pay but does not pay amounts to the Agent for the account
of the Issuing Bank in full upon such request as required by Section  2.1(d)(iv)
or this Section 3.2(c),  such Lender shall, on demand,  pay to the Agent for the
account of the Issuing  Bank  interest on the unpaid  amount for each day during
the period  commencing  on the date of notice  given to such Lender  pursuant to
Section  2.1(d)  until such Lender pays such amount to the Agent for the account
of the  Issuing  Bank in full at the  interest  rate  per  annum  for  overnight
borrowing by the Agent from the Federal Reserve Bank.

     (iv)  In  the  event  the  Lenders  have  purchased  Participations  in any
Reimbursement  Obligation  as set forth in clause (ii)  above,  then at any time
payment (in fully collected,  immediately available funds) of such Reimbursement
Obligation,  in whole or in part,  is  received  by the  Issuing  Bank  from the
applicable  Borrower or Borrowers,  the Issuing Bank shall  promptly pay to each
Lender an amount equal to its Applicable  Commitment  Percentage of such payment
from the applicable Borrower or Borrowers.

     (d) Promptly  following the end of each calendar quarter,  the Issuing Bank
shall deliver to the Agent a notice  describing the aggregate  undrawn amount of
all Letters of Credit at the end of such quarter. Upon the request of any Lender
from time to time,  the Issuing Bank shall  deliver to the Agent,  and the Agent
shall deliver to such Lender, any other information reasonably requested by such
Lender with respect to each outstanding Letter of Credit.

     (e) The  issuance by the Issuing  Bank of each Letter of Credit  shall,  in
addition to the conditions  precedent set forth in Article VI, be subject to the
conditions  that such Letter of Credit be in such form and contain such terms as
shall be reasonably  satisfactory  to the Issuing Bank  consistent with the then
current  practices  and  procedures  of the Issuing Bank with respect to similar
letters of credit, and the applicable  Borrower or Borrowers shall have executed
and delivered such other instruments and agreements  relating to such Letters of
Credit as the Issuing Bank shall have reasonably  requested consistent with such
practices  and  procedures  and shall not be in conflict with any of the express
terms herein  contained.  All Letters of Credit shall be issued  pursuant to and
subject to the Uniform  Customs  and  Practice  for  Documentary  Credits,  1993
revision,  International  Chamber  of  Commerce  Publication  No.  500  and  all
subsequent amendments and revisions thereto.

     (f) The Borrowers agree that the Issuing Bank may, in its sole  discretion,
accept or pay, as complying  with the terms of any Letter of Credit,  any drafts
or other  documents  otherwise  in order  which  may be  signed  or issued by an
administrator,  executor, trustee in bankruptcy, debtor in possession,  assignee
for the benefit of creditors,  liquidator,  receiver,  attorney in fact or other
legal representative of a party who is authorized under such Letter of Credit to
draw or issue any drafts or other documents.

     (g) Without  limiting the generality of the provisions of Section 12.9, the
Borrowers  hereby agree to indemnify and hold  harmless the Issuing  Bank,  each
other  Lender and the Agent  from and  against  any and all claims and  damages,
losses, liabilities,  reasonable costs and expenses which the Issuing Bank, such
other Lender or the Agent may incur (or which may be claimed against the Issuing
Bank,  such  other  Lender  or the  Agent)  by any  Person  by  reason  of or in
connection with the issuance or transfer of or payment or failure to pay

                                                                

<PAGE>



     under any  Letter  of  Credit;  provided  that the  Borrowers  shall not be
required to indemnify  the Issuing  Bank,  any other Lender or the Agent for any
claims, damages, losses, liabilities,  costs or expenses to the extent, but only
to the extent,  (i) caused by the willful  misconduct or gross negligence of the
party to be indemnified or (ii) caused by the failure of the Issuing Bank to pay
under any Letter of Credit after the presentation to it of a request for payment
strictly  complying  with the terms and  conditions  of such  Letter of  Credit,
unless such payment is prohibited by any law, regulation, court order or decree.
The  indemnification  and hold harmless  provisions of this Section 3.2(g) shall
survive  repayment  of  the  Obligations,  occurrence  of the  Revolving  Credit
Termination Date and expiration or termination of this Agreement.

     (h) Without limiting the Borrowers'  rights as set forth in Section 3.2(g),
the  obligation of the Borrowers to  immediately  reimburse the Issuing Bank for
drawings  made under  Letters of Credit and the Issuing  Bank's right to receive
such  payment  shall  be  absolute,  unconditional  and  irrevocable,  and  such
obligations of the Borrowers shall be performed  strictly in accordance with the
terms of this  Agreement  (as waived,  modified or amended)  and such Letters of
Credit and the  related  Applications  and  Agreement  for any Letter of Credit,
under all circumstances whatsoever, including the following circumstances:

     (i) any lack of validity  or  enforceability  of the Letter of Credit,  the
obligation  supported  by the  Letter  of  Credit  or  any  other  agreement  or
instrument relating thereto (collectively, the "Related LC Documents");

     (ii) any amendment or waiver of or any consent to or departure  from all or
any of the Related LC Documents;

     (iii) the existence of any claim,  setoff,  defense (other than the defense
of payment in accordance with the terms of this Agreement) or other rights which
the Borrowers may have at any time against any  beneficiary or any transferee of
a Letter of Credit (or any persons or entities for whom any such  beneficiary or
any such transferee may be acting),  the Agent, the Lenders or any other Person,
whether in connection with the Loan  Documents,  the Related LC Documents or any
unrelated transaction;

     (iv) any breach of contract or other dispute  between the Borrowers and any
beneficiary  or any transferee of a Letter of Credit (or any persons or entities
for whom such beneficiary or any such transferee may be acting),  the Agent, the
Lenders or any other Person;

     (v) any draft,  statement or any other document  presented under the Letter
of Credit  proving to be forged,  fraudulent,  invalid  or  insufficient  in any
respect or any  statement  therein  being  untrue or  inaccurate  in any respect
whatsoever;

     (iv) any delay, extension of time, renewal,  compromise or other indulgence
or modification  granted or agreed to by the Agent, with or without notice to or
approval by the Borrowers in respect of any of the Borrowers'  Obligations under
this Agreement.

     Nothing  contained  in this clause (h) shall  relieve  the Issuing  Bank of
liability for its gross negligence or willful misconduct or breach of contract.



                                                                 

<PAGE>



     3.3.  Letter of Credit Facility Fees. The Borrowers shall pay to the Agent,
(i) for the pro rata benefit of the Lenders based on their Applicable Commitment
Percentages,  a fee on the  aggregate  amount  available  to be  drawn  on  each
outstanding  Letter of  Credit  at a rate  equal to the  Applicable  Margin  for
Eurodollar  Rate Loans,  and (ii) for the Issuing Bank,  when there is more than
one Lender,  0.125% based on the aggregate  amount available to be drawn on each
outstanding Letter of Credit. Such fees shall be due with respect to each Letter
of Credit  quarterly in arrears on the last day of each March,  June,  September
and  December,  the first such  payment to be made on the date of  issuance of a
Letter of Credit.  The fees described in this Section 3.3 shall be calculated on
the basis of a year of 360 days for the actual number of days elapsed.

     ARTICLE IV

     Security

     4.1. Guaranty.  To guarantee the full and timely payment and performance of
all Obligations now existing or hereafter arising, the Borrowers shall cause the
Guaranty to be delivered  by each  Domestic  Subsidiary  that is not a Borrowing
Subsidiary in the form and substance  reasonably  acceptable to the Agent, on or
before the Closing Date.  The  Borrowers  hereby agree to cause a Guaranty to be
delivered by any hereafter acquired or created Domestic  Subsidiary  pursuant to
the terms of Section  8.19 hereof.  Notwithstanding  the  foregoing,  a Domestic
Subsidiary  formed to issue  Convertible  Preferred  Securities  (and whose only
asset is the Convertible  Debentures or amounts  received  thereon) shall not be
required to become a Guarantor.

     4.2.  Stock  Pledge.  (a) As security  for the full and timely  payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable,  its  obligations as a Guarantor under the Guaranty  Agreement,  the
Borrowers  and each  Person  owning  any  Pledged  Stock  shall on or before the
Closing Date deliver to the Agent, in form and substance  reasonably  acceptable
to the Agent, a Pledge Agreement  together with  certificates  representing such
Pledged Stock with stock powers duly  executed in blank which Pledge  Agreements
shall pledge to the Agent for the benefit of the Lenders (w) 100% of the capital
stock and  related  interests  and  rights of any  Domestic  Subsidiary  and any
Subsidiary  of a  Borrowing  Subsidiary  and (x) not less than 65% of the Voting
Stock and 100% of the non-voting  common stock and related  interests and rights
of any  Direct  Foreign  Subsidiary  in  accordance  with the terms  hereof  and
thereof.

     (b) BREED and each  Subsidiary  hereby agree to pledge to the Agent for the
benefit of the Lenders (y) 100% of the capital  stock and related  interests and
rights of any Domestic  Subsidiary and any Subsidiary of a Borrowing  Subsidiary
hereafter  acquired or created and owned directly or indirectly by BREED and (z)
not less than 65% of the Voting  Stock and 100% of the  non-voting  common stock
and related  interests  and rights of any Direct  Foreign  Subsidiary  hereafter
acquired  or  created  and,  in each  case,  to  deliver  to the  Agent a Pledge
Agreement  substantially in the form of Exhibit P-1 or P-2, as applicable within
thirty (30) days after the  acquisition or creation of such Domestic  Subsidiary
or  Direct  Foreign  Subsidiary,  as the case may be,  pursuant  to the terms of
Section 8.19, hereof;  provided,  however, in the event the laws or practices of
any foreign  jurisdiction  preclude or prevent the completion or delivery of the
Pledge Agreement as provided herein, the Direct Foreign Subsidiary shall have an
additional forty-five (45) days to deliver such Pledge Agreement.

     4.3.  Security  Interests.  As security for the full and timely payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable,  its obligations as a Guarantor under the Guaranty Agreement,  BREED
shall,  and shall cause each  Domestic  Subsidiary  to, on or before the Closing
Date deliver to

                                                                 

<PAGE>



     the Agent, in form and substance  reasonably  acceptable to the Agent,  the
Security Agreement,  the Uniform Commercial Code financing statements,  and each
other  Security  Instrument  sufficient  to  grant to the  Agent a  valid,  duly
perfected security interest in the Collateral  described therein,  subject to no
prior Liens other than Permitted  Liens,  and with respect to the Mortgages,  no
prior Liens other than the Permitted Encumbrances as defined therein, and do all
things  necessary  in the  opinion of the Agent and its  counsel to grant to the
Agent for the benefit of the Lenders a first priority  security  interest,  duly
perfected  with  respect to  Collateral  governed by the UCC, in all  Collateral
subject to no prior Lien or other  encumbrance or restriction on transfer (other
than  restrictions  on  transfer  imposed  by  applicable  securities  laws  and
Permitted  Liens).  BREED hereby agrees to cause the Security  Instruments to be
delivered by any hereafter  acquired or created  Domestic  Subsidiary or, to the
extent  applicable  under  foreign law or practice,  Direct  Foreign  Subsidiary
pursuant to the terms of Section 8.19 hereof.

     4.4.  Lease  Assignments.  As security for the full and timely  payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable,  the Guarantors'  Obligations  under the Guaranty  Agreement,  BREED
shall,  and shall cause each  Domestic  Subsidiary  to, on or before the Closing
Date deliver to the Agent,  in form and substance  reasonably  acceptable to the
Agent, the Lease  Assignments.  The Lease  Assignments  shall be delivered on or
before the Closing  Date and  thereafter  as any new or  additional  facility is
leased by BREED or any  existing  or  hereafter  acquired  or  created  Domestic
Subsidiary.

     4.5. Mortgages. As security for the full and timely payment and performance
of (i) all Obligations now existing or hereafter arising and (ii) if applicable,
the Guarantors' Obligations under the Guaranty Agreement, BREED shall, and shall
cause each Domestic  Subsidiary to, on or before the Closing Date deliver to the
Agent, in form and substance reasonably  acceptable to the Agent, the Mortgages.
The Mortgages shall be delivered on or before the Closing Date and thereafter as
any new or  additional  real  property is  acquired by BREED or any  existing or
hereafter acquired or created Domestic Subsidiary.

     4.6.  Landlord  Waivers.  As security  for the full and timely  payment and
performance of (i) all Obligations now existing or hereafter arising and (ii) if
applicable,  the Guarantors'  Obligations  under the Guaranty  Agreement,  BREED
shall,  and shall cause each  Domestic  Subsidiary  to, on or before the Closing
Date deliver to the Agent,  in form and substance  reasonably  acceptable to the
Agent, to the extent available, the Landlord Waivers. The Landlord Waivers shall
be delivered on or before the Closing Date and  thereafter  as new or additional
facility  is leased by BREED or any  existing or  hereafter  acquired or created
Domestic Subsidiary.

     4.7. Intellectual Property. As security for the full and timely payment and
performance of (i) all  Obligations  now existing or hereafter  arising and (ii)
certain of the  Guarantors'  Obligations  under the  Guaranty  Agreement,  BREED
shall,  and shall cause each  Domestic  Subsidiary  to, on or before the Closing
Date deliver to the Agent,  in form and substance  reasonably  acceptable to the
Agent,  the  Intellectual  Property  Security  Agreement  and  the  Intellectual
Property Assignment.  BREED hereby agrees to pledge, or cause to be pledged, all
intellectual  property  interests and licenses hereafter acquired or created and
owned by BREED  and any  Domestic  Subsidiary  within  thirty  (30)  days of the
acquisition or creation of such  intellectual  property or license,  pursuant to
the terms of Section  8.19;  provided,  however,  that  should any  Intellectual
Property  Agreement  require  the  consent  of any  third  party,  BREED and its
Domestic  Subsidiaries  shall use its best  efforts to supply  such  Assignment;
provided  further  that in the  event  the  execution  of an  Assignment  or the
assignment  of the  Intellectual  Property  shall result in a forfeiture of such
Intellectual  Property  this  provision  shall  not  apply to such  Intellectual
Property.

                                                                 

<PAGE>



     4.8. Pledge and  Subordination  of Intercompany  Notes. As security for the
full and timely payment and  performance of (i) all  Obligations now existing or
hereafter  arising and (ii)  certain of the  Guarantors'  Obligations  under the
Guaranty  Agreement,  BREED shall cause the Intercompany Note Holders to deliver
the  Intercompany  Note  Pledge  Agreement  to the Agent for the  benefit of the
Lenders. BREED hereby agrees to cause the Intercompany Note Holders now existing
or hereafter acquired or created to pledge, grant a Lien and collaterally assign
to the Agent for the benefit of the Lenders all Intercompany  Notes now existing
or hereafter arising.

     4.9.  Pledge of  Partnership  Interests.  (a) As security  for the full and
timely payment and  performance of (i) all Obligations now existing or hereafter
arising and (ii) if applicable,  the Guarantors'  Obligations under the Guaranty
Agreement,  BREED and each  Person  owning any  Assigned  Interests  shall on or
before the Closing Date deliver to the Agent,  in form and substance  reasonably
acceptable  to the Agent,  a  Collateral  Assignment  of  Partnership  Interests
together with a Receipt and  Certificate  of Registrar as may be required by the
Agent, which Collateral  Assignment of Partnership Interests shall pledge to the
Agent for the benefit of the Lenders 100% of the ownership  interests and rights
in limited  partnerships in accordance with the terms hereof and thereof and, to
the extent hereafter required by the Agent, any joint venture interests.

     (b) BREED and each Subsidiary  hereby agree to  collaterally  assign to the
Agent for the benefit of the Lenders 100% of the ownership  interests and rights
in limited  partnership and joint ventures hereafter acquired or created,  other
than the joint venture described in Section 9.6(h),  and to deliver to the Agent
a Collateral Assignment of Partnership  Interests  substantially in the form and
content  acceptable to the Agent within thirty (30) days of the  acquisition  or
creation of such Subsidiary pursuant to the terms of Section 8.19.

     4.10. Collateral Assignment of Trademark License Agreement. As security for
the full and timely payment and  performance of (i) all Obligations now existing
or hereafter arising and (ii) if applicable,  the Guarantors'  Obligations under
the Guaranty Agreement, BREED shall cause the Collateral Assignment of Trademark
License Agreement to be delivered to the Agent for the benefit of the Lenders on
or before the Closing Date.

     4.11. Further Assurances. At the request of the Agent, BREED will, and will
cause each Subsidiary to, execute by its duly authorized officers, alone or with
the Agent, any certificate,  instrument,  statement or document and will procure
any such certificate,  instrument,  statement or document (and pay all connected
costs)  which the Agent  reasonably  deems  necessary  to create or preserve the
Liens (and the perfection and priority  thereof) of the Agent for the benefit of
the Lenders contemplated hereby and by the other Loan Documents.

     ARTICLE V

     Change in Circumstances

     5.1.  Increased Cost and Reduced Return. (a) If, after the date hereof, the
adoption  of any  applicable  law,  rule,  or  regulation,  or any change in any
applicable  law, rule, or  regulation,  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 by any Lender (or its Applicable  Lending Office) with any request or
directive  (whether  or not  having  the force of law) of any such  governmental
authority, central bank, or comparable agency:


                                                                 

<PAGE>



     (i) shall  subject such Lender (or its  Applicable  Lending  Office) to any
tax, duty, or other charge with respect to any Eurodollar Rate Loans,  its Note,
or its obligation to make Eurodollar Rate Loans, or change the basis of taxation
of any amounts  payable to such Lender (or its Applicable  Lending Office) under
this Agreement or its Note in respect of any  Eurodollar  Rate Loans (other than
taxes  imposed on the overall net income of such Lender by the  jurisdiction  in
which such Lender has its principal office or such Applicable Lending Office and
franchise taxes);

     (ii) shall impose, modify, or deem applicable any reserve, special deposit,
assessment,  or similar requirement (other than the Reserve Requirement utilized
in the  determination  of the  Eurodollar  Rate)  relating to any  extensions of
credit  or  other  assets  of,  or any  deposits  with or other  liabilities  or
commitments of, such Lender (or its Applicable  Lending  Office),  including the
Total Credit Commitment of such Lender hereunder; or

     (iii) shall impose on such Lender (or its Applicable Lending Office) or the
London interbank market any other condition affecting this Agreement or its Note
or any of such extensions of credit or liabilities or commitments;

     and the  result of any of the  foregoing  is to  increase  the cost to such
Lender  (or  its  Applicable   Lending  Office)  of  making,   Converting  into,
Continuing,  or  maintaining  any  Eurodollar  Rate  Loans or to reduce  any sum
received or receivable by such Lender (or its Applicable  Lending  Office) under
this Agreement or its Note with respect to any Eurodollar  Rate Loans,  then the
Borrowers  shall pay to such  Lender on demand  such  amount or  amounts as will
compensate  such  Lender for such  increased  cost or  reduction.  If any Lender
requests  compensation by the Borrowers under this Section 5.1(a), the Borrowers
may, by notice to such Lender (with a copy to the Agent), suspend the obligation
of such Lender to make or Continue  Loans of the Type with respect to which such
compensation  is requested,  or to Convert Loans of any other Type into Loans of
such Type, until the event or condition giving rise to such request ceases to be
in effect (in which case the  provisions  of Section  5.4 shall be  applicable);
provided  that such  suspension  shall not  affect  the right of such  Lender to
receive the compensation so requested.

     (b) If, after the date hereof,  any Lender shall have  determined  that the
adoption of any applicable law, rule, or regulation  regarding  capital adequacy
or any change therein or in the interpretation or administration  thereof by any
governmental  authority,  central bank, or  comparable  agency  charged with the
interpretation or administration  thereof, or any request or directive regarding
capital  adequacy  (whether  or not  having  the  force  of  law)  of  any  such
governmental  authority,  central bank, or comparable  agency, has or would have
the effect of  reducing  the rate of return on the capital of such Lender or any
corporation   controlling   such  Lender  as  a  consequence  of  such  Lender's
obligations  hereunder  to  a  level  below  that  which  such  Lender  or  such
corporation  could have  achieved but for such  adoption,  change,  request,  or
directive  (taking  into  consideration  its  policies  with  respect to capital
adequacy),  then from time to time upon demand the  Borrowers  shall pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction.

     (c) Each Lender shall  promptly  notify the  Borrowers and the Agent of any
event of which it has actual knowledge,  occurring after the date hereof,  which
will  entitle  such Lender to  compensation  pursuant  to this  Section and will
designate a different  Applicable  Lending Office if such designation will avoid
the need for,  or reduce the amount of, such  compensation  and will not, in the
reasonable  judgment of such  Lender,  be otherwise  disadvantageous  to it. Any
Lender claiming compensation under this Section shall furnish to the

                                                                 

<PAGE>



     Borrowers and the Agent a statement  setting forth the additional amount or
amounts to be paid to it hereunder  which shall be  conclusive in the absence of
manifest error. In determining  such amount,  such Lender may use any reasonable
averaging and attribution methods.

     5.2.  Limitation on Types of Loans.  If on or prior to the first day of any
Interest Period for any Eurodollar Rate Loan:

     (a) the Agent determines (which  determination shall be conclusive) that by
reason of circumstances  affecting the relevant market,  adequate and reasonable
means do not  exist  for  ascertaining  the  Eurodollar  Rate for such  Interest
Period; or

     (b)  the  Required  Lenders   determine  (which   determination   shall  be
conclusive)  and notify the Agent that the  Eurodollar  Rate will not adequately
and fairly reflect the cost to the Lenders of funding  Eurodollar Rate Loans for
such Interest Period;

     then the Agent shall give the Borrowers  prompt notice  thereof  specifying
the relevant Type of Loans and the relevant  amounts or periods,  and so long as
such  condition  remains in effect,  the Lenders shall be under no obligation to
make additional  Loans of such Type,  Continue Loans of such Type, or to Convert
Loans of any other Type into Loans of such Type and the  applicable  Borrower or
Borrowers shall, on the last day(s) of the then current  Interest  Period(s) for
the outstanding  Loans of the affected Type, either prepay such Loans or Convert
such  Loans  into  another  Type of Loan in  accordance  with the  terms of this
Agreement.

     5.3. Illegality.  Notwithstanding any other provision of this Agreement, in
the event that it becomes  unlawful  for any  Lender or its  Applicable  Lending
Office to make,  maintain,  or fund Eurodollar Rate Loans  hereunder,  then such
Lender shall promptly  notify the applicable  Borrower or Borrowers  thereof and
such  Lender's  obligation  to make or  Continue  Eurodollar  Rate  Loans and to
Convert other Types of Loans into Eurodollar Rate Loans shall be suspended until
such time as such  Lender may again make,  maintain,  and fund  Eurodollar  Rate
Loans (in which case the provisions of Section 5.4 shall be applicable).

     5.4. Treatment of Affected Loans. If the obligation of any Lender to make a
particular Type of Eurodollar  Rate Loan or to Continue,  or to Convert Loans of
any other Type into,  Loans of a particular Type shall be suspended  pursuant to
Section  5.1 or 5.3 hereof  (Loans of such Type being  herein  called  "Affected
Loans" and such Type being herein  called the  "Affected  Type"),  such Lender's
Affected Loans shall be automatically Converted into Base Rate Loans on the last
day(s) of the then current  Interest  Period(s)  for Affected  Loans (or, in the
case of a  Conversion  required by Section 5.3 hereof,  on such  earlier date as
such Lender may specify to the Borrowers  with a copy to the Agent) and,  unless
and until such  Lender  gives  notice as provided  below that the  circumstances
specified  in Section  5.1 or 5.3 hereof  that gave rise to such  Conversion  no
longer exist:

     (a) to the extent that such Lender's Affected Loans have been so Converted,
all payments and  prepayments  of principal  that would  otherwise be applied to
such Lender's  Affected  Loans shall be applied  instead to its Base Rate Loans;
and

     (b) all Loans that would  otherwise  be made or Continued by such Lender as
Loans of the  Affected  Type  shall be made or  Continued  instead  as Base Rate
Loans, and all Loans of such Lender that would otherwise be Converted into Loans
of the Affected  Type shall be Converted  instead into (or shall remain as) Base
Rate

                                                                 

<PAGE>



Loans.

     If such Lender gives notice to the applicable Borrower or Borrowers (with a
copy to the Agent) that the circumstances specified in Section 5.1 or 5.3 hereof
that gave rise to the  Conversion of such Lender's  Affected  Loans  pursuant to
this Section 5.4 no longer exist (which such Lender  agrees to do promptly  upon
such  circumstances  ceasing to exist) at a time when Loans of the Affected Type
made by other  Lenders are  outstanding,  such Lender's Base Rate Loans shall be
automatically  Converted,  on the first day(s) of the next  succeeding  Interest
Period(s)  for  such  outstanding  Loans of the  Affected  Type,  to the  extent
necessary so that,  after giving effect  thereto,  all Loans held by the Lenders
holding  Loans of the Affected  Type and by such Lender are held pro rata (as to
principal  amounts,  Types,  and  Interest  Periods)  in  accordance  with their
respective Revolving Credit Commitments and Term Loan Commitments.

     5.5. Compensation.  Upon the request of any Lender, the Borrowers shall pay
to such Lender such amount or amounts as shall be sufficient  (in the reasonable
opinion  of such  Lender)  to  compensate  it for any  loss,  cost,  or  expense
(including loss of anticipated profits) incurred by it as a result of:

     (a) any payment,  prepayment,  or Conversion of a Eurodollar  Rate Loan for
any  reason  (including,  without  limitation,  the  acceleration  of the  Loans
pursuant  to  Section  9.1) on a date  other  than the last day of the  Interest
Period for such Loan; or

     (b) any  failure  by the  Borrowers  for  any  reason  (including,  without
limitation, the failure of any condition precedent specified in Article VI to be
satisfied) to borrow (other than by reason of the failure of a Lender or Lenders
to  make  funds  available  without  cause),  Convert,  Continue,  or  prepay  a
Eurodollar Rate Loan on the date for such borrowing,  Conversion,  Continuation,
or  prepayment  specified  in the  relevant  notice  of  borrowing,  prepayment,
Continuation, or Conversion under this Agreement.

     Any Lender claiming  compensation  under this Section 5.5 shall furnish the
Borrowers  and the Agent a  statement  setting  forth in  reasonable  detail the
amounts  to be paid to it  hereunder  and the  determination  thereof  shall  be
conclusive absent manifest error.

     5.6. Taxes. (a) Any and all payments by the Borrowers to or for the account
of any Lender or the Agent  hereunder or under any other Loan Document  shall be
made free and clear of and without  deduction  for any and all present or future
taxes, duties, levies,  imposts,  deductions,  charges or withholdings,  and all
liabilities with respect thereto,  excluding, in the case of each Lender and the
Agent,  taxes imposed on its income,  and franchise  taxes imposed on it, by the
jurisdiction  under the laws of which  such  Lender (or its  Applicable  Lending
Office)  or the  Agent  (as the  case  may  be) is  organized  or any  political
subdivision thereof,  except withholding taxes applicable to a Lender, (all such
non-excluded taxes, duties, levies, imposts, deductions,  charges, withholdings,
and liabilities being hereinafter  referred to as "Taxes").  If the Borrowers or
the Lender  shall be  required  by law to deduct any Taxes from or in respect of
any sum payable under this Agreement or any other Loan Document to any Lender or
the Agent,  (i) the sum payable  shall be  increased  as necessary so that after
making all required deductions  (including  deductions  applicable to additional
sums payable under this Section 5.6) such Lender or the Agent receives an amount
equal to the sum it would have received had no such  deductions  been made, (ii)
the Borrowers shall make such deductions, (iii) the Borrowers shall pay the full
amount  deducted  to the  relevant  taxation  authority  or other  authority  in
accordance with applicable law, and (iv) the Borrowers shall furnish to

                                                                 

<PAGE>



     the Agent,  at its address  referred to in Section 11.2,  the original or a
certified copy of a receipt evidencing payment thereof.

     (b) In addition,  the Borrowers  agree to pay any and all present or future
stamp or documentary  taxes and any other excise or property taxes or charges or
similar  levies  which arise from any payment  made under this  Agreement or any
other Loan  Document or from the  execution or delivery  of, or  otherwise  with
respect to, this Agreement or any other Loan Document  (hereinafter  referred to
as "Other Taxes").

     (c) The Borrowers agree to indemnify each Lender and the Agent for the full
amount of Taxes and Other Taxes  (including,  without  limitation,  any Taxes or
Other Taxes  imposed or asserted by any  jurisdiction  on amounts  payable under
this  Section 5.6) paid by such Lender or the Agent (as the case may be) and any
liability  (including  penalties,  interest,  and expenses) arising therefrom or
with respect thereto.

     (d) Each  Lender  organized  under the laws of a  jurisdiction  outside the
United  States,  on or prior to the date of its  execution  and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which  it  becomes  a Lender  in the case of each  other
Lender,  and  from  time to time  thereafter  if  requested  in  writing  by the
Borrowers or the Agent (but only so long as such Lender remains lawfully able to
do so),  shall  provide the Borrowers and the Agent with (a) if such Lender is a
"bank"  within  the  meaning of Section  881(c)(3)(A)  of the Code (i)  Internal
Revenue  Service  Form  1001 or 4224,  as  appropriate,  or any  successor  form
prescribed  by the  Internal  Revenue  Service,  certifying  that such Lender is
entitled to benefits  under an income tax treaty to which the United States is a
party  which  reduces  the rate of  withholding  tax on  payments of interest or
certifying that the income receivable  pursuant to this Agreement is effectively
connected  with the conduct of a trade or business  in the United  States,  (ii)
Internal Revenue Service Form W-8 or W-9, as appropriate,  or any successor form
prescribed  by the  Internal  Revenue  Service,  and  (iii)  any  other  form or
certificate required by any taxing authority (including any certificate required
by Sections  871(h) and 881(c) of the Internal  Revenue Code),  certifying  that
such  Lender  is  entitled  to an  exemption  from or a  reduced  rate of tax on
payments  pursuant to this  Agreement or any of the other Loan Documents or, (b)
if such Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and which intends to claim  exemption  from U.S.  Federal  withholding  tax
under  Section  871(h)  of  881(c)  of the Code  with  respect  to  payments  of
"portfolio  interest",  a  form  W-8,  or any  subsequent  versions  thereof  or
successors  thereto  (and,  if such  Lender  delivers a Form W-8, a  certificate
representing  that such Lender is not a bank for  purposes of Section  881(c) of
the Code,  is not a  10-percent  shareholder  (within  the  meaning  of  Section
871(h)(3)(B) of the Code of any of the Borrowers and is not a controlled foreign
corporation  related  to any of the  Borrowers  (within  the  meaning of Section
864(d)(4) of the Code)),  properly  completed  and duly  executed by such Lender
claiming complete exemption from, or a reduced rate of, U.S. Federal withholding
tax on payments of interest by the Borrower  under this  Agreement and the other
Loan Documents.

     (e) For any period with respect to which a Lender has failed to provide the
Borrowers and the Agent with the  appropriate  form  pursuant to Section  5.6(d)
(unless such failure is due to a change in treaty, law, or regulation  occurring
subsequent to the date on which a form  originally was required to be provided),
such Lender shall not be entitled to  indemnification  under  Section  5.6(a) or
5.6(b) with respect to Taxes imposed by the United  States;  provided,  however,
that  should a Lender,  which is  otherwise  exempt from or subject to a reduced
rate of  withholding  tax,  become  subject to Taxes  because of its  failure to
deliver a form required  hereunder,  the Borrowers shall take such steps as such
Lender shall  reasonably  request to assist such Lender to recover such Taxes at
such Lender's expense.

                                                                 

<PAGE>



     (f) If the Borrowers are required to pay  additional  amounts to or for the
account of any Lender  pursuant to this Section 5.6, then such Lender will agree
to use reasonable  efforts to change the jurisdiction of its Applicable  Lending
Office  so as to  eliminate  or reduce  any such  additional  payment  which may
thereafter  accrue  if such  change,  in the  judgment  of such  Lender,  is not
otherwise disadvantageous to such Lender.

     (g) Within  thirty  (30) days after the date of any  payment of Taxes,  the
Borrowers  shall  furnish to the Agent  evidence  of such  payment and the Agent
shall provide a copy of such evidence to the applicable Lender.

     (h)  Without  prejudice  to the  survival  of any  other  agreement  of the
Borrowers  hereunder,  the agreements and obligations of the Borrowers contained
in this  Section  5.6 shall  survive the  termination  of the  Revolving  Credit
Commitments and Term Loan Commitments and the payment in full of the Notes.

     5.7. Lending Office.  Without  affecting its rights under this Article V or
any other provision of this  Agreement,  each Lender agrees that if there is any
increase in cost to or  reduction  in an amount  receivable  by such Lender with
respect to which the  Borrowers  would be  obligated to  compensate  such Lender
pursuant to this Article V, such Lender shall use reasonable efforts to elect an
alternative  lending  office (to the extent such Lender has available to it such
an  office)  which  would  not  result  in any such  increase  in any cost to or
reduction in any amount receivable by such Lender;  provided,  however,  that no
Lender shall be obligated to select an alternative lending office if such Lender
determines, in its sole discretion,  that (i) as a result of such selection such
Lender would be in violation  of any  applicable  law,  regulation,  treaty,  or
guideline,  or would incur  additional  costs or expenses or (ii) such selection
would be  inadvisable  for  regulatory  reasons or would impose an  unreasonable
burden or additional costs on such Lender.

     5.8.  Syndication Costs. If during Phase I, II, or III (as set forth in the
definition of Applicable Margin),  the Agent incurs any breakage costs,  charges
or fees  incurred  with  respect  to  Eurodollar  Rate  Loans on  account of the
syndication  of the  Revolving  Credit  Facility  and Term  Loan  Facility,  the
Borrowers shall immediately  reimburse the Agent for any such costs,  charges or
fees. Such right of  reimbursement  is in addition to, and not in limitation of,
the other  provisions of this Article V. In addition,  the Borrowers  agree that
the  incurrence  of such  costs  and  expenses  shall  not be the  basis for the
Borrowers  withholding  its  consent or  approval  of any Person as an  Eligible
Assignee.

     5.9. Replacement Banks. BREED may, on ten (10) Business Days' prior written
notice  to the Agent and a Lender,  cause a Lender  who has  incurred  increased
costs or is unable to make  Eurodollar  Rate  Loans to (and such  Lender  shall)
assign,  pursuant to Section 12.1, all of its rights and obligations  under this
Agreement to an Eligible Assignee designated by BREED which is willing to become
a Lender for a purchase price equal to the outstanding  principal  amount of the
Loans payable to such Lender plus any accrued but unpaid interest on such Loans,
any accrued  but unpaid  fees with  respect to such  Lender's  Revolving  Credit
Commitment  and any other amount  payable to such Lender  under this  Agreement;
provided,  however,  that any expenses or other  amounts which would be owing to
such Lender pursuant to any  indemnification  provision  hereof  (including,  if
applicable,  Section  5.5) shall be payable by BREED as if BREED had prepaid the
Loans of such Lender  rather  than such  Lender  having  assigned  its  interest
hereunder.  BREED or the assignee shall pay the applicable  processing fee under
Section 12.1.




                                                                 

<PAGE>



     ARTICLE VI

     Conditions to Making Loans and Issuing Letters of Credit

     6.1.  Conditions of Term Loan and Initial  Advance.  The  obligation of the
Lenders to make the Term Loan and the initial Advance under the Revolving Credit
Facility,  and of the Issuing Bank to issue any Letter of Credit,  is subject to
the conditions precedent that:

     (a) the  Agent  shall  have  received  on the  Closing  Date,  in form  and
substance satisfactory to the Agent and Lenders, the following:

     (i) executed  originals of each of this Agreement,  the Notes,  the initial
Guaranties,  the Security Instruments,  the LC Account Agreement,  and the other
Loan Documents, together with all schedules and exhibits thereto;

     (ii) the  favorable  written  opinion or opinions  with respect to the Loan
Documents and the  transactions  contemplated  thereby of special counsel to the
Loan Parties dated the Closing Date (including  opinions of local U.S.  counsel,
local counsel to Direct Foreign Subsidiaries, special U.S. intellectual property
counsel as to issues  relating to Collateral,  and special tax counsel as to the
deductibility  of interest  payments on the Convertible  Preferred  Securities),
addressed to the Agent and the Lenders and satisfactory to Smith Helms Mulliss &
Moore,  L.L.P.,  special  counsel  to the Agent,  substantially  in the forms of
Exhibit S-1, S-2, and S-3 hereto;

     (iii) resolutions of the boards of directors or other appropriate governing
body (or of the  appropriate  committee  thereof)  of each of the  Loan  Parties
certified  by its  secretary  or  assistant  secretary  as of the Closing  Date,
approving  and  adopting the Loan  Documents to be executed by such Person,  and
authorizing the execution and delivery thereof;

     (iv) specimen  signatures of officers of each of the Loan Parties executing
the Loan  Documents  on behalf of such  Person,  certified  by the  secretary or
assistant secretary of such Person;

     (v) the  Organizational  Documents of each of the Loan Parties certified as
of a recent date by the Secretary of State of its state of organization;

     (vi) the  Operating  Documents of each of the Loan Parties  certified as of
the Closing Date as true and correct by its secretary or assistant secretary;

     (vii)  certificates  issued as of a recent date by the Secretaries of State
of the respective jurisdictions of formation of each of the Credit Parties as to
the due existence and good standing of such Person or the equivalent, if any, in
foreign jurisdictions;

     (viii)  appropriate  certificates  of  qualification  to do business,  good
standing and,  where  appropriate,  authority to conduct  business under assumed
name, issued in respect of each of the Credit Parties as of a recent date by the
Secretary of State or comparable official of each jurisdiction, if any, in which
the failure to be qualified to do business or authorized so to conduct  business
could have a Material Adverse Effect;

                                                                 

<PAGE>



     (ix) stock  certificates  representing  all of the shares of Pledged  Stock
with undated stock powers executed in blank for each certificate;

     (x) copies of all  partnership  and joint venture  agreements  certified as
true and  complete by the  Secretary  or  Assistant  Secretary of the Loan Party
party thereto;

     (xi) Certificate and Receipt of Registrar of all of the Assigned Interests;

     (xii)  Intercompany  Notes  existing as of the Closing Date  together  with
endorsements  or  instruments  of  assignment  executed  in blank  and  attached
thereto;

     (xiii) consent by makers of Intercompany Notes to pledge under Intercompany
Note Assignment;

     (xiv) copies of the Organizational Documents and Operating Documents for A.
Breed, Ltd. and J. Breed, Ltd.

     (xv)  commitments for policies  insuring title to the Mortgaged  Properties
acceptable in form and substance to the Agent;

     (xvi) copies of title exceptions with respect to the Mortgaged  Properties,
acceptable in form and substance to the Agent;

     (xvii) to the  extent  they  currently  exist,  surveys  for the owned real
property of BREED and its Subsidiareis;

     (xviii)  insurance  report for certain  owned and leased  real  property of
BREED and its Subsidiaries as reasonably required by the Agent;

     (xix) flood  certificates and evidence of flood insurance for any Mortgaged
Property in a federally designated flood zone;

     (xx) owner's affidavit for each of the Mortgaged Properties;

     (xxi) to the  extent  available  to BREED,  the  environmental  audit  with
respect to the owned and leased real property of BREED and its  Subsidiaries and
other  environmental  information as reasonably  requested by the Agent and with
results satisfactory to the Agent;

     (xxii) to the extent  consented to by the  respective  landlords,  Landlord
Waivers and Lease  Assignments for each of BREED's or any Domestic  Subsidiary's
leased facilities;

     (xxiii) to the extent  available,  consents to the Lease  Assignments  from
each   landlord  for  the  leased  real  property  of  BREED  and  its  Domestic
Subsidiaries;

     (xxiv) an executed copy of the sublease from  AlliedSignal  to BREED of the
Greenville,

                                                                 

<PAGE>



     Alabama  property;  and a copy of the  opinion  required  under  the  lease
between  AlliedSignal  and  the  Industrial  Development  Board  of the  City of
Greenville  dated May 1, 1992 as a condition  to  AlliedSignal  subleasing  such
property to BREED; and consents from The Bank of New York, the Indenture Trustee
and the  Industrial  Development  Board of the City of  Greenville,  in form and
substance  satisfactory  to  the  Agent,  consenting  to the  assignment  of the
sublease to the Agent;

     (xxv) certified copy of the Trademark License Agreement;

     (xxvi) UCC-1 Financing  Statements,  including without  limitation  fixture
filings, duly executed by the Borrowers and each of the Guarantors and in proper
form for filing,  for all locations  required by  applicable  law to perfect the
lien of the  Agent  and the  Lenders  under the  Security  Agreement  as a first
priority  Lien as to items of  Collateral  in which a security  interest  may be
perfected by the filing of financing statements;

     (xxvii) a copy of BREED's  employment  agreement with each of the Managers,
certified as true and complete by the Secretary or Assistant Secretary of BREED;

     (xxviii)receipt  and  satisfactory  review  of  (A)  audited   consolidated
financial  statements  of BREED and its  Subsidiaries  as of June 30, 1997,  (B)
consolidated  interim  financial  statements of BREED and its Subsidiaries as of
July 31, 1997,  and (C)  operating  statements  of the  Acquired  Business as of
August 31, 1997;

     (xxix) receipt and satisfactory review of a pro forma consolidated  balance
sheet,  income  statement  and  statement  of cash flows of BREED as of June 30,
1997,  adjusted  to give  effect to the Allied  Acquisition  and the  financings
contemplated  in  this  Agreement   reviewed  by  certified  public  accountants
acceptable to the Agent;

     (xxx) notice of appointment of the initial Authorized Representative(s);

     (xxxi) all schedules to the Credit  Agreement and the other Loan  Documents
which shall be reviewed by and satisfactory to the Agent;

     (xxxii) evidence of the insurance program to be maintained by BREED and its
Subsidiaries  after  the  Allied  Acquisition,   which  such  program  shall  be
reasonably satisfactory to the Agent;

     (xxxiii)executed  copies, certified as true and correct by the Secretary of
BREED, of the Siemens Stock Purchase Documents and the Prudential Stock Purchase
Documents  together  with  evidence of receipt of at least  $300,000,000  in the
aggregate from the Siemens Stock Purchase and the Prudential Stock Purchase;

     (xxxiv)certificate  of the  President or Chief  Financial  Officer of BREED
that (A) all  conditions  precedent  to the  consummation  of the Siemens  Stock
Purchase  and  the  Prudential  Stock  Purchase  have  been  satisfied,  (B) all
conditions  precedent to the consummation of the Allied Acquisition as set forth
in the Asset  Purchase  Agreement  and  other  Acquisition  Documents  have been
satisfied  and not  waived  without  the  approval  of the Agent  including  all
required consents set forth on Schedule 9.3 of the Asset Purchase  Agreement and
all Required  Consents  (as defined in the Asset  Purchase  Agreement)  of third
parties,  (C) upon the tendering of the cash proceeds from the Revolving  Credit
Facility and Term Loan Facility, the Allied Acquisition shall be

                                                                 

<PAGE>



     effective,  and (D) no event has  occurred or  condition  exists that could
reasonably be expected to have a material adverse effect on the ability of BREED
or any other party thereto to consummate the  Convertible  Preferred  Securities
Issuance;

     (xxxv)  evidence  satisfactory  to the  Agent  that  after  payment  of the
purchase price for the Allied  Acquisition,  repayment of existing  Indebtedness
and all related  fees and  expenses,  and after  deducting  all Letter of Credit
Outstandings,  there shall be available to the Borrowers for working  capital at
least $75,000,000;

     (xxxvi)a schedule of the corporate and capital ownership structure of BREED
and its Subsidiaries  immediately after giving effect to the Allied  Acquisition
which shall be reviewed by and be satisfactory to the Agent;

     (xxxvii)evidence  that all fees payable by BREED to the Agent, NMSI and the
Lenders have been paid in full;

     (xxxviii)an initial Borrowing Notice, if any;

     (xxxix)payoff  letters  from the  holders of  existing  Indebtedness  to be
refinanced with the Revolving Credit Facility;

     (xl) such other  documents,  instruments,  certificates and opinions as the
Agent or any Lender may reasonably  request in connection with the  consummation
of the transactions contemplated hereby, including the due perfection of a first
priority security interest in all Collateral.

     (b) In the good faith judgment of the Agent and the Lenders:

     (i) there  shall  not have  occurred  or  become  known to the Agent or the
Lenders  any  event,  condition,  situation  or  status  since  the  date of the
information  contained in the financial and business  projections,  budgets, pro
forma data and forecasts concerning BREED and its Subsidiaries  delivered to the
Agent prior to the making of the initial  Loan that has had or could  reasonably
be expected to result in a Material Adverse Effect;

     (ii)  no  litigation,   action,  suit,  investigation  or  other  arbitral,
administrative  or  judicial  proceeding  shall be  pending or  threatened  that
purports to affect BREED or its  Subsidiaries,  or the Acquired Business or that
could have a material adverse effect on BREED or its Subsidiaries,  the Acquired
Business, the Allied Acquisition or any other transaction contemplated hereby or
on the ability of BREED and the other Loan Parties to perform their  obligations
under  the  Loan  Documents  and the  early  termination  or  expiration  of any
applicable  waiting period imposed by law or regulation  with respect the Allied
Acquisition  without  notice of intent to challenge or a request for  additional
information,  and no  injunction  shall have been  issued  enjoining  BREED from
purchasing the Acquired Business;

     (iii) the Loan  Parties  shall have  received all  approvals,  consents and
waivers, and shall have made or given all necessary filings and notices as shall
be  required  to  consummate  the  Allied   Acquisition  and  the   transactions
contemplated  hereby without the occurrence of any default under,  conflict with
or violation of (A) any applicable law, rule, regulation, order or decree of any
Governmental Authority or arbitral authority or

                                                                

<PAGE>



     (B) any agreement,  document or instrument to which any of the Loan Parties
is a party or by which any of them or their properties is bound;

     (iv) BREED and its  Subsidiaries  shall be in compliance  with all existing
material financial obligations;

     (v) there  shall  not have been any  material  amendment,  modification  or
waiver of any of the terms or conditions of the Asset Purchase Agreement without
consent of the Agent; and

     (vi) immediately after giving effect to the Allied Acquisition, there shall
be not less than  $75,000,000  under the terms of the Revolving  Credit Facility
available  for working  capital  purposes,  excluding  Letters of Credit  issued
pursuant to Article III.

     6.2.  Conditions of all Loans and Letters of Credit. The obligations of the
Lenders  to make any Loans,  and the  Issuing  Bank to issue  Letters of Credit,
hereunder on or subsequent  to the Closing Date are subject to the  satisfaction
of the following conditions:

     (a) the Agent shall have received a Borrowing Notice if required by Article
II;

     (b) the  representations  and  warranties  of the Loan Parties set forth in
Article VII and in each of the other Loan Documents shall be true and correct in
all material  respects on and as of the date of such Advance or Letter of Credit
issuance or renewal,  with the same  effect as though such  representations  and
warranties had been made on and as of such date,  except to the extent that such
representations  and warranties  expressly  relate to an earlier date and except
that the financial  statements  referred to in Section 7.6(a) shall be deemed to
be those  financial  statements  most  recently  delivered  to the Agent and the
Lenders pursuant to Section 8.1 and except as otherwise permitted hereunder from
the date  financial  statements  are  delivered  to the Agent and the Lenders in
accordance with such Section;

     (c) in the case of the  issuance  of a Letter  of  Credit,  the  applicable
Borrower or Borrowers  shall have  executed and delivered to the Issuing Bank an
Application and Agreement for Letter of Credit in form and content acceptable to
the Issuing Bank together with such other  instruments and documents as it shall
request;

     (d) at the  time of (and  after  giving  effect  to)  each  Advance  or the
issuance  of a Letter of Credit,  no Default  or Event of Default  specified  in
Article X shall have occurred and be continuing; and

     (e) immediately after giving effect to:

     (i) a Loan,  the  aggregate  principal  balance of all  outstanding  Loans,
Participations  and  Reimbursement  Obligations for each Lender shall not exceed
such Lender's Revolving Credit Commitment;

     (ii) a Letter of Credit or renewal thereof, the aggregate principal balance
of all  outstanding  Participations  in  Letters  of  Credit  and  Reimbursement
Obligations  (or in the case of the Issuing Bank,  its remaining  interest after
deduction  of  all   Participations  in  Letters  of  Credit  and  Reimbursement
Obligations  of other  Lenders) for each Lender and in the  aggregate  shall not
exceed,  respectively,  (X) such Lender's Letter of Credit Commitment or (Y) the
Total Letter of Credit Commitment;

                                                                 

<PAGE>



     (iii) a Loan or Letter of Credit  issued in an  Alternative  Currency,  the
Dollar  Value of Loans in  Alternative  Currencies  shall not  exceed  the Total
Alternative Currency Sublimit; and

     (iv) a Loan or a Letter of Credit or renewal thereof,  the sum of Letter of
Credit  Outstandings  plus Revolving  Credit  Outstandings  shall not exceed the
Total Revolving Credit Commitment.

     ARTICLE VII

     Representations and Warranties

     Each  Borrower  represents  and warrants  with respect to itself and to its
Subsidiaries (which representations and warranties shall survive the delivery of
the  documents  mentioned  herein  and the  making of Loans and the  issuing  of
Letters of Credit), that:

     7.1. Organization and Authority.

     (a)  BREED  and  each  Subsidiary  is a  corporation  or  partnership  duly
organized  and  validly  existing  under  the  laws of the  jurisdiction  of its
formation;

     (b) BREED and each  Subsidiary (x) has the requisite power and authority to
own its  properties  and  assets  and to  carry  on its  business  as now  being
conducted and as contemplated in the Loan Documents,  and (y) is qualified to do
business in every jurisdiction in which the conduct of its business or ownership
of its assets requires it to be so qualified;

     (c) BREED has the power and authority to execute,  deliver and perform this
Agreement and the Notes, and to borrow  hereunder,  and to execute,  deliver and
perform each of the other Loan Documents to which it is a party;

     (d) Each  Guarantor  has the power and  authority  to execute,  deliver and
perform  the  Guaranty  and each of the other  Loan  Documents  to which it is a
party; and

     (e) When executed and  delivered,  each of the Loan  Documents to which any
Loan  Party is a party  will be the  legal,  valid  and  binding  obligation  or
agreement of such Loan Party,  enforceable against such Loan Party in accordance
with its terms, subject to the effect of any applicable bankruptcy,  moratorium,
insolvency,  reorganization or other similar law affecting the enforceability of
creditors'  rights  generally and to the effect of general  principles of equity
(whether considered in a proceeding at law or in equity);

     7.2. Loan Documents.  The execution,  delivery and performance by each Loan
Party of each of the Loan Documents to which it is a party:

     (a) have  been  duly  authorized  by all  requisite  Organizational  Action
(including  any  required  shareholder  or partner  approval) of such Loan Party
required for the lawful execution, delivery and performance thereof;

     (b)  do  not  violate  any  provisions  of  (i)  applicable  law,  rule  or
regulation, (ii) any judgment, writ,

                                                                 

<PAGE>



     order,  determination,   decree  or  arbitral  award  of  any  Governmental
Authority or arbitral authority binding on such Loan Party or its properties, or
(iii) the Organizational Documents or Operating Documents of such Loan Party;

     (c) does not and will not be in  conflict  with,  result  in a breach of or
constitute an event of default,  or an event which, with notice or lapse of time
or both,  would constitute an event of default,  under any contract,  indenture,
agreement or other  instrument  or document to which such Loan Party is a party,
or by which the properties or assets of such Loan Party are bound; and

     (d) except as provided in the Security  Instruments,  does not and will not
result in the creation or imposition  of any Lien upon any of the  properties or
assets of such Loan Party or any Subsidiary;

     7.3.  Solvency.  Each Loan  Party is  Solvent  after  giving  effect to the
transactions contemplated by the Loan Documents;

     7.4.  Subsidiaries and Stockholders.  BREED has no Subsidiaries  other than
those Persons listed as Subsidiaries in Schedule 7.4 and additional Subsidiaries
created or acquired  after the Closing Date in  compliance  with  Section  8.19;
Schedule  7.4  states  as of the date  hereof  the  organizational  form of each
entity,  the  authorized and issued  capitalization  of each  Subsidiary  listed
thereon, the number of shares or other equity interests of each class of capital
stock or interest  issued and outstanding of each such Subsidiary and the number
and/or  percentage of  outstanding  shares or other equity  interest  (including
options,  warrants and other rights to acquire any  interest) of each such class
of  capital  stock  or  other  equity  interest  owned  by  BREED or by any such
Subsidiary;  the  outstanding  shares  or other  equity  interests  of each such
Subsidiary  have been duly  authorized and validly issued and are fully paid and
nonassessable;  and BREED  and each such  Subsidiary  owns  beneficially  and of
record  all the shares and other  interests  it is listed as owning in  Schedule
7.4, free and clear of any Lien;

     7.5. Ownership  Interests.  BREED owns no interest in any Person other than
the Persons listed in Schedule

     7.4, Integrated Sensor Solutions,  Inc. and the joint ventures described in
the  agreements  provided  to the Agent  pursuant to Section  6.1(a)(x),  equity
investments in Persons not constituting Subsidiaries permitted under Section 9.6
and  additional  Subsidiaries  created or  acquired  after the  Closing  Date in
compliance with Section 8.19;

     7.6. Financial Condition.

     (a)  BREED  has  heretofore   furnished  to  each  Lender  (i)  an  audited
consolidated balance sheet of BREED and its Subsidiaries as at June 30, 1997 and
the  notes   thereto  and  the  related   consolidated   statements  of  income,
stockholders'  equity and cash flows for the Fiscal  Year then ended as examined
and certified by Ernst & Young, LLP and (ii) an unaudited  consolidated  interim
statement of income of BREED and its Subsidiaries as of July 31, 1997. Except as
set forth therein, such financial statements (including the notes thereto in the
case of the audited  statements) present fairly the financial condition of BREED
and its  Subsidiaries as of the end of such Fiscal Year and one month period and
results of their  operations  for the Fiscal Year and interim  period then ended
and the changes in its stockholders'  equity for the Fiscal Year then ended, all
in conformity with GAAP applied on a Consistent Basis,  subject however,  in the
case of unaudited interim statements to year end audit adjustments;

                                                                 

<PAGE>



     (b) since June 30,  1997 there has been no material  adverse  change in the
condition, financial or otherwise, of BREED or any of its Subsidiaries or in the
businesses,  properties,  performance,  prospects or  operations of BREED or its
Subsidiaries,  nor have such businesses or properties been materially  adversely
affected  as a result  of any fire,  explosion,  earthquake,  accident,  strike,
lockout, combination of workers, flood, embargo or act of God; and

     (c) except as set forth in the financial  statements referred to in Section
7.6(a) or in Schedule 7.6 or permitted  by Section  9.4,  neither  BREED nor any
Subsidiary  has  incurred,  other than in the ordinary  course of business,  any
Indebtedness,  or other  commitment or liability  which remains  outstanding  or
unsatisfied;

     7.7. Title to Properties.  BREED and each of its  Subsidiaries has title to
all its real and personal  properties,  subject to no transfer  restrictions  or
Liens of any kind,  except  with  respect  to the real  property  subject to the
Mortgages,  the Permitted Encumbrances as defined in each of the Mortgages,  and
with  respect  to  the  other  real  and  personal   properties,   the  transfer
restrictions  and Liens described in Schedule 7.7 and Liens permitted by Section
9.3;

     7.8. Taxes.  BREED and each of its  Subsidiaries  has filed or caused to be
filed all federal, state and local tax returns which are required to be filed by
it and,  except  for taxes and  assessments  being  contested  in good  faith by
appropriate   proceedings   diligently  conducted  and  against  which  reserves
reflected  in  the  financial   statements   described  in  Section  7.6(a)  and
satisfactory  to BREED's  independent  certified  public  accountants  have been
established,  have paid or caused to be paid all taxes as shown on said  returns
or on any  assessment  received by it, to the extent that such taxes have become
due and the  failure of which  would  reasonably  be expected to have a Material
Adverse Effect;

     7.9. Other Agreements. No Loan Party nor any Subsidiary is

     (a) a party to or subject to any judgment, order, decree, agreement,  lease
or instrument,  or subject to other  restrictions,  which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect;

     (b) in default in the performance,  observance or fulfillment of any of the
obligations,  covenants or  conditions  contained in any agreement or instrument
(including the Asset  Purchase  Agreement) to which BREED or any Subsidiary is a
party,  which default has, or if not remedied within any applicable grace period
could reasonably be likely to have, a Material Adverse Effect; or

     (c) a party to or bound by any agreement  with any other Person (other than
the Agent and the Lenders pursuant to this Agreement or any other Loan Document)
which  prohibits,  limits or restricts the ability of any Subsidiary to make any
payments,  directly  or  indirectly,  to  BREED by way of  dividends,  advances,
repayments  of loans or advances,  or other  returns on  investments,  or by any
other agreement or arrangement  which restricts the ability of any Subsidiary to
make any payment, directly or indirectly, to BREED.

     7.10. Litigation. Except as set forth in Schedule 7.10, there is no action,
suit,  investigation  or  proceeding  at law or in equity  or by or  before  any
governmental instrumentality or agency or arbitral body pending, or, to the best
knowledge of the Borrowers,  threatened by or against BREED or any Subsidiary or
affecting  BREED or any  Subsidiary or any  properties or rights of BREED or any
Subsidiary, which could reasonably be expected to

                                                                 

<PAGE>



     have a Material Adverse Effect;

     7.11.  Margin Stock.  The proceeds of the borrowings made hereunder will be
used by the Borrowers only for the purposes expressly authorized herein. None of
such  proceeds  will  be  used,  directly  or  indirectly,  for the  purpose  of
purchasing  or  carrying  any margin  stock or for the  purpose of  reducing  or
retiring any  Indebtedness  which was  originally  incurred to purchase or carry
margin stock or for any other  purpose which might  constitute  any of the Loans
under this Agreement a "purpose  credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Borrowers nor any
agent acting in their behalf has taken or will take any action which might cause
this Agreement or any of the documents or instruments  delivered pursuant hereto
to violate any regulation of the Board or to violate the Securities Exchange Act
of 1934, as amended,  or the  Securities  Act of 1933, as amended,  or any state
securities laws, in each case as in effect on the date hereof;

     7.12.  Investment Company. No Loan Party is an "investment  company," or an
"affiliated  person"  of, or  "promoter"  or  "principal  underwriter"  for,  an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended (15 U.S.C. ss. 80a-1, et seq.). The application of the proceeds
of the Loans and repayment  thereof by the Borrowers and the  performance by the
Loan Parties of the  transactions  contemplated  by the Loan  Documents will not
violate any  provision of said Act, or any rule,  regulation  or order issued by
the Securities and Exchange Commission thereunder,  in each case as in effect on
the date hereof;

     7.13. Patents, Etc. BREED and each Subsidiary owns or has the right to use,
under valid license  agreements or otherwise,  all material  patents,  licenses,
franchises,  trademarks, trademark rights, trade names, trade name rights, trade
secrets and copyrights  necessary to or used in the conduct of its businesses as
now conducted and as contemplated  by the Loan  Documents,  in all cases without
known conflict with any patent,  license,  franchise,  trademark,  trade secret,
trade  name,  copyright,  other  proprietary  right of any other  Person,  which
conflict is reasonably likely to have a Material Adverse Effect;

     7.14. No Untrue  Statement.  Neither (a) this  Agreement nor any other Loan
Document or  certificate  or document  executed and delivered by or on behalf of
BREED or any Subsidiary in accordance  with or pursuant to any Loan Document nor
(b)  any  statement,  representation,  or  warranty  provided  to the  Agent  in
connection  with the  negotiation or preparation of the Loan Documents  contains
any  misrepresentation  or untrue statement of material fact or omits to state a
material fact necessary,  in light of the circumstance  under which it was made,
in order  to make  any such  warranty,  representation  or  statement  contained
therein not misleading;

     7.15. No Consents,  Etc. Neither the respective businesses or properties of
the Loan Parties or any Subsidiary,  nor any relationship among the Loan Parties
or any Subsidiary and any other Person,  nor any circumstance in connection with
the  execution,   delivery  and  performance  of  the  Loan  Documents  and  the
transactions  contemplated thereby, is such as to require a consent, approval or
authorization   of,  or  filing,   registration  or   qualification   with,  any
Governmental  Authority or any other Person on the part of any Loan Party or any
Subsidiary  as a condition to the  execution,  delivery and  performance  of, or
consummation of the transactions contemplated by the Loan Documents,  including,
without  limitation,  the Allied Acquisition (other than the consents identified
in the Asset Purchase Agreement), or if so, such consent (and in the case of the
Allied  Acquisition  the  Required  Consents,  as defined in the Asset  Purchase
Agreement), approval,  authorization,  filing, registration or qualification has
been duly obtained or effected, or shall have been obtained or effected prior to
the Closing Date, as the case may be;

                                                                 

<PAGE>



     7.16. Employee Benefit Plans.

     (a) BREED,  each ERISA  Affiliate and each Subsidiary is in compliance with
all applicable  provisions of ERISA,  the Code and the regulations and published
interpretations  thereunder and in compliance  with all Foreign Benefit Laws and
the  regulations  and published  interpretations  thereunder with respect to all
Employee  Benefit  Plans,  except  for any  required  amendments  for  which the
remedial  amendment  period as defined in Section 401(b) of the Code has not yet
expired.  Each  Employee  Benefit  Plan that is intended to be  qualified  under
Section 401(a) of the Code has been  determined or BREED or its  Subsidiaries is
in the process of obtaining a determination  by the Internal  Revenue Service to
be so  qualified,  each  trust  related to such plan has been  determined  to be
exempt under Section 501(a) of the Code, and each Employee  Benefit Plan subject
to  any  Foreign  Benefit  Law  has  received  the  required  approvals  by  any
Governmental  Authority  regulating  such  Employee  Benefit  Plan.  No material
liability  has been  incurred  by BREED or any  ERISA  Affiliate  which  remains
unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan
or any Multiemployer Plan;

     (b) Neither BREED,  any ERISA  Affiliate nor any Subsidiary has (i) engaged
in a nonexempt prohibited  transaction  described in Section 4975 of the Code or
Section 406 of ERISA  affecting any of the Employee  Benefit Plans or the trusts
created  thereunder  which could subject any such Employee Benefit Plan or trust
to a material tax or penalty on prohibited  transactions  imposed under Internal
Revenue Code  Section  4975 or ERISA,  (ii)  incurred  any  accumulated  funding
deficiency with respect to any Employee Benefit Plan,  whether or not waived, or
any other material  liability to the PBGC which remains  outstanding  other than
the  payment of  premiums  and there are no premium  payments  which are due and
unpaid,  (iii)  failed  to  make  a  required   contribution  or  payment  to  a
Multiemployer Plan, (iv) failed to make a required installment or other required
payment under Section 412 of the Code, Section 302 of ERISA or the terms of such
Employee Benefit Plan, or (v) failed to make a required contribution or payment,
or  otherwise  failed to operate in  compliance  with any  Foreign  Benefit  Law
regulating any Employee Benefit Plan;

     (c) No  Termination  Event has occurred or is reasonably  expected to occur
with  respect to any  Employee  Benefit  Plan except for the hourly  represented
retirement plans of BREED's Grabill, Indiana and Niles, Michigan facilities, and
neither  BREED  nor any ERISA  Affiliate  has  incurred  any  unpaid  withdrawal
liability with respect to any Multiemployer Plan;

     (d) The present value of all vested  accrued  benefits  under each Employee
Benefit Plan which is subject to Title IV of ERISA or whose funding is regulated
by any Foreign  Benefit Law, did not, as of the most recent  valuation  date for
each such plan,  exceed the then  current  value of the assets of such  Employee
Benefit Plan allocable to such benefits;

     (e) To the best of BREED's knowledge, each Employee Benefit Plan subject to
Title IV of ERISA or the funding of which is  regulated  by any Foreign  Benefit
Law,  maintained  by BREED,  any ERISA  Affiliate  or any  Subsidiary,  has been
administered  in  accordance  with its terms in all material  respects and is in
compliance in all material  respects with all applicable  requirements of ERISA,
all Foreign Benefit Laws, and other applicable laws, regulations and rules;

     (f) The consummation of the Loans and the issuance of the Letters of Credit
provided  for herein  will not involve any  prohibited  transaction  under ERISA
which is not subject to a statutory or administrative

                                                                 

<PAGE>



     exemption; and

     (g) No material proceeding,  claim, lawsuit and/or investigation exists or,
to the best  knowledge of BREED after due inquiry,  is threatened  concerning or
involving any Employee Benefit Plan;

     7.17. No Default.  As of the date hereof,  there does not exist any Default
or Event of Default hereunder;

     7.18.  Environmental  Matters.  BREED and each  Subsidiary is in compliance
with all  applicable  Environmental  Laws in all material  respects and has been
issued and currently maintains or is pursuing all required federal, state, local
and foreign permits, licenses, certificates and approvals. Neither BREED nor any
Subsidiary  has  been  notified  of any  pending  or  threatened  action,  suit,
proceeding or investigation which, and neither BREED nor any Subsidiary is aware
of any facts which, (i) calls into question,  or could reasonably be expected to
call into question, compliance by BREED or any Subsidiary with any Environmental
Laws, (ii) which seeks,  or could  reasonably be expected to form the basis of a
meritorious  proceeding,  to suspend, revoke or terminate any license, permit or
approval necessary for the generation,  handling, storage, treatment or disposal
of any  Hazardous  Material  or the  operation  of BREED's  or any  Subsidiary's
business or facility,  or (iii) seeks to cause, or could  reasonably be expected
to form the basis of a meritorious proceeding to cause, any property of BREED or
any Subsidiary to be subject to any restrictions on ownership, use, occupancy or
transferability  under  any  Environmental  Law,  which in any of the  foregoing
instances would reasonably be expected to have a Material Adverse Effect;

     7.19. Employment Matters. (a) Except as set forth in Schedule 7.19, none of
the employees of BREED or any Subsidiary is subject to any collective bargaining
agreement and there are no strikes, work stoppages,  election or decertification
petitions or proceedings,  unfair labor charges, equal opportunity  proceedings,
or other material  labor/employee  related  controversies or proceedings pending
or, to the best knowledge of BREED,  threatened  against BREED or any Subsidiary
or between BREED or any Subsidiary and any of its employees, other than (in each
of the foregoing  cases) employee  grievances  arising in the ordinary course of
business  which  could  not  reasonably  be  expected,  individually  or in  the
aggregate, to have a Material Adverse Effect;

     (b) Except to the extent a failure to maintain  compliance would not have a
Material  Adverse  Effect,  BREED and each  Subsidiary  is in  compliance in all
material respects with all applicable laws, rules and regulations  pertaining to
labor or employment  matters,  including without  limitation those pertaining to
wages, hours,  occupational safety and taxation and there is neither pending or,
to the knowledge of BREED, threatened any litigation,  administrative proceeding
nor, to the knowledge of BREED,  any  investigation,  in respect of such matters
which, if decided adversely, could reasonably be likely,  individually or in the
aggregate, to have a Material Adverse Effect;

     7.20.  RICO.  Neither BREED nor any Subsidiary is engaged in or has engaged
in any course of conduct that could subject any of their  respective  properties
to any Lien,  seizure or other  forfeiture  under any  criminal  law,  racketeer
influenced and corrupt  organizations  law, civil or criminal,  or other similar
laws;

     7.21. Allied Acquisition Representations.  On the Closing Date, each of the
representations  and  warranties  contained  in Article 6 of the Asset  Purchase
Agreement,  including  all Exhibits  and  Schedules  referenced  therein and all
definitions of defined terms  referenced  therein and all  disclosures of Allied
contained therein, are incorporated herein by reference and given by BREED as of
the Closing Date;

                                                                 

<PAGE>



     7.22. Allied Acquisition.  All conditions  precedent to the consummation of
the Allied  Acquisition as set forth in the Asset  Purchase  Agreement and other
Acquisition Documents have been satisfied and not waived without the approval of
the Agent (which  approval  shall not be  unreasonably  withheld)  including all
Required Consents (as defined in the Asset Purchase  Agreement) and approvals of
third  parties and upon the  tendering of the cash  proceeds  from the Revolving
Credit Facility, the Allied Acquisition shall be effective;

     7.23. Perfected Security Instruments.  (a) At all times after execution and
delivery of each Pledge Agreement by the Pledgor  thereunder and satisfaction of
the conditions set forth in Section 6.1, the security interests created in favor
of the Agent for the benefit of the  Lenders  under the Pledge  Agreements  will
constitute valid, perfected security interests in the Pledged Stock and Assigned
Interests, subject to no other Liens;

     (b) At all times after  execution and delivery of each Security  Instrument
(other than the Pledge  Agreements) by the parties thereto and completion of the
filings and recordings  listed on Schedule 7.23 hereto,  the security  interests
created in favor of the Agent for the benefit of the Lenders  under the Security
Instruments (other than the Pledge Agreements) will constitute valid,  perfected
security  interests in the  Collateral  described  therein,  subject to no other
Liens whatsoever, except for Permitted Liens, and with respect to the Mortgages,
subject to no other Liens whatsoever,  except for the Permitted  Encumbrances as
defined in each of the Mortgages.

     ARTICLE VIII

     Affirmative Covenants

     Until the Facility  Termination  Date,  unless the Required  Lenders  shall
otherwise  consent in writing,  BREED will, and where applicable will cause each
Subsidiary to:

     8.1.  Financial  Reports,  Etc. (a) As soon as  practical  and in any event
within 90 days after the end of each Fiscal  Year of BREED,  deliver or cause to
be delivered to the Agent,  together with sufficient  copies for each Lender (i)
consolidated and  consolidating  (by major lines of business)  balance sheets of
BREED and its  Subsidiaries  as at the end of such  Fiscal  Year,  and the notes
thereto,  and the related  consolidated and consolidating  statements of income,
stockholders'  equity and cash flows, and the respective notes thereto, for such
Fiscal Year,  setting forth comparative  financial  statements for the preceding
Fiscal Year, all prepared in accordance with GAAP applied on a Consistent  Basis
and containing opinions (in the case of the consolidated  statements) of Ernst &
Young LLP, or other such independent  certified public  accountants  selected by
BREED and approved by the Agent,  which are  unqualified  as to the scope of the
audit  performed  and  as to  the  "going  concern"  status  of  BREED  and  its
Subsidiaries  and without any exception not acceptable to the Required  Lenders,
and (ii) a certificate of an Authorized Representative  demonstrating compliance
with Sections 9.1(a) through 9.1(c),  which  certificate shall be in the form of
Exhibit T;

     (b) as soon as  practical  and in any event within 45 days after the end of
each fiscal quarter (except the last fiscal quarter of the Fiscal Year), deliver
to the Agent together with sufficient  copies for each Lender,  (i) consolidated
and  consolidating  (by major line of business)  balance sheets of BREED and its
Subsidiaries as at the end of such fiscal quarter,  and the related consolidated
and  consolidating  statements of income and cash flows for such fiscal  quarter
and for the period from the  beginning of the then  current  Fiscal Year through
the end of  such  reporting  period,  and  accompanied  by a  certificate  of an
Authorized Representative to the effect that

                                                                 

<PAGE>



     such financial  statements  present fairly the financial  position of BREED
and its  Subsidiaries  as of the end of such  fiscal  period and the  results of
their  operations  and the changes in their  financial  position for such fiscal
period,  in  conformity  with the  standards  set forth in Section  7.6(a)  with
respect to interim financial statements, and (ii) a certificate of an Authorized
Representative  containing  computations  for such  quarter  comparable  to that
required pursuant to Section 8.1(a)(ii);

     (c) as soon as  practical  and in any event within 30 days after the end of
each calendar  month (except the last month of a fiscal quarter or Fiscal Year),
deliver to the Agent  consolidated and consolidating (by major line of business)
balance  sheets of BREED  and its  Subsidiaries  as at the end of such  calendar
month, and the related  consolidated and consolidating  statements of income and
cash flows for such calendar  month and for the period from the beginning of the
then current  Fiscal Year through the end of such month,  and  accompanied  by a
certificate  of an Authorized  Representative  to the effect that such financial
statements   present   fairly  the  results  of  operations  of  BREED  and  its
Subsidiaries  as of the end of such calendar month and for such calendar  month,
respectively,  and the changes in their financial  position for such period,  in
conformity  with the  standards  set forth in  Section  7.6(a)  with  respect to
interim financial statements;

     (d) together  with each delivery of the  financial  statements  required by
Section  8.1(a)(i),  deliver to the Agent and each Lender a letter from  BREED's
accountants  specified in Section 8.1(a)(i) stating that in performing the audit
necessary  to render an  opinion on the  financial  statements  delivered  under
Section 8.1(a)(i), they obtained no knowledge of any Default or Event of Default
by the  Borrowers  in the  fulfillment  of the  terms  and  provisions  of  this
Agreement insofar as they relate to financial matters (which at the date of such
statement  remains  uncured);  or if the accountants have obtained  knowledge of
such Default or Event of Default,  a statement  specifying the nature and period
of existence thereof; (e) promptly upon their becoming available to BREED, BREED
shall deliver to the Agent,  together with sufficient  copies for each Lender, a
copy of (i) all regular or special reports or effective registration  statements
which  BREED or any  Subsidiary  shall  file with the  Securities  and  Exchange
Commission (or any successor thereto) or any securities exchange, (ii) any proxy
statement   distributed  by  BREED  or  any  Subsidiary  to  its   shareholders,
bondholders  or the  financial  community in general,  and (iii) any  management
letter or other  report  submitted  to BREED or any  Subsidiary  by  independent
accountants in connection with any annual,  interim or special audit of BREED or
any Subsidiary;

     (f) promptly deliver or cause to be delivered to the Agent,  written notice
of any event  which  constitutes  or which with the passage of time or giving of
notice or both would constitute a default or event of default under any Material
Contract to which BREED or any of its  Subsidiaries is a party or by which BREED
or any Subsidiary thereof or any of their respective properties may be bound;

     (g)  promptly,  from time to time,  deliver or cause to be delivered to the
Agent such other information regarding BREED's and any Subsidiary's  operations,
business affairs and financial condition as the Agent may reasonably request;

     Subject to Section 12.1(f), the Agent and the Lenders are hereby authorized
to deliver a copy of any such financial or other information delivered hereunder
to the  Lenders  (or  any  affiliate  of any  Lender)  or to the  Agent,  to any
Governmental  Authority having jurisdiction over the Agent or any of the Lenders
pursuant  to  any  written  request  therefor  or  in  the  ordinary  course  of
examination of loan files,  or to any other Person who shall acquire or consider
the  assignment  of,  or  acquisition  of any  participation  interest  in,  any
Obligation permitted by

                                                                 

<PAGE>



     this Agreement  provided that notice is given to BREED if such  information
is delivered to a Person not enumerated herein;

     8.2.  Maintain  Properties.   Maintain  all  properties  necessary  to  its
operations in good working order and condition, ordinary wear and tear excepted,
make all needed  repairs,  replacements  and  renewals to such  properties,  and
maintain free from Liens all trademarks, trade names, patents, copyrights, trade
secrets, know- how, and other intellectual property and proprietary  information
(or adequate  licenses  thereto),  in each case as are  necessary to conduct its
business as currently  conducted or as  contemplated  hereby,  all in accordance
with customary and prudent business practices;

     8.3. Existence, Qualification, Etc. Except as otherwise expressly permitted
under  Section 9.7, do or cause to be done all things  necessary to preserve and
keep in full  force  and  effect  its  existence  and all  material  rights  and
franchises,  and, except to the extent conveyed in connection with a transaction
permitted under Section 9.5 hereof,  maintain its license or qualification to do
business as a foreign  corporation  and good  standing in each  jurisdiction  in
which its  ownership  or lease of property or the nature of its  business  makes
such license or qualification necessary;

     8.4. Regulations and Taxes. Comply in all material respects with or contest
in good  faith all  statutes  and  governmental  regulations  and pay all taxes,
assessments,  governmental  charges,  claims for labor,  supplies,  rent and any
other  obligation  which,  if unpaid,  would  become a Lien  against  any of its
properties  except  liabilities  being  contested  in good faith by  appropriate
proceedings  diligently conducted and against which adequate reserves acceptable
to BREED's independent certified public accountants have been established unless
and until any Lien  resulting  therefrom  attaches  to any of its  property  and
becomes enforceable against the Lenders;

     8.5. Insurance. (a) Keep all of its insurable properties adequately insured
at all times with responsible  insurance carriers against loss or damage by fire
and other  hazards,  including  containing  provisions  required by the Security
Instruments,  (b) maintain general public liability  insurance at all times with
responsible insurance carriers against liability on account of damage to persons
and  property  and  (c)  maintain   insurance  under  all  applicable   workers'
compensation  laws  (or  in  the  alternative,  maintain  required  reserves  if
self-insured for workers'  compensation  purposes) and against loss by reason of
business   interruption   such  policies  of  insurance  to  have  such  limits,
deductibles,  exclusions,  co-insurance and other  provisions  providing no less
coverages than that specified in Schedule 8.5. Each of the policies of insurance
described in this Section 8.5 shall comply in all respects with the terms of the
Security Instruments;

     8.6. True Books.  Keep true books of record and account in which full, true
and correct  entries will be made of all of its dealings and  transactions,  and
set up on its books such  reserves as may be  required  by GAAP with  respect to
doubtful  accounts and all taxes,  assessments,  charges,  levies and claims and
with respect to its business in general, and include such reserves in interim as
well as year-end financial statements;

     8.7. Right of Inspection. Permit any representative designated by the Agent
or any Lender,  to visit and inspect any of the properties,  corporate books and
financial  reports  of BREED  or any  Subsidiary  and to  discuss  its  affairs,
finances and accounts  with its  principal  officers and  independent  certified
public  accountants,  all at reasonable times, at reasonable  intervals and with
reasonable  prior  notice and permit  any  Lender to  discuss  BREED's  affairs,
finances  and  accounts  with  its  principal   officers  and  its   independent
accountants all at reasonable times, at reasonable intervals and with reasonable
prior notice;

                                                                 

<PAGE>



     8.8. Observe all Laws. Conform to and duly observe in all material respects
all  laws,  rules  and  regulations  and all  other  valid  requirements  of any
Governmental Authority with respect to the conduct of its business;

     8.9.  Governmental  Licenses.  Obtain and maintain all  licenses,  permits,
certifications and approvals of all applicable  Governmental  Authorities as are
required  for  the  conduct  of  its  business  as  currently  conducted  and as
contemplated by the Loan Documents;

     8.10. Covenants Extending to Other Persons.  Cause each of its Subsidiaries
to do with respect to itself,  its  business and its assets,  each of the things
required of BREED in Sections 8.2 through 8.9, and 8.18 inclusive;

     8.11. Officer's Knowledge of Default. Upon any Authorized Representative or
the  General  Counsel of BREED  obtaining  knowledge  of any Default or Event of
Default  hereunder or under any other  obligation of BREED or any  Subsidiary to
any Lender,  or any event,  development or occurrence  which could reasonably be
expected to have a Material Adverse Effect,  cause such officer or an Authorized
Representative to promptly notify the Agent of the nature thereof, the period of
existence  thereof,  and what action BREED or such  Subsidiary  proposes to take
with respect thereto;

     8.12. Suits or Other Proceedings. Upon any Authorized Representative or the
General  Counsel  of  BREED  obtaining  knowledge  of any  litigation  or  other
proceedings being instituted  against BREED or any Subsidiary or any attachment,
levy, execution or other process being instituted against any assets of BREED or
any Subsidiary  making a claim or claims which is likely to result in damages in
an aggregate amount greater than $10,000,000 not otherwise covered by insurance,
or could  reasonably  be expected to have a Material  Adverse  Effect,  promptly
deliver to the Agent  written  notice  thereof  stating the nature and status of
such litigation, dispute, proceeding, levy, execution or other process;

     8.13. Notice of Environmental  Complaint or Condition.  Promptly provide to
the Agent true, accurate and complete copies of any and all notices, complaints,
orders,  directives,  claims,  or citations  received by BREED or any Subsidiary
relating to any (a) violation or alleged violation by BREED or any Subsidiary of
any applicable  Environmental Law; (b) release or threatened release by BREED or
any  Subsidiary,  or at any facility or property  owned or leased or operated by
BREED or any Subsidiary or by any Person handling, transporting, or disposing of
any Hazardous  Material on behalf of BREED or any  Subsidiary,  of any Hazardous
Material,  except where occurring legally; or (c) liability or alleged liability
of BREED or any Subsidiary for the costs of cleaning up,  removing,  remediating
or responding to a release of Hazardous Materials, which in any of the foregoing
instances would reasonably be expected to have a Material Adverse Effect;

     8.14.  Environmental  Compliance.  If BREED or any Subsidiary shall receive
any letter, notice, complaint, order, directive, claim or citation alleging that
BREED or and  Subsidiary  has violated any  Environmental  Law, has released any
Hazardous  Material  or is  liable  for the  costs  of  cleaning  up,  removing,
remediating or responding to a release of Hazardous  Materials,  which in any of
the foregoing  instances would reasonably be expected to have a Material Adverse
Effect,  BREED  shall,  within  the  time  period  permitted  by the  applicable
Environmental Law or the Governmental  Authority  responsible for enforcing such
Environmental  Law,  either  (i)  remove  or  remedy,  or cause  the  applicable
Subsidiary  to remove or remedy,  such  violation  or  release  or satisfy  such
liability  or (ii)  contest in good faith such  violation so long as no remedial
action shall be required to be taken during the period of such contest;


                                                                 

<PAGE>



     8.15.  Indemnification.  Without  limiting the generality or application of
Section 12.9,  BREED hereby agrees to indemnify and hold the Agent,  the Lenders
and NMSI,  and their  respective  officers,  directors,  employees  and  agents,
harmless from and against any and all claims,  losses,  penalties,  liabilities,
damages and expenses  (including  assessment  and cleanup  costs and  reasonable
attorneys' fees and  disbursements)  arising directly or indirectly from, out of
or by  reason  of (a) the  violation  of any  Environmental  Law by BREED or any
Subsidiary or with respect to any property owned, operated or leased by BREED or
any Subsidiary or (b) the handling, storage, treatment,  emission or disposal of
any Hazardous Materials by or on behalf of BREED or any Subsidiary or on or with
respect to property owned or leased or operated by BREED or any Subsidiary.  The
provisions of this Section 8.15 shall survive the Facility  Termination Date and
expiration or termination of this Agreement;

     8.16. Further Assurances.  At the Borrowers' cost and expense, upon request
of the  Agent,  duly  execute  and  deliver  or  cause to be duly  executed  and
delivered,  to the Agent  such  further  instruments,  documents,  certificates,
financing and continuation statements,  and do and cause to be done such further
acts that may be reasonably  necessary or advisable in the reasonable opinion of
the Agent to carry out more  effectively  the  provisions  and  purposes of this
Agreement and the other Loan Documents;

     8.17 Employee Benefit Plans.

     (a) With  reasonable  promptness,  and in any event within thirty (30) days
thereof,  give notice to the Agent of (a) the  establishment of any new Employee
Benefit  Plan  (which  notice  shall  include a summary of such  plan),  (b) the
commencement of  contributions  to any Employee Benefit Plan to which BREED, any
of  its  ERISA  Affiliates  or  any  of  its  Subsidiaries  was  not  previously
contributing, (c) any material increase in the benefits of any existing Employee
Benefit Plan, (d) each funding waiver request filed with respect to any Employee
Benefit  Plan  and all  communications  received  or sent by  BREED,  any  ERISA
Affiliate or any Subsidiary  with respect to such request and (e) the failure of
BREED or any ERISA Affiliate or any Subsidiary to make a required installment or
payment  under  Section  302 of ERISA or Section 412 of the Code (in the case of
Employee  Benefit Plans  regulated by the Code or ERISA) or any Foreign  Benefit
Law (in the case of any Employee  Benefit Plan regulated by any Foreign  Benefit
Law) by the due date;

     (b) Promptly and in any event within fifteen (15) days of becoming aware of
the occurrence or  forthcoming  occurrence of any (a)  Termination  Event or (b)
nonexempt  "prohibited  transaction,"  as such term is defined in Section 406 of
ERISA or Section 4975 of the Code,  in  connection  with any Pension Plan or any
trust created  thereunder,  deliver to the Agent a notice  specifying the nature
thereof,  what action BREED, any ERISA Affiliate or any Subsidiary has taken, is
taking or proposes to take with  respect  thereto  and,  when known,  any action
taken or threatened by the Internal  Revenue  Service,  the Department of Labor,
the PBGC or any other Governmental Authority with respect thereto; and

     (c) With  reasonable  promptness  but in any event within fifteen (15) days
for purposes of clauses (a), (b) and (c), deliver to the Agent copies of (a) any
unfavorable determination letter from the Internal Revenue Service regarding the
qualification  of an Employee Benefit Plan under Section 401(a) of the Code, (b)
all notices  received by BREED or any ERISA  Affiliate or any  Subsidiary of the
PBGC's or any Governmental  Authority's intent to terminate any Employee Benefit
Plan or to have a trustee  appointed to administer  any Pension  Plan,  (c) each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed
by BREED or any ERISA  Affiliate with the Internal  Revenue Service with respect
to each Employee Benefit Plan

                                                                 

<PAGE>



     and (d) all  notices  received  by  BREED  or any  ERISA  Affiliate  from a
Multiemployer  Plan sponsor  concerning  the  imposition or amount of withdrawal
liability  pursuant  to Section  4202 of ERISA.  BREED will  notify the Agent in
writing within five (5) Business Days of BREED or any ERISA Affiliate  obtaining
knowledge  or  reason to know that  BREED or any  ERISA  Affiliate  has filed or
intends  to file a notice  of intent  to  terminate  any  Pension  Plan  under a
distress termination within the meaning of Section 4041(c) of ERISA;

     8.18.  Continued  Operations.  Except  as  permitted  under  Section  9.12,
continue at all times to conduct its business and engage principally in the same
or  complementary  line  or  lines  of  business   substantially  as  heretofore
conducted;

     8.19  Additional  Support  Documents.  Within  thirty  (30)  days  (or such
additional  amount of time as is  reasonably  necessary in the case of a Foreign
Subsidiary  but in no event more than  ninety (90) days) of the  acquisition  or
creation  of  any  Domestic  Subsidiary  or  Direct  Foreign  Subsidiary  or any
Subsidiary of a Borrowing  Subsidiary cause to be delivered to the Agent for the
benefit of the Lenders each of the following:

     (a) in the case of a Domestic Subsidiary,

     (i) a Guaranty  executed by such Domestic  Subsidiary  substantially in the
form of Exhibit G hereto;

     (ii)  a  Security   Agreement   executed   by  such   Domestic   Subsidiary
substantially in the form of Exhibit R hereto;

     (iii) if  applicable,  to the extent  consented to by any  necessary  third
party,  Landlord  Waivers (in the form of Exhibit L), Lease  Assignments (in the
form of Exhibit N), Mortgages,  an Intellectual  Property Security Agreement (in
the form of Exhibit H), and an Intercompany  Note Pledge  Agreement (in the form
of Exhibit Q);

     (b) (i) in the case that such  Subsidiary  is directly  owned by BREED or a
Domestic Subsidiary or a Borrowing  Subsidiary which has previously  delivered a
Pledge  Agreement,  Exhibit A and a revised  Schedule I to the Pledge  Agreement
dated the date hereof together with (x) stock  certificates or other appropriate
evidence  of  ownership  representing  100% of the  capital  stock  and  related
interests  and rights of a Domestic  Subsidiary  and a Subsidiary of a Borrowing
Subsidiary  or (y)  not  less  than  65% of the  Voting  Stock  and  100% of the
non-voting  common stock and related  interests and rights of any Direct Foreign
Subsidiary  and (z) duly executed  stock powers or powers of assignment in blank
affixed thereto;

     (ii) in the case that  such  Subsidiary  is  directly  owned by a  Domestic
Subsidiary  which has not  previously  delivered  a Pledge  Agreement,  a Pledge
Agreement  substantially  similar  in form  and  content  to that  executed  and
delivered by certain Domestic Subsidiaries on the Closing Date, with appropriate
revisions as to the identity of the pledgor and as required by  applicable  law,
if such  Subsidiary is a Foreign  Subsidiary,  and securing  Obligations of such
Pledgor  under  its  Guaranty,  together  with (x) stock  certificates  or other
appropriate  evidence of ownership  representing  100% of the capital  stock and
related  interests and rights of a Domestic  Subsidiary or (y) not less than 65%
of the  Voting  Stock  and  100% of the  non-voting  common  stock  and  related
interests and rights of any Direct  Foreign  Subsidiary  (z) duly executed stock
powers or powers of  assignment in blank  affixed  thereto or a Certificate  and
Receipt of Registrar; or

                                                                 

<PAGE>



     (c) in the case that such  Subsidiary is a partnership  that has not issued
certificates  evidencing  ownership of such  partnership or joint  venture,  the
Collateral  Assignment of Partnership  Interests and  Certificate and Receipt of
Registrar  of such  partnership  or  such  joint  venture  with  respect  to the
registration of the Lien on Assigned Interests so long as such assignment is not
prohibited by the Governing Documents of such partnership or joint venture;

     (d) an  opinion  of  counsel  to the  Subsidiary  dated  as of the  date of
delivery of the Guaranty and other Loan  Documents  provided for in this Section
8.19and  addressed  to  the  Agent  and  the  Lenders,  in  form  and  substance
substantially  identical to the opinion of counsel delivered pursuant to Section
6.1(a)(ii)  hereof on the Closing  Date with respect to each Loan Party which is
party to any Loan Document  which such newly  acquired or created  Subsidiary is
required to deliver or cause to be delivered pursuant to subparagraphs (a), (b),
or (c) above.

     (e) current copies of the Organizational  Documents and Operating Documents
of such  Subsidiary,  minutes of duly  called and  conducted  meetings  (or duly
effected  consent actions) of the Board of Directors,  partners,  or appropriate
committees  thereof  (and,  if  required  by such  Organizational  Documents  or
Operating  Documents,  of the  shareholders) of such Subsidiary  authorizing the
actions and the  execution  and delivery of documents  described in this Section
8.19.

     8.20.  Operating Plan. As soon as practical and in any event within 90 days
after the Closing Date, BREED shall deliver to the Agent a copy of the Operating
Plan;  provided,  however,  that if at any time before the Facility  Termination
Date, management of BREED determines that the forecasts of the Operating Plan no
longer accurately  reflect the current projected  financial results of BREED and
its Subsidiaries,  as promptly as practicable after such  determination date and
in any event  within 30 days of the end of the  fiscal  quarter  for which  such
determination  was made,  BREED shall  deliver to the Agent a revised  Operating
Plan;

     8.21.  Allied  Acquisition  Audit.  As soon as  practical  and in any event
within 45 days after the Closing  Date,  BREED shall deliver to the Agent a copy
of an audit of the Acquired Business for the three (3) years ending December 31,
1996 conducted by Price Waterhouse, LLP and unaudited financial statements as of
September  30,  1997;  and within 95 days after the initial  Advance,  unaudited
financial statements as of the date of the initial Advance.  Notwithstanding the
foregoing,  AlliedSignal's failure to provide such statements,  without fault of
BREED, shall not constitute an Event of Default;

     8.22.  Diligent  Pursuit of  Waiver.  BREED  shall use its best  efforts to
obtain a waiver of the limitations set forth in the letter dated August 26, 1996
to BREED from the Securities and Exchange Commission;

     8.23.  Swap  Agreements.  Not later than  thirty  (30) days  following  the
Closing Date, the Borrowers shall enter into interest rate protection agreements
containing terms and conditions acceptable to BREED and the Agent providing Rate
Hedging  Obligations  which limit the risk of interest  rate  fluctuations  in a
notional  amount of not less  than (i)  $300,000,000  or (ii) in the event  that
Outstandings   are  less  than   $300,000,000,   fifty   percent  (50%)  of  all
Outstandings;

     8.24.  Subsidiary  Support  of  Permitted  Indebtedness.  So  long  as  not
prohibited  by law,  BREED  and  each  Subsidiary  shall  cause  each  of  their
Subsidiaries to make cash payments,  directly or indirectly, to the Borrowers by
way of dividends, advances, repayments of loans or advances, or other returns on
investments, or by way of

                                                                 

<PAGE>



     any other  arrangement  such that the  Borrowers  shall have the ability to
satisfy all interest and  principal  payments  required  under the terms of this
Agreement or any other Loan Document and under the terms of any other  Permitted
Indebtedness.

     8.25. Convertible Debentures.

     (a) The  Convertible  Preferred  Securities  Issuance  shall have  occurred
within 180 days of the Closing Date.

     (b)  In  the  event  any  distribution  with  respect  to  the  Convertible
Debentures  would give rise to an Event of Default,  promptly give the BTI Trust
notice of the election by BREED to defer such distribution until payment in full
of the Obligations.

     8.26 Management. Cause the Person occupying the office of (i) Vice Chairman
of the Board of Directors, (ii) President and Chief Operating Officer, and (iii)
Executive  Vice  President  of  Operations  Worldwide  to remain in such office,
except for reason of death or disability.

     ARTICLE IX

     Negative Covenants

     Until the Facility  Termination  Date,  unless the Required  Lenders  shall
otherwise consent in writing,  BREED will not, nor will it permit any Subsidiary
to:

     9.1. Financial Covenants.

     (a) Consolidated  Shareholder's Equity.  Permit Consolidated  Shareholder's
Equity to be less than the following:  (i) ninety percent (90%) of the pro-forma
Consolidated Shareholders' Equity of BREED and its Subsidiaries and the Acquired
Business  as set forth in the Form 8-K filed with the  Securities  and  Exchange
Commission as a result of the completion of the Allied Acquisition, less

     (ii) the sum of:

     (A) All after tax charges related to the restructure  plan announced in the
second quarter of Fiscal Year 1998, as approved by the Agent, plus

     (B) All after tax  charges for  disruption  costs  directly  related to the
aforementioned restructure plan, as approved by the Agent, plus

     (C) All after tax fees and expenses,  including  financing  fees,  that are
related to the Allied Acquisition, as approved by the Agent, plus

     (D) After tax charges  for the write off of in process R&D of the  Acquired
Business, as approved by the Agent, plus

                                                                 

<PAGE>



     (E) Cash Dividends on either the  Convertible  Preferred  Securities or the
Series B Preference Shares so long as the Convertible  Preferred Securities have
not been issued, plus

     (F) Cash  dividends  paid to common  stockholders  on or about  November 4,
1997;

     plus

     (iii) the sum of:

     (A) Ninety percent (90%) of Consolidated  Net Income (with no reduction for
losses), plus

     (B) One hundred percent (100%) of the Net Proceeds of any Equity Offering.

     (iv) The  foregoing  calculation,  (i) - (ii) + (iii) shall be exclusive of
the effects of any foreign  currency  translation  amounts  after  September 30,
1997.

     (b) Consolidated  EBITDA.  Permit at any time during the respective periods
set forth below  Consolidated  EBITDA (less those items described in Section 9.1
(a)(ii)(A)(B) and (D)) to be less than that set forth opposite each such period:


                     Period                                      Amount
Three months ending December 31, 1997                           $25,000,000
Six months ending March 31, 1997                                $64,000,000
Nine months ending June 30, 1998                               $107,000,000

     (c) Limitation on Capital  Expenditures.  Make Capital  Expenditures  which
exceed during the respective periods set forth below (on a cumulative basis) the
amount set forth opposite each such period:


                     Period                                           Amount
Three months ending December 31, 1997                               $17,000,000
Six months ending March 31, 1998                                    $37,000,000
Nine months ending June 30, 1998                                    $57,000,000


     9.2. Acquisitions.  Enter into any agreement,  contract, binding commitment
or other  arrangement  providing  for any  Acquisition,  or take any  action  to
solicit  the tender of  securities  or  proxies  in respect  thereof in order to
effect any Acquisition.

     9.3.  Liens.  Incur,  create or  permit to exist any Lien,  charge or other
encumbrance of any nature  whatsoever with respect to any property or assets now
owned or hereafter acquired by BREED or any Subsidiary, other than Liens created
in favor of the Agent and the Lenders under the Loan Documents and the following
(collectively, the "Permitted Liens"):


                                                                 

<PAGE>



     (a) Liens existing as of the date hereof and as set forth in Schedule 7.7;

     (b)  Liens  imposed  by  law  for  taxes,  assessments  or  charges  of any
Governmental  Authority  for claims not yet due or which are being  contested in
good faith by appropriate  proceedings  diligently conducted and with respect to
which adequate reserves or other appropriate  provisions are being maintained in
accordance with GAAP.

     (c)  statutory  Liens of  landlords  and Liens of  carriers,  warehousemen,
mechanics, materialmen and other Liens imposed by law or created in the ordinary
course of business and in existence  less than 90 days from the date of creation
thereof for amounts  not yet due or which are being  contested  in good faith by
appropriate  proceedings diligently conducted and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance with
GAAP;

     (d) Liens  incurred or  deposits  made in the  ordinary  course of business
(including,  without  limitation,  surety bonds and appeal  bonds) in connection
with  workers'  compensation,  unemployment  insurance and other types of social
security  benefits  or to secure  the  performance  of  tenders,  bids,  leases,
contracts (other than for the repayment of Indebtedness),  statutory obligations
and other similar  obligations or arising as a result of progress payments under
government contracts;

     (e) purchase  money Liens to secure  Indebtedness  permitted  under Section
9.4(e) and  incurred  to  purchase  fixed  assets,  provided  such  Indebtedness
represents  not less than 75% and not more than  100% of the  purchase  price of
such  assets as of the date of purchase  thereof and no property  other than the
assets so purchased secured such Indebtedness;

     (f) Liens arising in connection with Capital Leases permitted under Section
9.4(f) provided that no such Lien shall extend to any Collateral or to any other
property other than the assets subject to such Capital Leases;

     (g)  easements  (including   reciprocal  easement  agreements  and  utility
agreements),  rights-of-way,  covenants, consents, reservations,  encroachments,
variations and zoning and other restrictions,  charges or encumbrances  (whether
or not recorded), which do not interfere materially with the ordinary conduct of
the business of BREED or any Subsidiary and which do not materially detract from
the value of the  property  to which they  attach or  materially  impair the use
thereof to BREED or any Subsidiary;

     9.4.   Indebtedness.   Incur,  create,   assume  or  permit  to  exist  any
Indebtedness,  howsoever  evidenced,  except  the  following  (collectively  the
"Permitted Indebtedness"):

     (a)  Indebtedness  existing as of the Closing Date as set forth in Schedule
7.6; provided the outstanding  amount of such Indebtedness shall not at any time
exceed $100,000,000 in the aggregate; provided, further, none of the instruments
and  agreements  evidencing  or governing  such  Indebtedness  shall be amended,
modified  or  supplemented  after  the  Closing  Date to  change  any  terms  of
subordination,  repayment or rights of conversion, put, exchange or other rights
from such terms and rights as in effect on the Closing Date;

     (b)  Indebtedness  owing to the Agent or any Lender in connection with this
Agreement, any Note or other Loan Document;

     (c) Indebtedness required under Section 8.23;

     (d) the endorsement of negotiable  instruments for deposit or collection or
similar transactions in the ordinary course of business;

     (e)  purchase  money  Indebtedness  in an  aggregate  amount  not to exceed
$10,000,000 at any time;

                                                                 

<PAGE>



     (f) Capital  Leases (i) with respect to the  construction  and equipping of
the  VT1  FAB2  Facility  in  Finland  in an  aggregate  amount  not  to  exceed
$10,000,000  at any time and (ii) other than described in clause (i) above in an
aggregate principal amount not to exceed $10,000,000 at any time;

     (g) Intercompany Advances; and

     (h) Guaranties of Indebtedness permitted hereunder of Guarantors and Direct
Foreign  Subsidiaries.,  and the limited  guaranty of the Convertible  Preferred
Securities.

     9.5. Transfer of Assets. Sell, lease,  transfer or otherwise dispose of any
assets of BREED or any Subsidiary other than:

     (a)  dispositions  of  assets  in the  ordinary  course  of  business;  (b)
dispositions of property that is substantially  worn,  damaged,  obsolete or, in
the judgment of BREED, no longer best used or useful in its business  (including
Gallino Plasturgia S.r.l.) or that of any Subsidiary;

     (c) transfers of assets necessary to give effect to investment or merger or
consolidation transactions permitted by Sections 9.6 and 9.7.

     (d) after the Agent has approved the Operating Plan, dispositions described
therein.

     9.6. Investments.  Purchase, own, invest in or otherwise acquire,  directly
or  indirectly,  any stock or other  securities,  or make or permit to exist any
interest whatsoever in any other Person or permit to exist any loans or advances
to any Person,  except that BREED and its Subsidiaries may maintain  investments
or invest in:

     (a) any Person acquired in an Acquisition permitted hereunder;

     (b) Eligible Securities;

     (c) investments,  including joint ventures,  existing as of the date hereof
and as set forth in Schedule 7.4 and the Siemens  joint  venture  referred to in
Section 9.6(h);

     (d) accounts  receivable  arising and trade credit  granted in the ordinary
course of  business  and any  securities  received  in  satisfaction  or partial
satisfaction thereof in connection with accounts of financially troubled Persons
to the extent reasonably necessary in order to prevent or limit loss;

     (e) Intercompany Advances;

     (f) investments in Guarantors  formed for the purpose of an Equity Offering
or a Debt Offering;

     (g) loans and advances to  employees in the ordinary  course of business in
an aggregate amount not to exceed $4,000,000;

     (h) non-cash investments in a joint venture with Siemens AG or a subsidiary
thereof not to exceed in the aggregate $20,000,000;

     (i)  other  investments  in joint  ventures,  the BTI  Trust  and  minority
interest investments in an aggregate amount not to exceed $1,000,000;

     (j) advances to Foreign Subsidiaries who are not Borrowing Subsidiaries nor
Direct Foreign Subsidiaries in

                                                                 

<PAGE>



     an aggregate amount not to exceed $1,000,000; and

     (k)  investments  in BTI Trust of up to 3% of the  principal  amount of the
Convertible Preferred Securities.

     9.7. Merger or Consolidation.  (a) Consolidate with or merge into any other
Person, or (b) permit any other Person to merge into it; provided,  however, (i)
any  Subsidiary of BREED may merge or transfer all or  substantially  all of its
assets into or consolidate with its parent, a Guarantor, a Borrowing Subsidiary,
or BREED,  and (ii) any other Person may merge into or consolidate with BREED or
any  wholly-owned  Subsidiary  and any  Subsidiary may merge into or consolidate
with any other Person in order to consummate an Acquisition permitted by Section
9.2, provided further,  that any resulting or surviving entity shall execute and
deliver such agreements and other documents, including a Guaranty, and take such
other  action as the Agent may  require  to  evidence  or  confirm  its  express
assumption of the obligations and liabilities of its predecessor  entities under
the Loan Documents;

     9.8 Restricted Payments.  Make any Restricted Payment or apply or set apart
any of their assets  therefor or agree to do any of the  foregoing  except (a) a
one time cash  dividend of  approximately  $2,200,000  payable to the holders of
BREED common stock on or before  November4,  1997, (b) BREED may make Restricted
Payments (i) prior to the issuance of the  Convertible  Preferred  Securities on
the  Series B  Preference  Shares  required  pursuant  to the  Prudential  Stock
Purchase  Documents  and (ii) after the  issuance of the  Convertible  Preferred
Securities to the BTI Trust on the Convertible Debentures (and the BTI Trust may
make  distributions  on the  Convertible  Preferred  Securities) so long as both
before and after giving effect  thereto,  no Default or Event of Default exists,
and (c) the  redemption  of the Series B  Preference  Shares  with Net  Proceeds
received  from the sale of the  Convertible  Preferred  Securities or such other
equity or equity linked securities as approved by the Required Lenders.

     9.9. Transactions with Affiliates.  Other than transactions permitted under
Sections  9.5,  9.6,  9.7 and 9.8, and  transactions  with the BTI Trust (to the
extent  necessary  for BREED to  perform  its  obligations  with  respect to the
Convertible Preferred Securities),  Guarantors, Borrowing Subsidiaries or Direct
Foreign  Subsidiaries,  enter  into any  transaction  after  the  Closing  Date,
including,  without  limitation,  the  purchase,  sale,  lease  or  exchange  of
property,  real or personal, or the rendering of any service, with any Affiliate
of BREED,  except  (a)that  such  Persons  may render  services  to BREED or its
Subsidiaries  for  compensation  at the same  rates  generally  paid by  Persons
engaged in the same or  similar  businesses  for the same or  similar  services,
(b)that  BREED  or any  Subsidiary  may  render  services  to such  Persons  for
compensation at the same rates generally charged by BREED or such Subsidiary and
(c) in either  case in the  ordinary  course of  business  and  pursuant  to the
reasonable  requirements of BREED's (or any  Subsidiary's)  business  consistent
with past practice of BREED and its  Subsidiaries  and upon fair and  reasonable
terms no less favorable to BREED (or any Subsidiary) than would be obtained in a
comparable arm's-length transaction with a Person not an Affiliate;

     9.10.  Compliance  with ERISA,  the Code and  Foreign  Benefit  Laws.  With
respect to any Pension Plan, Employee Benefit Plan or Multiemployer Plan:

     (a) permit the occurrence of any Termination  Event which would result in a
liability on the part of BREED,  any ERISA  Affiliate,  or any Subsidiary to the
PBGC or any Governmental Authority; or

     (b) permit the present value of all benefit  liabilities under all Employee
Benefit Plans to exceed the current value of the assets of such Employee Benefit
Plans allocable to such benefit liabilities; or

     (c) permit any accumulated funding deficiency (as defined in Section 302 of
ERISA and Section 412 of the Code) with respect to any Pension Plan,  whether or
not waived; or

     (d) fail to make any  contribution  or  payment to any  Multiemployer  Plan
which BREED or any ERISA  Affiliate  may be required to make under any agreement
relating to such Multiemployer Plan, or any law pertaining

                                                                 

<PAGE>



     thereto; or

     (e)  engage,  or permit  BREED or any ERISA  Affiliate  to  engage,  in any
prohibited  transaction  under Section 406 of ERISA or Sections 4975 of the Code
for which a civil penalty  pursuant to Section 502(I) of ERISA or a tax pursuant
to Section 4975 of the Code may be imposed; or

     (f)  permit  the  establishment  of any  Employee  Benefit  Plan  providing
post-retirement welfare benefits or establish or amend any Employee Benefit Plan
which establishment or amendment could result in liability to BREED or any ERISA
Affiliate or any  Subsidiary  or increase the  obligation  of BREED or any ERISA
Affiliate  or any  Subsidiary  to a  Multiemployer  Plan  other than those to be
established for certain employees acquired as part of the Allied Acquisition; or

     (g) fail, or permit BREED or any ERISA  Affiliate or any Subsidiary to fail
to establish,  maintain and operate each Employee  Benefit Plan in compliance in
all material  respects with the  provisions of ERISA,  the Code,  all applicable
Foreign  Benefit  Laws and all other  applicable  laws and the  regulations  and
interpretations thereof;

     9.11. Accounting Changes.  Change its Fiscal Year or make any change in its
accounting treatment and reporting practices except as required by GAAP;

     9.12.  Dissolution,  etc. Wind up,  liquidate or dissolve  (voluntarily  or
involuntarily)  or commence or suffer any  proceedings  seeking any such winding
up, liquidation or dissolution, except for the dissolution of Gallino Plasturgia
S.r.l.  and  Akebono  Vaitec and in  connection  with a merger or  consolidation
permitted pursuant to Section 9.7 or as provided in the Operating Plan;

     9.13. Limitations on Sales and Leasebacks.  Enter into any arrangement with
any  Person  providing  for the  leasing by BREED or any  Subsidiary  of real or
personal  property,  whether  now  owned  or  hereafter  acquired  in a  related
transaction or series of related  transactions,  which has been or is to be sold
or  transferred by BREED or any Subsidiary to such Person or to any other Person
to whom funds have been or are to be advanced by such Person on the  security of
such property or rental obligations of BREED or any Subsidiary;

     9.14.  Change  in  Control.  Cause,  suffer or permit to exist or occur any
Change of Control;

     9.15.  Limitation on Guaranties.  Enter into or cause,  suffer or permit to
exist any Guaranties except as permitted in Section 9.4.

     9.16.  Negative  Pledge Clauses.  Enter into or cause,  suffer or permit to
exist any  agreement  with any  Person  other  than the  Agent  and the  Lenders
pursuant to this Agreement or any other Loan Documents which prohibits or limits
the ability of any of BREED or any Subsidiary to create, incur, assume or suffer
to exist any Lien upon any of its  property,  assets or  revenues,  whether  now
owned or  hereafter  acquired,  in favor of the Agent and the Lenders  under the
Loan  Documents;  provided that BREED and any  Subsidiary may enter into such an
agreement in connection with, and limited solely to, property  acquired with the
proceeds of purchase money Indebtedness permitted hereunder;

     9.17.  Prepayments,  Etc. of Indebtedness.  (a) Prepay,  redeem,  purchase,
defease or otherwise  satisfy  prior to the  scheduled  maturity  thereof in any
manner,  or make any payment in  violation  of any  subordination  terms of, any
Indebtedness; or

     (b)  amend,  modify or change in any manner  any term or  condition  of any
Indebtedness  described  in  Section  9.4(a)  or any lease so that the terms and
conditions  thereof are less  favorable  to the Agent and the  Lenders  than the
terms of such Indebtedness or leases as of the Closing Date;


                                                                

<PAGE>



     9.18.  Restrictive  Agreements.  Enter  into or cause,  suffer or permit to
exist any agreement  with any other Person (other than the Agent and the Lenders
pursuant to this Agreement or any other Loan Document) which  prohibits,  limits
or restricts the ability of any  Subsidiary  to make any  payments,  directly or
indirectly,  to  BREED by way of  dividends,  advances,  repayments  of loans or
advances, or other returns on investments, or any other agreement or arrangement
which restricts the ability of any such Subsidiary to make any payment, directly
or indirectly, to BREED.

     ARTICLE X

     Events of Default and Acceleration

     10.1. Events of Default. If any one or more of the following events (herein
called "Events of Default")  shall occur for any reason  whatsoever (and whether
such  occurrence  shall be voluntary or involuntary or come about or be effected
by operation of law or pursuant to or in compliance with any judgment, decree or
order  of any  court  or any  order,  rule  or  regulation  of any  Governmental
Authority), that is to say:

     (a) if  default  shall  be  made in the due  and  punctual  payment  of the
principal of any Loan, Reimbursement Obligation or other Obligation, when and as
the same shall be due and payable  whether  pursuant to any provision of Article
II or Article III, at maturity, by acceleration or otherwise and; or

     (b) if default shall be made in the due and punctual  payment of any amount
of interest on any Loan,  Reimbursement Obligation or other Obligation or of any
fees or other amounts  payable to any of the Lenders or the Agent on the date on
which the same shall be due and payable; or

     (c) if  default  shall  be made in the  performance  or  observance  of any
covenant set forth in Section 2.3(b), 2.12, 8.7, 8.11, 8.12, 8.19, 8.20, 8.25(a)
or 8.26 (and such  Default in the case of Section  8.26  shall  continue  for 15
days) or Article IX;

     (d) if a default  shall be made in the  performance  or  observance  of, or
shall occur  under,  any  covenant,  agreement  or  provision  contained in this
Agreement  or the Notes  (other than as  described  in clauses  (a),  (b) or (c)
above) and such  default  shall  continue for thirty (30) or more days after the
earlier of receipt of notice of such  default by the  Authorized  Representative
from the Agent or an  Authorized  Representative  of BREED becomes aware of such
default,  or if a default shall be made in the  performance or observance of, or
shall occur under, any covenant,  agreement or provision contained in any of the
other Loan Documents  (beyond any  applicable  grace period,  if any,  contained
therein) ( including  without  limitation  failure of any  Guarantor  to pay the
Agent all of the Guaranteed  Obligations in accordance  with, and as defined in,
the Guaranty on the Business Day on which the Agent has demanded such payment in
accordance  with the terms of the  Guaranty ) or in any  instrument  or document
evidencing or creating any obligation,  guaranty,  or Lien in favor of the Agent
or any of the  Lenders  or  delivered  to the  Agent  or any of the  Lenders  in
connection with or pursuant to this Agreement or any of the  Obligations,  or if
any Loan Document ceases to be in full force and effect (other than by reason of
any action by the Agent or any Lender), or if without the written consent of the
Lenders, this Agreement or any other Loan Document shall be disaffirmed or shall
terminate,  be terminable or be terminated or become void or  unenforceable  for
any reason whatsoever (other than in accordance with its terms in the absence of
default or by reason of any action by the Lenders or the Agent); or

     (e) if there shall occur (i) a default, which is not waived, in the payment
of any  principal,  interest,  premium  or  other  amount  with  respect  to any
Indebtedness  or Rate  Hedging  Obligation  (other  than  the  Loans  and  other
Obligations) of BREED or any Subsidiary in an amount not less than $2,000,000 in
the  aggregate  outstanding,  or (ii) a  default,  which is not  waived,  in the
performance,  observance or fulfillment of any term or covenant contained in any
agreement or instrument under or pursuant to which any such Indebtedness or Rate
Hedging  Obligation  referred  to in clause (i) may have been  issued,  created,
assumed,  guaranteed or secured by BREED or any  Subsidiary,  or (iii) any other
event of default as specified in any agreement or  instrument  under or pursuant
to which any such Indebtedness or Rate

                                                                 

<PAGE>



     Hedging Obligation may have been issued,  created,  assumed,  guaranteed or
secured  by BREED or any  Subsidiary,  and any such  default or event of default
specified in clauses (i), (ii) or (iii) shall  continue for more than the period
of grace, if any, therein  specified,  or such default or event of default shall
permit the holder of any such  Indebtedness  or Rate Hedging  Obligation (or any
agent or trustee  acting on behalf of one or more  holders)  to  accelerate  the
maturity thereof; or

     (f) if any representation, warranty or other statement of fact contained in
any Loan  Document or in any  writing,  certificate,  report or statement at any
time  furnished  to the Agent or any  Lender  by or on  behalf of the  Borrowers
pursuant to or in connection  with any Loan  Document,  or  otherwise,  shall be
false or misleading in any material respect when given; or

     (g) if BREED or any Subsidiary  shall be unable to pay its debts  generally
as they become due; file a petition to take advantage of any insolvency statute;
make an assignment for the benefit of its  creditors;  commence a proceeding for
the appointment of a receiver,  trustee,  liquidator or conservator of itself or
of the whole or any substantial part of its property;  file a petition or answer
seeking  liquidation,  reorganization or arrangement or similar relief under the
federal bankruptcy laws or any other applicable law or statute; or

     (h) if a court of competent  jurisdiction shall enter an order, judgment or
decree appointing a custodian,  receiver,  trustee, liquidator or conservator of
BREED  or  any  Subsidiary  or of  the  whole  or any  substantial  part  of its
properties and such order,  judgment or decree continues  unstayed and in effect
for a period of sixty (60) days,  or approve a petition  filed  against BREED or
any Subsidiary  seeking  liquidation,  reorganization  or arrangement or similar
relief under the federal  bankruptcy laws or any other applicable law or statute
of the United  States of America or any state,  which  petition is not dismissed
within  sixty (60) days;  or if, under the  provisions  of any other law for the
relief or aid of debtors, a court of competent jurisdiction shall assume custody
or control of BREED or any Subsidiary or of the whole or any substantial part of
its properties,  which control is not relinquished within sixty (60) days; or if
there is commenced  against BREED or any  Subsidiary  any proceeding or petition
seeking  reorganization,   arrangement  or  similar  relief  under  the  federal
bankruptcy  laws or any other  applicable law or statute of the United States of
America or any state which  proceeding  or petition  remains  undismissed  for a
period of sixty (60)  days;  or if BREED or any  Subsidiary  takes any action to
indicate its consent to or approval of any such proceeding or petition; or

     (i) if (i) one or more  judgments or orders where the amount not covered by
insurance  (or the amount as to which the insurer is found not to be liable for)
is in excess of $1,000,000 is rendered against BREED or any Subsidiary,  or (ii)
there is any  attachment,  injunction  or  execution  against  any of BREED's or
Subsidiaries'  properties  for  any  amount  in  excess  of  $1,000,000  in  the
aggregate;  and such  judgment,  attachment,  injunction  or  execution  remains
unpaid, unstayed,  undischarged,  unbonded or undismissed for a period of thirty
(30) days; or

     (j) if BREED or any Subsidiary shall,  other than in the ordinary course of
business  (as  determined  by past  practices  or as set forth in the  Operating
Plan),  suspend all or any part of its operations material to the conduct of the
business of BREED or such  Subsidiary for a period of more than sixty (60) days;
or (k) any material  uninsured damage to or loss, theft or destruction of any of
the Collateral shall occur;

     (l) any actual or asserted  invalidity (other than by the Agent or Lenders)
of the Loan Documents; or

     (m) if there shall occur any Termination Event; or

     (n) there shall occur any Change in Control; or

     (o) the  occurrence  of any  Indenture  Event of Default or the  failure to
register securities of the Borrower or BTI Trust as required by any agreement or
instrument to which either of them is a party;

     then,  and in any such event and at any time  thereafter,  if such Event of
Default or any other Event of Default shall have

                                                                 

<PAGE>



     not been waived,

     (A) either or both of the  following  actions may be taken:  (i) the Agent,
with the consent of the  Required  Lenders,  may,  and at the  direction  of the
Required  Lenders  shall,  declare any obligation of the Lenders and the Issuing
Bank to make further Loans or to issue additional  Letters of Credit terminated,
whereupon the obligation of each Lender to make further Loans and of the Issuing
Bank  to  issue  additional   Letters  of  Credit,   hereunder  shall  terminate
immediately,  and (ii) the Agent shall at the direction of the Required Lenders,
at  their  option,  declare  by  notice  to  the  Borrowers  any  or  all of the
Obligations  to be  immediately  due and payable,  and the same,  including  all
interest accrued thereon and all other obligations of the Borrowers to the Agent
and the Lenders,  shall  forthwith  become  immediately  due and payable without
presentment,  demand,  protest,  notice or other  formality of any kind,  all of
which  are  hereby  expressly  waived,  anything  contained  herein  or  in  any
instrument evidencing the Obligations to the contrary notwithstanding; provided,
however,  that  notwithstanding  the  above,  if there  shall  occur an Event of
Default  under clause (g) or (h) above,  then the  obligation  of the Lenders to
make Loans and of the Issuing Bank to issue  Letters of Credit  hereunder  shall
automatically  terminate and any and all of the Obligations shall be immediately
due and payable without the necessity of any action by the Agent or the Required
Lenders or notice by or to the Agent or the Lenders;

     (B) The Borrowers shall,  upon demand of the Agent or the Required Lenders,
deposit  cash with the Agent in an amount  equal to the  amount of any Letter of
Credit  Outstandings,  as  collateral  security for the  repayment of any future
drawings or payments  under such Letters of Credit,  and such  amounts  shall be
held by the Agent pursuant to the terms of the LC Account Agreement; and

     (C) the Agent and each of the  Lenders  shall  have all of the  rights  and
remedies available under the Loan Documents or under any applicable law.

     10.2.  Agent to Act. In case any one or more Events of Default  shall occur
and not have been waived or cured,  the Agent may,  and at the  direction of the
Required Lenders shall,  proceed to protect and enforce their rights or remedies
either by suit in equity or by action at law, or both,  whether for the specific
performance of any covenant, agreement or other provision contained herein or in
any other Loan  Document,  or to enforce the payment of the  Obligations  or any
other legal or equitable right or remedy.

     10.3.  Cumulative  Rights.  No right or remedy  herein  conferred  upon the
Lenders or the Agent is intended to be exclusive of any other rights or remedies
contained  herein or in any other Loan Document,  and every such right or remedy
shall be cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.

     10.4. No Waiver.  No course of dealing between the Borrowers and any Lender
or the Agent or any  failure  or delay on the part of any Lender or the Agent in
exercising any rights or remedies under any Loan Document or otherwise available
to it shall  operate  as a waiver  of any  rights or  remedies  and no single or
partial exercise of any rights or remedies shall operate as a waiver or preclude
the exercise of any other  rights or remedies  hereunder or of the same right or
remedy on a future occasion.

     10.5.  Allocation of Proceeds.  If an Event of Default has occurred and not
been  waived,  and the  maturity of the Notes has been  accelerated  pursuant to
Article X hereof,  all payments  received by the Agent hereunder,  in respect of
any principal of or interest on the  Obligations or any other amounts payable by
the Borrowers hereunder, shall be applied by the Agent in the following order:

     (a) amounts due to the Lenders pursuant to Sections 2.10, 3.3 and 12.5;

     (b)  payments  of interest on Loans and  Reimbursement  Obligations,  to be
applied for the ratable benefit of the Lenders;

                                                                

<PAGE>



     (c)  payments of principal of Loans and  Reimbursement  Obligations,  to be
applied for the ratable benefit of the Lenders;

     (d) payments of cash amounts to the Agent in respect of outstanding Letters
of Credit pursuant to Section 10.1(B);

     (e) amounts due to the Lenders pursuant to Sections 3.2(g), 8.15 and 12.9;

     (f) payments of all other amounts due under any of the Loan  Documents,  if
any, to be applied for the ratable benefit of the Lenders;

     (g) amounts due to any of the Lenders in respect of Obligations  consisting
of  liabilities  under any Swap  Agreement with any of the Lenders on a pro rata
basis according to the amounts owed; and

     (h) any surplus  remaining after application as provided for herein, to the
Borrowers or otherwise as may be required by applicable law.

     10.6.  Judgment Currency.  The Borrowers,  the Agent and each Lender hereby
agree that if, in the event that a judgment  is given in relation to any sum due
to the Agent or any Lender hereunder,  such judgment is given in a currency (the
"Judgment   Currency")  other  than  that  in  which  such  sum  was  originally
denominated  (the  "Original  Currency"),  the Borrowers  agree to indemnify the
agent or such  Lender,  as the case may be, to the extent that the amount of the
Original  Currency  which could have been  purchased by the Agent in  accordance
with normal banking procedures on the Business Day following receipt of such sum
is less than the sum which  could have been so  purchased  by the Agent had such
purchase  been made on the day on which such  judgment was given or, if such day
is not a Business Day, on the Business Day  immediately  preceding the giving of
such  judgment,  and if the amount so  purchased  exceeds the amount which could
have been so  purchased by the Agent had such  purchase  been made on the day on
which  such  judgment  was given or, if such day is not a Business  Day,  on the
Business Day  immediately  preceding such judgment,  the Agent or the applicable
Lenders  agrees to remit such excess to the  Borrowers.  The  agreements in this
Section shall survive payment of all Obligations.

     ARTICLE XI

     The Agent

     11.1. Appointment,  Powers, and Immunities.  Each Lender hereby irrevocably
appoints and  authorizes  the Agent to act as its agent under this Agreement and
the other Loan  Documents  with such powers and  discretion as are  specifically
delegated  to the  Agent  by the  terms of this  Agreement  and the  other  Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Agent (which term as used in this sentence and in Section 11.5 and the first
sentence of Section 11.6 hereof shall include its affiliates and its own and its
affiliates' officers, directors,  employees, and agents): (a) shall not have any
duties or  responsibilities  except those  expressly set forth in this Agreement
and  shall  not be a  trustee  or  fiduciary  for any  Lender;  (b) shall not be
responsible  to the  Lenders  for any  recital,  statement,  representation,  or
warranty  (whether  written  or  oral)  made in or in  connection  with any Loan
Document or any certificate or other document referred to or provided for in, or
received by any of them under,  any Loan Document,  or for the value,  validity,
effectiveness, genuineness, enforceability, or sufficiency of any Loan Document,
or any other document  referred to or provided for therein or for any failure by
any Loan Party or any other Person to perform any of its obligations thereunder;
(c) shall not be responsible for or have any duty to ascertain, inquire into, or
verify the  performance or observance of any covenants or agreements by any Loan
Party or the satisfaction of any condition or to inspect the property (including
the  books  and  records)  of any  Loan  Party  or any  of its  Subsidiaries  or
affiliates;  (d) shall not be required to initiate or conduct any  litigation or
collection proceedings under any Loan Document; and (e) shall not be responsible
to any  Lender  for any  action  taken or  omitted to be taken by it under or in
connection with any Loan

                                                                 

<PAGE>



     Document,  except for its own gross negligence or willful  misconduct.  The
Agent may employ agents and attorneys-in-  fact and shall not be responsible for
the negligence or misconduct of any such agents or attorneys-in-fact selected by
it with reasonable care. Each Lender hereby irrevocably  designates and appoints
NationsBank as the Agent for the Lenders under this  Agreement,  and each of the
Lenders hereby irrevocably  authorizes NationsBank as the Agent for such Lender,
to take such action on its behalf under the provisions of this Agreement and the
other Loan  Documents and to exercise such powers as are expressly  delegated to
the Agent by the terms of this Agreement and such other Loan Documents, together
with such other powers as are reasonably incidental thereto. The Agent shall not
have any duties or responsibilities, except those expressly set forth herein, or
any fiduciary  relationship with any of the Lenders,  and no implied  covenants,
functions,  responsibilities,  duties,  obligations or liabilities shall be read
into this  Agreement or any other Loan  Document or otherwise  exist against the
Agent.

     11.2.  Reliance  by Agent.  The Agent  shall be  entitled  to rely upon any
certification,  notice, instrument,  writing, or other communication (including,
without limitation, any thereof by telephone or telefacsimile) believed by it to
be genuine and correct and to have been signed,  sent or made by or on behalf of
the proper  Person or Persons,  and upon advice and  statements of legal counsel
(including  counsel  for any Loan  Party),  independent  accountants,  and other
experts  selected  by the  Agent.  The Agent may deem and treat the payee of any
Note as the holder  thereof for all purposes  hereof  unless and until the Agent
receives and accepts an Assignment  and Acceptance  executed in accordance  with
Section  12.1  hereof.  As to any matters  not  expressly  provided  for by this
Agreement,  the Agent shall not be required to exercise any  discretion  or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the  Required  Lenders,  and such  instructions  shall be  binding on all of the
Lenders;  provided,  however,  that the Agent  shall not be required to take any
action that  exposes the Agent to personal  liability or that is contrary to any
Loan Document or applicable  law or unless it shall first be  indemnified to its
satisfaction  by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking any such action.

     11.3.  Defaults.  The Agent shall not be deemed to have knowledge or notice
of the occurrence of a Default or Event of Default unless the Agent has received
written notice from a Lender or the Borrowers  specifying  such Default or Event
of Default and stating that such notice is a "Notice of  Default".  In the event
that the Agent receives such a notice of the occurrence of a Default or Event of
Default,  the Agent shall give prompt notice  thereof to the Lenders.  The Agent
shall  (subject to Section  11.2  hereof)  take such action with respect to such
Default or Event of Default as shall  reasonably  be  directed  by the  Required
Lenders,  provided  that,  unless and until the Agent shall have  received  such
directions,  the Agent may (but shall not be obligated to) take such action,  or
refrain  from  taking  such  action,  with  respect to such  Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.

     11.4. Rights as Lender. With respect to its Revolving Credit Commitment and
Term Loan  Commitment and the Loans made by it,  NationsBank  (and any successor
acting as Agent)  in its  capacity  as a Lender  hereunder  shall  have the same
rights and powers  hereunder  as any other  Lender and may  exercise the same as
though it were not  acting as the  Agent,  and the term  "Lender"  or  "Lenders"
shall,  unless  the  context  otherwise  indicates,  include  the  Agent  in its
individual  capacity.  NationsBank  (and any successor  acting as Agent) and its
affiliates  may  (without  having to  account  therefor  to any  Lender)  accept
deposits from,  lend money to, make  investments  in,  provide  services to, and
generally engage in any kind of lending,  trust, or other business with any Loan
Party or any of its  Subsidiaries  or  affiliates  as if it were not  acting  as
Agent,  and NationsBank  (and any successor  acting as Agent) and its affiliates
may  accept  fees and  other  consideration  from  any Loan  Party or any of its
Subsidiaries  or affiliates  for services in connection  with this  Agreement or
otherwise without having to account for the same to the Lenders.

     11.5  Indemnification.  The Lenders  agree to  indemnify  the Agent (to the
extent not  reimbursed  under  Section  12.9  hereof,  but without  limiting the
obligations  of the  Borrowers  under such Section)  ratably in accordance  with
their  respective  Total  Credit  Commitments,  for  any  and  all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses  (including  attorneys'  fees), or disbursements of any kind and nature
whatsoever  that may be imposed on,  incurred  by or asserted  against the Agent
(including by any Lender) in any way relating to or arising

                                                                 

<PAGE>



     out of any Loan Document or the  transactions  contemplated  thereby or any
action taken or omitted by the Agent under any Loan  Document;  provided that no
Lender  shall be liable for any of the  foregoing  to the extent they arise from
the gross  negligence  or willful  misconduct  of the Person to be  indemnified.
Without  limitation of the foregoing,  each Lender agrees to reimburse the Agent
promptly upon demand for its ratable  share of any costs or expenses  payable by
the  Borrowers  under Section 12.5, to the extent that the Agent is not promptly
reimbursed  for  such  costs  and  expenses  by the  Borrowers.  The  agreements
contained in this  Section  shall  survive  payment in full of the Loans and all
other amounts payable under this Agreement.

     11.6.  Non-Reliance on Agent and Other Lenders.  Each Lender agrees that it
has,  independently  and without reliance on the Agent or any other Lender,  and
based on such documents and information as it has deemed  appropriate,  made its
own credit analysis of the Loan Parties and their  Subsidiaries  and decision to
enter into this Agreement and that it will,  independently  and without reliance
upon the Agent or any other Lender,  and based on such documents and information
as it shall deem appropriate at the time,  continue to make its own analysis and
decisions in taking or not taking  action under the Loan  Documents.  Except for
notices,  reports, and other documents and information  expressly required to be
furnished  to the Lenders by the Agent  hereunder,  the Agent shall not have any
duty  or  responsibility  to  provide  any  Lender  with  any  credit  or  other
information concerning the affairs, financial condition, or business of any Loan
Party or any of its Subsidiaries or affiliates that may come into the possession
of the Agent or any of its affiliates.

     11.7.  Resignation  of Agent.  The  Agent may  resign at any time by giving
notice thereof to the Lenders and the Borrowers. Upon any such resignation,  the
Required  Lenders shall have the right to appoint a successor  Agent meeting the
requirements  set forth herein.  The  Borrowers  shall have the right to approve
such  Agent so long as no Default or Event of  Default  exist.  If no  successor
Agent  shall  have been so  appointed  by the  Required  Lenders  and shall have
accepted such  appointment  within  thirty (30) days after the retiring  Agent's
giving of notice of  resignation,  then the retiring Agent may, on behalf of the
Lenders,  appoint a successor  Agent which shall be a commercial  bank organized
under the laws of the  United  States of America  having  combined  capital  and
surplus of at least  $500,000,000.  Upon the  acceptance of any  appointment  as
Agent hereunder by a successor,  such successor  shall thereupon  succeed to and
become vested with all the rights, powers, discretion, privileges, and duties of
the retiring  Agent,  and the retiring Agent shall be discharged from its duties
and obligations  hereunder.  After any retiring Agent's resignation hereunder as
Agent,  the  provisions  of this  Article  XI shall  continue  in effect for its
benefit in respect  of any  actions  taken or omitted to be taken by it while it
was acting as Agent.

     11.8.  Fees.  When and if there  shall be more than one  Lender  under this
Agreement,  the Borrowers agree to pay to the Agent, for its individual account,
an  Agent's  fee as from time to time  agreed to by the  Borrowers  and Agent in
writing.

     ARTICLE XII

     Miscellaneous

     12.1. Assignments and Participations.  (a) Each Lender may assign to one or
more  Eligible  Assignees all or a portion of its rights and  obligations  under
this Agreement  (including,  without limitation,  all or a portion of its Loans,
its Notes,  its  Revolving  Credit  Commitment,  and its Term Loan  Commitment);
provided, however, that

     (i) each such assignment shall be to an Eligible Assignee;

     (ii) except in the case of an assignment to another Lender or an assignment
of all of a Lender's  rights and  obligations  under  this  Agreement,  any such
partial assignment made prior to November 5, 1997 shall be in an amount at least
equal to $1,000,000 or an integral  multiple of $1,000,000 and after November 4,
1997 shall be in an amount at least equal to $5,000,000 or an integral  multiple
of  $5,000,000  (or if  less,  the  entire  remaining  amount  of such  Lender's
Revolving Credit Commitment or Term Loan Commitment) in excess thereof;

                                                                 

<PAGE>



     (iii) each such assignment by a Lender with respect to the Revolving Credit
Facility  shall be of a  constant,  and not  varying,  percentage  of all of its
rights and obligations  under the Revolving Credit Facility and Letter of Credit
Facility and the Revolving Note;

     (iv)  each  such  assignment  by a Lender  with  respect  to the Term  Loan
Facility  shall be of a  constant,  and not  varying,  percentage  of all of its
rights and obligations under the Term Loan Facility and the Term Note; and

     (v) the parties to such  assignment  shall execute and deliver to the Agent
for its acceptance an Assignment and Acceptance in the form of Exhibit B hereto,
together  with any Note  subject  to such  assignment  and a  processing  fee of
$3,500; provided, that in the case of contemporaneous assignments by a Lender to
more than one fund managed by or advised by the same  investment  advisor (which
funds are not then Lenders hereunder), only a single $3,500 fee shall be payable
for all such contemporaneous assignments.

     Upon execution, delivery, and acceptance of such Assignment and Acceptance,
the  assignee  thereunder  shall be a party  hereto  and,  to the extent of such
assignment, have the obligations, rights, and benefits of a Lender hereunder and
the assigning  Lender shall,  to the extent of such  assignment,  relinquish its
rights and be  released  from its  obligations  under this  Agreement.  Upon the
consummation of any assignment pursuant to this Section, the assignor, the Agent
and the Borrowers shall make appropriate  arrangements so that, if required, new
Notes are  issued to the  assignor  and the  assignee.  If the  assignee  is not
incorporated  under the laws of the United States of America or a state thereof,
it shall deliver to the Borrowers  and the Agent  certification  as to exemption
from deduction or withholding of Taxes in accordance with Section 5.6.

     (b) The Agent shall  maintain at its address  referred to in Section 12.2 a
copy of each  Assignment  and  Acceptance  delivered to and accepted by it and a
register for the  recordation  of the names and addresses of the Lenders and the
Revolving Credit Commitment and Term Loan Commitment of, and principal amount of
the Loans owing to, each Lender from time to time (the "Register").  The entries
in the  Register  shall be  conclusive  and  binding  for all  purposes,  absent
manifest  error,  and the  Borrowers,  the Agent and the  Lenders may treat each
Person  whose name is recorded in the  Register  as a Lender  hereunder  for all
purposes of this  Agreement.  The Register  shall be available for inspection by
the  Borrowers or any Lender at any  reasonable  time and from time to time upon
reasonable prior notice.

     (c) Upon its  receipt  of an  Assignment  and  Acceptance  executed  by the
parties  thereto,  together with any Note subject to such assignment and payment
of the processing  fee, the Agent shall,  if such  Assignment and Acceptance has
been completed and is in substantially the form of Exhibit B hereto,  (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the parties thereto.

     (d) Each  Lender  may sell  participations  at its  expense  to one or more
Persons in all or a portion of its rights and  obligations  under this Agreement
(including all or a portion of its Revolving  Credit  Commitment and its Loans);
provided, however, that (i) such Lender's obligations under this Agreement shall
remain unchanged,  (ii) such Lender shall remain solely responsible to the other
parties  hereto for the  performance  of such  obligations,  (iii) the Borrowers
shall  continue to deal solely and directly with such Lender in connection  with
such Lender's rights and obligations under this Agreement, and such Lender shall
retain the sole right to enforce the  obligations  of the Borrowers  relating to
its Loans and its Note and to approve any amendment,  modification, or waiver of
any  provision  of this  Agreement  (other than  amendments,  modifications,  or
waivers  decreasing  the amount of principal of or the rate at which interest is
payable on such Loans or Note, extending any scheduled principal payment date or
date fixed for the payment of interest on such Loans or Note,  or extending  its
Revolving Credit Commitment) and (iv) the sale of any such  participation  which
requires BREED to file a registration statement with federal or state regulatory
authorities shall not be permitted.

     (e)  Notwithstanding  any other provision set forth in this Agreement,  any
Lender may at any time assign and pledge all or any portion of its Loans and its
Note to any Federal Reserve Bank as collateral security pursuant to Regulation A
and  any  Operating  Circular  issued  by such  Federal  Reserve  Bank.  No such
assignment shall release the

                                                                 

<PAGE>



     assigning Lender from its obligations hereunder.

     (f) Any Lender may furnish any information  concerning  BREED or any of its
Subsidiaries in the possession of such Lender from time to time to assignees and
participants  (including prospective assignees and participants) so long as such
Lender shall  require in writing  (which  writing names the Borrowers as a third
party  beneficiary  thereof) any such  assignee or  participant  or  perspective
assignee or  participant  to maintain  the  confidentiality  of any  information
delivered to it which is not publicly available.

     (g) The  Borrowers may not assign,  nor shall they cause,  suffer or permit
any Guarantor to assign any rights,  powers,  duties or  obligations  under this
Agreement of the other Loan Documents  without the prior written  consent of all
the Lenders.

     12.2.  Notices.  Any  notice  shall be  conclusively  deemed  to have  been
received by any party hereto and be effective (i) on the day on which  delivered
(including hand delivery by commercial  courier  service) to such party (against
receipt  therefor),  (ii) on the date of receipt at such address,  telefacsimile
number or telex  number as may from time to time be  specified  by such party in
written notice to the other parties hereto or otherwise  received),  in the case
of notice by telegram or telefacsimile,  respectively (where the receipt of such
message is verified by return), or (iii) on the fifth Business Day after the day
on which mailed, if sent prepaid by certified or registered mail, return receipt
requested, in each case delivered, transmitted or mailed, as the case may be, to
the address or  telefacsimile  number,  as appropriate,  set forth below or such
other address or number as such party shall specify by notice hereunder:

         (a)      if to the Borrowers:

                  BREED Technologies, Inc.
                  5300 Old Tampa Highway
                  Lakeland, Florida 33811
                  Attention:
                  Telephone:
                  Telefacsimile:

         (b)      if to the Agent:

                  NationsBank, National Association
                  Independence Center, 15th Floor
                  NC1-001-15-04
                  Charlotte, North Carolina  28255
                  Attention: Agency Services
                  Telephone:        (704) 388-2374
                  Telefacsimile:            (704) 386-9923

                  with a copy to:

                  NationsBank, National Association
                  400 N. Ashley Drive, 2nd Floor
                  Tampa, Florida 33602
                  Attention: Global Finance
                  Telephone:        (813) 224-5194
                  Telefacsimile:            (813) 224-5948

         (c)      if to the Lenders:

                                                                 

<PAGE>



     At the  addresses  set  forth  on the  signature  pages  hereof  and on the
signature page of each Assignment and
Acceptance;

     (d) if to any Guarantor,  at the address set forth on the signature page of
the Guaranty or other Loan Document executed by such Guarantor,  as the case may
be.

     12.3. Right of Set-off; Adjustments. (a) Upon the occurrence and during the
continuance of any Event of Default, each Lender (and each of its affiliates) is
hereby  authorized  at any time and from  time to time,  to the  fullest  extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender (or any of its affiliates) to or for the credit or
the  account of the  Borrowers  against  any and all of the  obligations  of the
Borrowers now or hereafter  existing  under this  Agreement and the Note held by
such  Lender,  irrespective  of whether  such Lender  shall have made any demand
under this  Agreement or such Note and although the payment of such  obligations
may not have been  accelerated.  Each  Lender  agrees  promptly  to  notify  the
Borrowers after any such set-off and application made by such Lender;  provided,
however,  that the failure to give such notice  shall not affect the validity of
such set-off and  application.  The rights of each Lender under this Section are
in addition to other rights and remedies (including,  without limitation,  other
rights of set-off) that such Lender may have.

     (b) If any Lender (a  "benefitted  Lender")  shall at any time  receive any
payment of all or part of the Loans owing to it, or interest thereon, or receive
any collateral in respect  thereof  (whether  voluntarily or  involuntarily,  by
set-off,  or  otherwise),  in a greater  proportion  than any such payment to or
collateral  received  by any other  Lender,  if any,  in  respect  of such other
Lender's Loans owing to it, or interest  thereon,  such benefitted  Lender shall
purchase  for cash  from the  other  Lenders a  participating  interest  in such
portion of each such other  Lender's  Loans owing to it, or shall  provide  such
other Lenders with the benefits of any such collateral, or the proceeds thereof,
as shall be  necessary  to cause  such  benefitted  Lender to share  the  excess
payment or benefits of such  collateral  or  proceeds  ratably  with each of the
Lenders; provided, however, that if all or any portion of such excess payment or
benefits is thereafter  recovered  from such  benefitted  Lender,  such purchase
shall be rescinded,  and the purchase price and benefits returned, to the extent
of such recovery,  but without interest.  The Borrowers agree that any Lender so
purchasing a  participation  from a Lender pursuant to this Section 12.3 may, to
the  fullest  extent  permitted  by law,  exercise  all of its rights of payment
(including the right of set-off) with respect to such  participation as fully as
if such Person were the direct  creditor of the  Borrowers in the amount of such
participation.

     12.4. Survival. All covenants,  agreements,  representations and warranties
made  herein  shall  survive  the  making  by the  Lenders  of the Loans and the
issuance of the Letters of Credit and the  execution and delivery to the Lenders
of this  Agreement and the Notes and shall  continue in full force and effect so
long as any of Obligations  remain  outstanding or any Lender has any commitment
hereunder  or  the  Borrowers  have  continuing   obligations  hereunder  unless
otherwise provided herein.  Whenever in this Agreement any of the parties hereto
is referred to, such  reference  shall be deemed to include the  successors  and
permitted assigns of such party and all covenants,  provisions and agreements by
or on behalf of the Borrowers  which are contained in the Loan  Documents  shall
inure to the benefit of the successors  and permitted  assigns of the Lenders or
any of them.

     12.5.  Expenses.  The Borrowers agree to pay on demand all reasonable costs
and  expenses  of the Agent in  connection  with the  syndication,  preparation,
execution,  and delivery of this Agreement,  the other Loan  Documents,  and the
other documents to be delivered hereunder,  including,  without limitation,  the
reasonable  fees (not to exceed  $500,000) and expenses of Smith Helms Mulliss &
Moore,  L.L.P.,  counsel for the Agent, with respect thereto and with respect to
advising  the  Agent  as to its  rights  and  responsibilities  under  the  Loan
Documents. The Borrowers further agree to pay on demand all reasonable costs and
expenses of the Agent,  including,  without limitation,  the reasonable fees and
expenses of counsel for the Agent, in connection with any future modification or
amendment of this Agreement,  the other Loan Documents,  and the other documents
delivered hereunder. The Borrowers further agree to pay on demand all reasonable
costs and  expenses of the Agent and the  Lenders,  if any  (including,  without
limitation, reasonable attorneys' fees and

                                                                 

<PAGE>



     expenses  and  the  cost of  internal  counsel),  in  connection  with  the
enforcement (whether through negotiations,  legal proceedings,  or otherwise) of
the Loan Documents and the other documents to be delivered hereunder.

     12.6.  Amendments and Waivers. Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by the Borrowers  and the Required  Lenders (and, if
Article XI or the  rights or duties of the Agent are  affected  thereby,  by the
Agent);  provided that no such  amendment or waiver shall,  unless signed by all
the  Lenders,  (i)  increase  the  Revolving  Credit  Commitments  or Term  Loan
Commitments of the Lenders,  (ii) reduce the principal of or rate of interest on
any Loan or any fees or other amounts payable hereunder, (iii) postpone any date
fixed for the payment of any scheduled  installment  of principal of or interest
on any Loan or any fees or other amounts payable hereunder or for termination of
any  Revolving  Credit  Commitment  or Term Loan  Commitment,  (iv)  change  the
percentage of the Revolving  Credit  Commitments or Term Loan  Commitments or of
the unpaid principal amount of the Notes, or the number of Lenders,  which shall
be required for the Lenders or any of them to take any action under this Section
or any other provision of this Agreement or (v) release any Guarantor or Pledged
Stock or a material portion of the other Collateral except pursuant to any sale,
merger or consolidation permitted hereunder; and provided, further, that no such
amendment or waiver which  affects the rights,  privileges,  or  obligations  of
NationsBank as issuer of Letters of Credit,  shall be effective unless signed in
writing by NationsBank.

     Notwithstanding  any provision of the other Loan Documents to the contrary,
as between the Agent and the Lenders, execution by the Agent shall not be deemed
conclusive  evidence  that the Agent has  obtained  the  written  consent of the
Required  Lenders.  No notice to or demand on the  Borrowers  in any case  shall
entitle  the  Borrowers  to any other or further  notice or demand in similar or
other circumstances,  except as otherwise expressly provided herein. No delay or
omission on any Lender's or the Agent's part in exercising any right,  remedy or
option shall operate as a waiver of such or any other right, remedy or option or
of any Default or Event of Default.

     12.7.  Counterparts.  This  Agreement  may be  executed  in any  number  of
counterparts,  each of which when so executed and  delivered  shall be deemed an
original,  and it shall not be necessary  in making  proof of this  Agreement to
produce or account for more than one such fully-executed counterpart.

     12.8.  Termination.  The termination of this Agreement shall not affect any
rights of the  Borrowers,  the  Lenders  or the Agent or any  obligation  of the
Borrowers, the Lenders or the Agent, arising prior to the effective date of such
termination,  and the  provisions  hereof shall  continue to be fully  operative
until all  transactions  entered into or rights created or obligations  incurred
prior to such  termination  have been fully disposed of, concluded or liquidated
and the  Obligations  arising  prior  to or after  such  termination  have  been
irrevocably paid in full. The rights granted to the Agent for the benefit of the
Lenders  under the Loan  Documents  shall  continue  in full  force and  effect,
notwithstanding the termination of this Agreement,  until all of the Obligations
have been paid in full after the termination  hereof (other than  Obligations in
the nature of continuing  indemnities or expense  reimbursement  obligations not
yet due and payable,  which shall  continue) or the Borrowers have furnished the
Lenders and the Agent with an indemnification satisfactory to the Agent and each
Lender with respect thereto. All representations, warranties, covenants, waivers
and agreements  contained herein shall survive  termination hereof until payment
in full of the Obligations unless otherwise provided herein. Notwithstanding the
foregoing,  if  after  receipt  of  any  payment  of  all  or  any  part  of the
Obligations, any Lender is for any reason compelled to surrender such payment to
any Person  because  such  payment is  determined  to be void or  voidable  as a
preference,  impermissible  setoff,  a diversion of trust funds or for any other
reason,  this Agreement  shall continue in full force and the Borrowers shall be
liable to, and shall  indemnify and hold the Agent or such Lender  harmless for,
the amount of such payment surrendered until the Agent or such Lender shall have
been finally and  irrevocably  paid in full.  The  provisions  of the  foregoing
sentence shall be and remain effective notwithstanding any contrary action which
may have been taken by the Agent or the Lenders in reliance  upon such  payment,
and any such contrary action so taken shall be without prejudice to the Agent or
the  Lenders'  rights  under  this  Agreement  and  shall be deemed to have been
conditioned upon such payment having become final and irrevocable.


                                                                

<PAGE>



     12.9.  Indemnification.  (a) The  Borrowers  agree  to  indemnify  and hold
harmless  the  Agent  and each  Lender  and each of their  affiliates  and their
respective officers, directors and employees (each, an "Indemnified Party") from
and  against  any and all  claims,  damages,  losses,  liabilities,  costs,  and
expenses (including, without limitation, reasonable attorneys' fees) that may be
incurred by or asserted or awarded against any  Indemnified  Party, in each case
arising  out of or in  connection  with  or by  reason  of  (including,  without
limitation,  in connection with any investigation,  litigation, or proceeding or
preparation of defense in connection  therewith) the Loan Documents,  any of the
transactions  contemplated  herein or the actual or proposed use of the proceeds
of the Loans, except to the extent such claim, damage, loss, liability, cost, or
expense is finally judicially determined to have directly and primarily resulted
from such  Indemnified  Party's gross negligence or willful  misconduct.  In the
case of an investigation,  litigation or other proceeding to which the indemnity
in this Section 12.9(a)  applies,  such indemnity shall be effective  whether or
not such  investigation,  litigation or proceeding is brought by the  Borrowers,
their directors,  shareholders or creditors or an Indemnified Party or any other
Person or any Indemnified  Party is otherwise a party thereto and whether or not
the transactions contemplated hereby are consummated.

     (b)  Without  prejudice  to the  survival  of any  other  agreement  of the
Borrowers  hereunder,  the agreements and obligations of the Borrowers contained
in this  Section  12.9 shall  survive  the  payment in full of the Loans and all
other amounts payable under this Agreement and the Notes.

     12.10.  Severability.  If any provision of this Agreement or the other Loan
Documents  shall be determined to be illegal or invalid as to one or more of the
parties  hereto,  then such provision shall remain in effect with respect to all
parties,  if any, as to whom such provision is neither illegal nor invalid,  and
in any event all other  provisions  hereof shall remain effective and binding on
the parties hereto.

     12.11.  Entire  Agreement.  This  Agreement,  together  with the other Loan
Documents,  constitutes  the entire  agreement among the parties with respect to
the subject matter hereof and supersedes all previous  proposals,  negotiations,
representations,  commitments  and  other  communications  between  or among the
parties, both oral and written, with respect thereto.

     12.12.  Agreement  Controls.  In the event that any term of any of the Loan
Documents  other than this  Agreement  conflicts  with any express  term of this
Agreement,  the terms and  provisions  of this  Agreement  shall  control to the
extent of such conflict.

     12.13 Usury Savings Clause. Notwithstanding any other provision herein, the
aggregate interest rate charged under any of the Notes, including all charges or
fees in connection  therewith  deemed in the nature of interest under applicable
law shall not exceed the Highest Lawful Rate (as such term is defined below). If
the rate of interest (determined without regard to the preceding sentence) under
this Agreement at any time exceeds the Highest  Lawful Rate (as defined  below),
the  outstanding  amount of the Loans made hereunder  shall bear interest at the
Highest Lawful Rate until the total amount of interest due hereunder  equals the
amount of interest  which would have been due  hereunder  if the stated rates of
interest  set  forth in this  Agreement  had at all  times  been in  effect.  In
addition, if when the Loans made hereunder are repaid in full the total interest
due hereunder (taking into account the increase provided for above) is less than
the total amount of interest  which would have been due  hereunder if the stated
rates of interest set forth in this  Agreement  had at all times been in effect,
then to the extent  permitted  by law, the  Borrowers  shall pay to the Agent an
amount  equal to the  difference  between  the amount of  interest  paid and the
amount of interest  which would have been paid if the Highest Lawful Rate had at
all times been in effect.  Notwithstanding the foregoing, it is the intention of
the Lenders and the Borrowers to conform  strictly to any applicable usury laws.
Accordingly, if any Lender contracts for, charges, or receives any consideration
which  constitutes  interest in excess of the Highest Lawful Rate, then any such
excess shall be cancelled  automatically  and, if previously paid, shall at such
Lender's option be applied to the outstanding amount of the Loans made hereunder
or be refunded to the Borrowers.  As used in this  paragraph,  the term "Highest
Lawful Rate" means the maximum lawful interest rate, if any, that at any time or
from time to time may be contracted  for,  charged,  or received  under the laws
applicable  to such  Lender  which are  presently  in effect  or, to the  extent
allowed by law, under

                                                                 

<PAGE>



     such  applicable  laws which may  hereafter  be in effect and which allow a
higher maximum nonusurious interest rate than applicable laws now allow.

     12.14. Governing Law; Waiver of Jury Trial.

     (a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS  (OTHER THAN CERTAIN PLEDGE
AGREEMENTS COVERING SHARES OF DIRECT FOREIGN SUBSIDIARIES) SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE NOTWITHSTANDING ITS
EXECUTION AND DELIVERY OUTSIDE SUCH STATE.

     (b) THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY  AGREE AND CONSENTS THAT
ANY SUIT, ACTION OR PROCEEDING  ARISING OUT OF OR RELATING TO THIS AGREEMENT AND
THE TRANSACTIONS  CONTEMPLATED  HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL
COURT SITTING IN THE COUNTY OF HILLSBOROUGH,  STATE OF FLORIDA, UNITED STATES OF
AMERICA AND, BY THE  EXECUTION  AND DELIVERY OF THIS  AGREEMENT,  THE  BORROWERS
EXPRESSLY WAIVE ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE IN, OR TO THE  EXERCISE OF  JURISDICTION  OVER IT AND ITS PROPERTY BY, ANY
SUCH COURT IN ANY SUCH SUIT,  ACTION OR  PROCEEDING,  AND THE  BORROWERS  HEREBY
IRREVOCABLY SUBMIT GENERALLY AND UNCONDITIONALLY TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING.

     (c) THE  BORROWERS  AGREE THAT  SERVICE OF PROCESS  MAY BE MADE BY PERSONAL
SERVICE OF A COPY OF THE SUMMONS  AND  COMPLAINT  OR OTHER LEGAL  PROCESS IN ANY
SUCH SUIT,  ACTION OR  PROCEEDING,  OR BY REGISTERED OR CERTIFIED  MAIL (POSTAGE
PREPAID) TO THE ADDRESS OF THE  BORROWERS  PROVIDED IN SECTION  12.2,  OR BY ANY
OTHER METHOD OF SERVICE  PROVIDED FOR UNDER THE APPLICABLE LAWS IN EFFECT IN THE
STATE OF FLORIDA.

     (d) NOTHING  CONTAINED IN SUBSECTIONS  (a) OR (b) HEREOF SHALL PRECLUDE THE
AGENT OR ANY LENDER FROM BRINGING ANY SUIT, ACTION OR PROCEEDING  ARISING OUT OF
OR RELATING TO ANY LOAN  DOCUMENT  IN THE COURTS OF ANY  JURISDICTION  WHERE THE
BORROWERS OR ANY OF THE  BORROWERS'  PROPERTY OR ASSETS MAY BE FOUND OR LOCATED.
TO THE EXTENT  PERMITTED BY THE APPLICABLE  LAWS OF ANY SUCH  JURISDICTION,  THE
BORROWERS  HEREBY  IRREVOCABLY  SUBMIT TO THE JURISDICTION OF ANY SUCH COURT AND
EXPRESSLY WAIVE, IN RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, OBJECTION TO
THE  EXERCISE  OF  JURISDICTION  OVER THEM AND THEIR  PROPERTY BY ANY SUCH OTHER
COURT OR COURTS WHICH NOW OR HEREAFTER MAY BE AVAILABLE UNDER APPLICABLE LAW.

     (e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES
UNDER OR RELATED TO ANY LOAN DOCUMENT OR ANY AMENDMENT,  INSTRUMENT, DOCUMENT OR
AGREEMENT  DELIVERED  OR THAT  MAY IN THE  FUTURE  BE  DELIVERED  IN  CONNECTION
THEREWITH,  THE BORROWERS, THE AGENT AND THE LENDERS HEREBY AGREE, TO THE EXTENT
PERMITTED BY APPLICABLE  LAW, THAT ANY SUCH ACTION OR PROCEEDING  SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY AND HEREBY IRREVOCABLY WAIVE, TO THE EXTENT
PERMITTED BY APPLICABLE  LAW, ANY RIGHT SUCH PERSON MAY HAVE TO TRIAL BY JURY IN
ANY SUCH ACTION OR PROCEEDING.

     12.15. Recovery Under Florida Mortgage. The recovery of the Agent under the
Mortgage executed by BREED Automotive of Florida, Inc. to secure the Obligations
as defined  therein  encumbering  approximately  430 acres of real  property  as
described  therein  and to be  recorded  in the Clerk of  Circuit  Court of Polk
County, Florida (the "Florida

                                                                

<PAGE>



     Mortgage") shall be limited to the principal amount of $50,000,000 together
with  accrued  interest  on such  amount and other costs and fees as provided in
such Florida  Mortgage.  The Florida Mortgage secures the first amounts advanced
and the last amounts repaid to the Lenders.


                                                [Signatures on following pages]

                                                                 

<PAGE>



     IN WITNESS  WHEREOF,  the parties hereto have caused this  instrument to be
made, executed and delivered by their duly authorized officers as of the day and
year first above written.

                                              BREED TECHNOLOGIES, INC.
WITNESS:
   /s/ R. Malloy McKeithen                           By:/s/ Lizanne Guptill
                                                     Name:   Lizanne Guptill
   /s/ Joseph J. Troy                                Title:     Secretary

                                              BREED AUTOMOTIVE SAFETY SYSTEMS SL
WITNESS:
 /s/ R. Malloy McKeithen                             By: /s/ Lizanne Guptill
                                                     Name: Lizanne Guptill
 /s/ Joseph J. Troy                                  Title:

                                              BREED ITALIAN HOLDINGS, SRL
WITNESS:
 /s/ R. Malloy McKeithen                             By:/s/ Lizanne Guptill
                                                     Name: Lizanne Guptill
 /s/ Joseph J. Troy                                  Title:

                                              BREED UK LIMITED
WITNESS:
 /s/ R. Malloy McKeithen                             By:/s/ Lizanne Guptill
                                                     Name:Lizanne Guptill
 /s/ Joseph J. Troy                                  Title:

                                              ICSRD R.F., GMBH
WITNESS:
 /s/ R. Malloy McKeithen                             By:/s/ Lizanne Guptill
                                                     Name: Lizanne Guptill
 /s/ Joseph J. Troy                                  Title:

                                              NATIONSBANK, NATIONAL ASSOCIATION,
                                                  as Agent for the Lenders

                                                     By:/s/ Miles C. Dearden III
                                                     Name: Miles C. Dearden III
                                                     Title:Senior Vice President

                                              NATIONSBANK, NATIONAL ASSOCIATION

                                                     By:/s/ Miles C. Dearden III
                                                     Name:Miles C. Dearden III
                                                     Title:Senior Vice President

                                                     Domestic Lending Office:
                                               NationsBank, National Association
                                                 Independence Center, 15th Floor
                                                     NC1-001-15-04

                                                               

<PAGE>



                                                Charlotte, North Carolina  28255
                                                     Attention: Jamie McCotter
                                                Telephone:        (704) 388-2374
                                                Telefacsimile:    (704) 386-9923

                                                     Wire Transfer Instructions:
                                               NationsBank, National Association
                                                     ABA# _________ Account No.:
                                             Reference: BREED Technologies, Inc.
                                                     Attention: Agency Services

                                                     BHF-BANK AKRIENGESELLSCHAFT

                              By:/s/ Linda Pace                   Anthony Heyman
                                Name:Linda Pace                   Anthony Heyman
                                   Title: V.P.                              A.T.

                                                     Domestic Lending Office:
                                                     BHF-BANK
                                                     590 Madison Avenue
                                                     New York, New York 10022
                                                     Attention: John Sykes
                                                Telephone:        (212) 756-5939
                                                Telefacsimile:    (212) 756-5536
                                                     Wire Transfer Instructions:
                                                     Bank of New York
                                                     New York, New York
                                                     ABA No.: 021000018
                                                     Account No.: 8023014646
                                                     Reference: BHF-BANK/Breed

                                             THE LONG-TERM CREDIT BANK OF JAPAN,
                                                     LIMITED

                                                     By:/s/ Satoru Otsubo
                                                     Name:Satoru Otsubo
                                                    Title: Joint General Manager

                                                     Domestic Lending Office:
                                     The Long-Term Credit Bank of Japan, Limited
                                                     165 Broadway
                                                     New York, New York 10006

                                                     Wire Transfer Instructions:
                                                     The Chase Manhattan Bank
                                                     ABA No.: 021 000 021
                                                     Account No.: 544-7-75066
                                  Reference: The Long-Term Credit Bank of Japan,
                                                     New York Branch

                                                               

<PAGE>



                                                     THE BANK OF NOVA SCOTIA

                                                     By:/s/ W.J. Brown
                                                     Name: W.J. Brown
                                                     Title:Vice President

                                                     Domestic Lending Office:
                                                     The Bank of Nova Scotia
                                          600 Peachtree Street, N.E., Suite 2700
                                                     Atlanta, Georgia 30308
                                                     Attention: Frank Sandler
                                                Telephone:        (404) 877-1505
                                                Telefacsimile:    (704) 888-8998

                                                     Wire Transfer Instructions:
                                                     The Bank of Nova Scotia
                                                     New York, New York
                                                     ABA No.: 026002532
                                                     Credit: ScotiaBanc Inc.
                                                     Account No.: 0735639
                                             Reference: BREED Technologies, Inc.
                                                     Attention: Phyllis Walker

                                                     VAN KAMPEN AMERICAN CAPITAL

                                                     By:/s/ Jeffrey W. Maillet
                                                     Name:Jeffrey W. Maillet
                                       Title: Senior Vice President and Director

                                                     Domestic Lending Office:
                                                     Van Kampen American Capital
                                                  One Parkview Plaza - 5th Floor
                                                Oakbrook Terrace, Illinois 60181

                                                     Wire Transfer Instructions:
                                                     State Street Bank & Trust
                                                     ABA#011000028
                                                     Account No.: 99001265
                                       Reference: VKAC PRIT (Breed Technologies)
                                                     Attention: Mr. Sean Emerson
                                                    Telecopier No.: 617-664-5366
                                                     Telephone No.: 617-664-5481



                                                               

<PAGE>



     EXHIBIT A

     Applicable Commitment Percentages

     I. Revolving Credit Facility

Lender                                      Revolving              Applicable
                                            Credit                 Commitment
                                            Commitment             Percentage

NationsBank, National
Association                                $ 225,000,000           75.000000000%

The Long-Term Credit Bank
of Japan, Limited                          $   25,000,000           8.333333333%

BHF-Bank Akriengesellschaft                $   25,000,000           8.333333333%

The Bank of Nova Scotia                    $   25,000,000           8.333333333%

                                           $   300,000,000              100%


     II. Term Loan Facility

Lender                                      Term                   Applicable
                                            Loan                   Commitment
                                            Commitment             Percentage

NationsBank, National
Association                                $ 375,000,000           62.500000000%

The Long-Term Credit Bank
of Japan, Limited                          $   50,000,000           8.333333333%

BHF-Bank Akriengesellschaft                $   50,000,000           8.333333333%

The Bank of Nova Scotia                    $   50,000,000           8.333333333%

Van Kampen American Capital                $  75,000,000           12.500000000%
                                           $ 600,000,000               100%

                                                              

<PAGE>



     EXHIBIT B-1

     Form of Assignment and Acceptance

     DATED ,

     Reference is made to the Credit Agreement dated as of October 30, 1997 (the
"Agreement")  among  BREED  TECHNOLOGIES,  INC.,  a  Delaware  corporation  (the
"Borrower"),  the  Lenders  (as  defined  in the  Agreement),  and  NationsBank,
National  Association  , as Agent for the Lenders  ("Agent").  Unless  otherwise
defined  herein,  terms  defined in the  Agreement are used herein with the same
meanings.

     The  "Assignor"  and the  "Assignee"  referred  to on  Schedule  1 agree as
follows:

     1. The Assignor hereby sells and assigns to the Assignee,  WITHOUT RECOURSE
and without representation or warranty except as expressly set forth herein, and
the Assignee hereby purchases and assumes from the Assignor,  an interest in and
to the  Assignor's  rights and  obligations  under the Credit  Agreement and the
other Loan Documents as of the date hereof equal to the  percentage  interest in
either the Revolving  Credit  Commitment or the Term Loan  Commitment,  or both,
specified on Schedule 1. After giving  effect to such sale and  assignment,  the
Assignee's  Revolving Credit  Commitment and Term Loan Commitment and the amount
of the Loans owing to the Assignee will be as set forth on Schedule 1.

     2. The  Assignor  (i)  represents  and  warrants  that it is the  legal and
beneficial  owner of the interest  being  assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty  and  assumes  no  responsibility   with  respect  to  any  statements,
warranties or  representations  made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability,  genuineness,  sufficiency
or value of the Loan  Documents or any other  instrument  or document  furnished
pursuant  thereto;  (iii) makes no  representation  or  warranty  and assumes no
responsibility  with respect to the financial condition of any Loan Party or the
performance or observance by any Loan Party of any of its obligations  under the
Loan Documents or any other instrument or document  furnished  pursuant thereto;
and (iv)  attaches the Note or Notes held by the Assignor and requests  that the
Agent  exchange  such Note or Notes for new  Notes  payable  to the order of the
Assignee in an amount  equal to the  Revolving  Credit  Commitment  or Term Loan
Commitment, or both, assumed by the Assignee pursuant hereto and to the Assignor
in an amount equal to the Revolving  Credit  Commitment or Term Loan Commitment,
or both, retained by the Assignor, if any, as specified on Schedule 1.

     3. The  Assignee  (i)  confirms  that it has  received a copy of the Credit
Agreement,  together  with  copies of the  financial  statements  referred to in
Section 8.1 thereof and such other  documents and  information  as it has deemed
appropriate  to make its own credit  analysis  and  decision  to enter into this
Assignment and Acceptance;  (ii) agrees that it will,  independently and without
reliance  upon the Agent,  the  Assignor  or any other  Lender and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own credit  decisions  in taking or not taking  action under the Credit
Agreement;  (iii)  confirms that it is an Eligible  Assignee;  (iv) appoints and
authorizes  the Agent to take such action as agent on its behalf and to exercise
such powers and  discretion  under the Credit  Agreement as are delegated to the
Agent by the terms  thereof,  together  with such powers and  discretion  as are
reasonably  incidental  thereto;  (v) agrees that it will perform in  accordance
with  their  terms  all of the  obligations  that  by the  terms  of the  Credit
Agreement are required to be performed by it as a Lender;  and (vi) attaches any
U.S. Internal Revenue Service or other forms required under Section 5.6.

     4. Following the execution of this  Assignment and  Acceptance,  it will be
delivered to the Agent for acceptance and recording by the Agent.  The effective
date for this Assignment and Acceptance (the "Effective Date") shall be the date
of acceptance hereof by the Agent, unless otherwise specified on Schedule 1.


                                                               

<PAGE>



     5. Upon such  acceptance  and  recording by the Agent,  as of the Effective
Date,  (i) the  Assignee  shall be a party to the Credit  Agreement  and, to the
extent  provided  in  this  Assignment  and  Acceptance,  have  the  rights  and
obligations of a Lender  thereunder and (ii) the Assignor  shall,  to the extent
provided  in this  Assignment  and  Acceptance,  relinquish  its  rights  and be
released from its obligations under the Credit Agreement.

     6. Upon such  acceptance  and  recording  by the Agent,  from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement and
the  Notes in  respect  of the  interest  assigned  hereby  (including,  without
limitation, all payments of principal, interest and commitment fees with respect
thereto) to the Assignee.  The Assignor and Assignee shall make all  appropriate
adjustments  in payments  under the Credit  Agreement  and the Notes for periods
prior to the Effective Date directly between themselves.

     7. This  Assignment and  Acceptance  shall be governed by, and construed in
accordance with, the laws of the State of Florida.

     8.  This  Assignment  and  Acceptance  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 taken
together shall  constitute one and the same  agreement.  Delivery of an executed
counterpart of Schedule 1 to this  Assignment  and  Acceptance by  telefacsimile
shall be  effective  as  delivery  of a manually  executed  counterpart  of this
Assignment and Acceptance.

     IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1 to
this  Assignment and Acceptance to be executed by their officers  thereunto duly
authorized as of the date specified thereon.



                                                               

<PAGE>



                             SCHEDULE 1
                                to
                       ASSIGNMENT AND ACCEPTANCE

         Percentage interest assigned:                                 ________%

           (a)  Revolving Credit Commitment                            ________%
           (b)  Term Loan Commitment                                   ________%

         Assignee's Revolving Credit Commitment:                       $_______
         Aggregate outstanding principal amount
           of Revolving Loans assigned:                                $_______

         Principal amount of Revolving Note payable
           to Assignee:                                                $_______

         Principal amount of Revolving Note payable
           to Assignor:                                                $_______

         Assignee's Term Loan Commitment:                              $_______

         Aggregate outstanding principal amount
           of Term Loans assigned:                                     $_______

         Principal amount of Term Note payable
            to Assignee:                                               $_______

         Principal amount of Term Note payable
            to Assignor:                                               $_______

         Effective Date (if other than date
               of acceptance by Agent):                           _______, 19__





                                                              

<PAGE>



                                                 [NAME OF ASSIGNOR], as Assignor


                                                     By:
                                                     Title:

                                                     Dated:              , 19 _



                                                 [NAME OF ASSIGNEE], as Assignee


                                                     By:
                                                     Title:

                                                     Lending Office:


Accepted [and Approved] *
this ___ day of ___________, 19 _

NATIONSBANK NATIONAL ASSOCIATION

By:
Title:


[Approved this ____ day
of ____________, 19__

BREED TECHNOLOGIES, INC.

By:                         ]*
Title:

     * Required  if the  Assignee is an  Eligible  Assignee  solely by reason of
clause (iii) of the definition of "Eligible Assignee".


                                                               

<PAGE>



     EXHIBIT C

     Notice of Appointment (or Revocation) of Authorized Representative

     Reference  is hereby made to the Credit  Agreement  dated as of October 30,
1997 (the "Agreement") among BREED  TECHNOLOGIES,  INC., a Delaware  corporation
("BREED"),  and certain  Subsidiaries of BREED  designated as Borrowers  therein
(BREED and such Subsidiaries  being  collectively  called the "Borrowers"),  the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders  ("Agent").  Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.

     The Borrower  hereby  nominates,  constitutes  and appoints each individual
named below as an Authorized Representative under the Loan Documents, and hereby
represents and warrants that (i) set forth opposite each such  individual's name
is a true and  correct  statement  of such  individual's  office  (to which such
individual has been duly elected or appointed),  a genuine specimen signature of
such  individual  and an address  for the  giving of notice,  and (ii) each such
individual  has  been  duly  authorized  by the  Borrower  to act as  Authorized
Representative under the Loan Documents:

Name and Address                   Office                     Specimen Signature










     Borrower  hereby revokes  (effective  upon receipt hereof by the Agent) the
prior appointment of ________________ as an Authorized Representative.

         This the ___ day of __________________, 19__.


                                                     BREED TECHNOLOGIES, INC.


                                                     By:
                                                     Name:
                                                     Title:

                                                               

<PAGE>



     EXHIBIT D

     Form of Borrowing Notice

To:      NationsBank, National Association,
         as Agent
         Independence Center, 15th Floor
         NC1-001-15-04
         Charlotte, North Carolina  28255
         Attention: Agency Services
         Telefacsimile:  (704)386-9923

     Reference  is hereby made to the Credit  Agreement  dated as of October 30,
1997 (the "Agreement") among BREED  TECHNOLOGIES,  INC., a Delaware  corporation
("BREED"),  and certain  Subsidiaries of BREED  designated as Borrowers  therein
(BREED and such Subsidiaries  being  collectively  called the "Borrowers"),  the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders  ("Agent").  Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.

     The Borrower through its Authorized  Representative  hereby gives notice to
the Agent that Loans of the type and amount set forth  below be made on the date
indicated:

Type of Loan             Interest             Aggregate
(check one)              Period(1)            Amount(2)          Date of Loan(3)

Revolving Loan
Base Rate Loan           ______               _________             ____________

Eurodollar Rate Loan     ______               _________             ____________

Alternative Currency(4)  ______               _________             ____________

Term Loan Segment
Base Rate Loan           ______               _________             ____________

Eurodollar Rate Loan     ______               _________             ____________

Alternative Currency(4)  ______               _________             ____________
--------------------------------------------------

(1)      For any Eurodollar Rate Loan, one, two, or three months.
(2)      Must be $5,000,000 or if greater an integral multiple of $1,000,000,
           unless a Base Rate Refunding Loan.
(3)      At least three (3) Business Days later if a Eurodollar Rate Loan;
(4)      Specify Pounds Sterling, Italian Lire, French Francs, Deutsch Marks,
           or Spanish Pesetas.

     The Borrower  hereby  requests that the proceeds of Loans described in this
Borrowing  Notice  be  made  available  to  the  Borrower  as  follows:  [insert
transmittal instructions] .

     The undersigned hereby certifies that:
    1.  No  Default  or  Event  of Defaultexists  either  now or after  giving
effect to the  borrowing  described herein; and

                                                               

<PAGE>



     2. All the  representations  and warranties set forth in Article VII of the
Agreement and in the Loan Documents  (other than those expressly stated to refer
to a particular  date) are true and correct in all  material  respects as of the
date hereof  except that the  reference to the  financial  statements in Section
7.6(a)  of the  Agreement  are  to  those  financial  statements  most  recently
delivered to you pursuant to Section 8.1 of the Agreement  (it being  understood
that any financial  statements  delivered pursuant to Section 8.1(b) or (c) have
not been certified by independent  public  accountants)  and attached hereto are
any changes to the Schedules referred to in connection with such representations
and warranties.

     3. All  conditions  contained  in the  Agreement  to the making of any Loan
requested hereby have been met or satisfied in full .

                                                     BREED TECHNOLOGIES, INC.


                                                     BY:
                                                     Authorized Representative

                                                     DATE:

                                                               

<PAGE>



     EXHIBIT E

     Form of Collateral Assignment of Trademark License Agreement

     [See Attached]

     EXHIBIT F

     Form of Collateral Assignment of Partnership Interests

     [See Attached]

     EXHIBIT G

     Form of Guaranty

     [See Attached]

     EXHIBIT H

     Form of Intellectual Property Security Agreement

     [See Attached]

     EXHIBIT I

     Form of Intercompany Notes

     ASSIGNMENT

     KNOW ALL MEN by these presents that the undersigned is the owner and holder
of that certain  promissory note dated ________ payable by  ________________  to
the undersigned in the original  principal  amount of $________ the ("Promissory
Note") and has sold, assigned,  transferred,  endorsed and set over, and by this
assignment   does   sell,   assign,   transfer,   endorse   and   set   over  to
______________________________________________   all  of  its  right  title  and
interest in the Promissory Note, and the obligations  described  therein and the
monies due and to become due thereunder.

     TO HAVE  AND TO HOLD  the  same  unto  ______________________________,  its
successors and assigns forever.

     IN WITNESS  WHEREOF,  the  undersigned  has caused  this  Assignment  to be
executed on the __ day of __________, _____.


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

                                               By:______________________________
                                                Name:___________________________
                                              Title:____________________________


                                                               

<PAGE>




     Certificate No. 1

     INTERCOMPANY NOTE



     Dated: [Insert Date]

     FOR VALUE RECEIVED,  the  undersigned,  [Insert name of  Intercompany  Note
Maker], a ______ corporation (the "Payor"),  hereby promises to pay to the order
of [Insert name of  Intercompany  Note Holder],  a __________  corporation  (the
"Payee"),  UPON DEMAND,  at [Insert  address of  Intercompany  Note Holder],  in
lawful money of the United States of America and in immediately available funds,
the  aggregate  amount  of all  loans  and  advances  by the  Payee to the Payor
remaining  outstanding  at such  time,  such  loans  and  advances  constituting
Intercompany  Advances in accordance with Section 9.4(g) of the Credit Agreement
dated as of October 30, 1997 (as amended,  supplemented or restated from time to
time,  the "Credit  Agreement";  the terms  defined  therein  and not  otherwise
defined herein being used herein as therein  defined) among BREED  Technologies,
Inc.  ("BREED")  and  certain  Subsidiaries  of BREED  designated  as  Borrowers
therein, as Borrowers,  NationsBank,  National  Association in its capacity as a
Lender  ("NationsBank")  and each  other  financial  institution  executing  and
delivering a signature  page to the Credit  Agreement  and each other  financial
institution  which may hereafter execute and deliver an instrument of assignment
with respect to the Credit Agreement (hereunder such financial  institutions may
be referred to individually as a "Lender" or collectively as the "Lenders"), and
NationsBank in its capacity as the Agent for the Lenders (the "Agent"), provided
that any and all  amounts  advanced  by the  Payor to the Payee at any time when
amounts are  outstanding  hereunder  shall be applied to the  prepayment of such
outstanding  amounts,  including  any interest  which  constitutes  part of such
outstanding amounts.

     Interest  shall be  payable  under  this  Intercompany  Note on any and all
principal amounts from time to time outstanding hereunder from and including the
date of the  initial  advance by the Payee and the Payor  until  such  principal
amounts    are   paid   in   full,    at   a   rate   per    annum    equal   to
[___________________________________________________________].  Accrued interest
shall be payable upon demand, or if no demand is made therefor, quarterly on the
last day of each calendar quarter.

     This  Intercompany  Note may, at the option of the Payor, be prepaid at any
time in whole or in part, without penalty or premium

     The  Payee  agrees  that the  accounts  of the Payor  shall be prima  facie
evidence  of the  amounts  advanced  by the Payee to the  Payor and the  amounts
repaid by the Payor to the Payee.  All  advances  made by the Payee to the Payor
hereunder,  and all  payments  made on account  of  principal  hereof,  shall be
recorded by the Payor and,  prior to any transfer  hereof,  endorsed on the grid
attached  hereto  that is part of this  Intercompany  Note;  provided  that  the
failure to record any such advance or payment  shall not affect the  obligations
of the Payor and the Payee with respect thereto.

     The indebtedness  evidenced by this  Intercompany  Note (the  "Subordinated
Indebtedness")  is and shall be subordinate and subject in right of payment,  to
the extent and in the manner hereinafter set forth, to the prior payment in full
of all obligations of the Payor now or hereafter existing under or in respect of
(a) the Loan  Documents,  whether for principal,  interest  (including,  without
limitation,  interest  accruing  after the filing of a petition  initiating  any
Proceeding (as defined  below),  whether or not such interest  accrues after the
filing of such  petition  for  purposes  of Chapter 11 of Title 11 of the United
States  Code or is an  allowed  claim in such  Proceeding),  fees,  commissions,
expenses or otherwise; and

     (b)  any  and  all  amendments,  modifications,   extensions,  refinancing,
renewals and refunding of the

                                                               

<PAGE>



     obligations  referred to in clause (a) of this  paragraph  that are made in
accordance with the applicable terms thereof (all such obligations under clauses
(a) and (b) of this paragraph being, collectively, the "Senior Indebtedness").

     For the purposes of the provisions  hereof,  the Senior  Indebtedness shall
not be deemed to have been paid in full  until the  Facility  Termination  Date;
provided,  however,  that on such date  neither  the Agent nor any other  Lender
shall have made any claim  against  the Payee or any other Loan Party  under any
provision of any of the Loan Documents that has not been cash  collateralized by
an amount  sufficient in the  reasonable  judgment of the Agent,  to secure such
claim.

     So long as the Senior  Indebtedness  shall not have been paid in full,  the
Payee  shall  not (a) ask,  demand,  sue for,  take or  receive  from the  Payor
(except,  so long as no Default or Event of Default  shall have  occurred and be
continuing,  in the  ordinary  course of  business  of the Payor and the  Payee,
directly or indirectly,  in cash or other property or by setoff or in any manner
(including, without limitation, from or by way of Collateral), payment of all or
any of the Subordinated  Indebtedness or (b) commence, or join with any creditor
other than the Agent or any Lender in  commencing,  or  directly  or  indirectly
cause the Payor to commence, or assist the Payor in commencing, any Proceeding.

     Upon the occurrence and during the  continuance of a Default or an Event of
Default,  no payment or  distribution  of any assets of the Payor of any kind or
character  (including,  without  limitation,  any payment that may be payable by
reason of any other  Indebtedness of the Payor being  subordinated to payment of
the Subordinated Indebtedness) shall be made by or on behalf of the Payor for or
on  account  of any  Subordinated  Indebtedness,  and the  Payee  shall not ask,
demand, sue for, take or receive from the Payor, directly or indirectly, in cash
or other  property  or by  setoff  or in any other  manner  (including,  without
limitation,  from  or by  way  of  Collateral),  payment  of  all  or any of the
Subordinated  Indebtedness,  unless and until  such  Default or Event of Default
shall have been cured or waived in writing  or such  Senior  Indebtedness  shall
have been paid in full,  after  which the Payor may  resume  making  any and all
required  payments in respect of the  Subordinated  Indebtedness  (including any
missed payments).

     In the event of any  dissolution,  winding  up,  liquidation,  arrangement,
reorganization,  adjustment,  protection,  relief or composition of the Payor or
its debts,  whether  voluntary or involuntary,  in any  bankruptcy,  insolvency,
arrangement,  reorganization,  receivership,  relief  or other  similar  case or
proceeding  under any  federal or state  bankruptcy  or  similar  law or upon an
assignment  for the benefit of creditors or any other  marshalling of the assets
and liabilities of the Payor or otherwise (each, a "Proceeding"), the Agent, for
its  benefit and for the ratable  benefit of the  Lenders,  shall be entitled to
receive  payment in full of all of the Senior  Indebtedness  before the Payee is
entitled to receive  any payment or  distribution  of any kind or  character  on
account of all or any of the  Subordinated  Indebtedness,  and, to that end, any
payment or  distribution  of any kind (whether in cash,  property or securities)
that  otherwise  would be payable  or  deliverable  upon or with  respect to the
Subordinated Indebtedness in any such Proceeding (including, without limitation,
any payment that may be payable by reason of any other Indebtedness of the Payor
being subordinated to payment of the Subordinated Indebtedness) shall be paid or
delivered  directly to the Agent, for its benefit and for the ratable benefit of
the Lenders for  application  (in the case of cash) to, or as collateral (in the
case of noncash  property or  securities)  for, the payment or prepayment of the
Senior Indebtedness until all of the Senior Indebtedness shall have been paid in
full.  In the event  that any  Subordinated  Indebtedness  is  declared  due and
payable before its stated  maturity,  if any, the Agent, for its benefit and for
the ratable benefit of the Lenders, shall be entitled to receive payment in full
of all  amounts  due or to  become  due on or in  respect  of all of the  Senior
Indebtedness  before the Payee is entitled  to receive  any payment  (including,
without limitation,  any payment that may be payable by reason of the payment of
any other  Indebtedness  of the Payor being  subordinated  to the payment of the
Subordinated   Indebtedness)  by  the  Payor  on  account  of  the  Subordinated
Indebtedness.

     Until such time as the Senior  Indebtedness  has been paid in full,  if any
Proceeding is commenced by or against the Payor,

                                                               

<PAGE>



     (a) the Agent is hereby  irrevocably  authorized  and empowered (in its own
name or in the name of the Payee or otherwise), but shall have no obligation, to
demand,  sue for, collect and receive every payment or distribution  referred to
above and give acquittance therefor,  and to file claims and proofs of claim and
take such other action (including,  without limitation,  voting the Subordinated
Indebtedness or enforcing any security  interest or other lien securing  payment
of the Subordinated  Indebtedness) as it may deem necessary or advisable for the
exercise  or  enforcement  of any of the rights or interest of the Agent and the
Lenders hereunder; and

     (b) the Payee  shall duly and  promptly  take such  action as the Agent may
request  (i) to collect  the  Subordinated  Indebtedness  for the account of the
Agent,  for its benefit and for the ratable benefit of the Lenders,  and to file
appropriate   claims  or  proofs  of  claim  in  respect  of  the   Subordinated
Indebtedness,  (ii) to execute and deliver to the Agent such powers of attorney,
assignments or other  instruments as the Agent may request in order to enable to
Agent to enforce any and all claims with respect to, and any security  interests
and other liens securing payment of, the Subordinated Indebtedness, and (iii) to
collect and receive any and all payments or distributions that may be payable or
deliverable upon or with respect to the Subordinated Indebtedness.

     All  payments or  distributions  upon or with  respect to the  Subordinated
Indebtedness  that are received by the Payee  contrary to the provisions of this
Agreement  shall be  received  in trust for the  benefit of the  Agent,  for its
benefit and for the ratable  benefit of the Lenders,  shall be  segregated  from
other  property or funds held by the Payee and shall be  forthwith  paid over or
delivered  directly to the Agent, for its benefit and for the ratable benefit of
the Lenders, in the same form as so received (with any necessary endorsement) to
be  applied  (in the case of cash)  to,  or held as  collateral  (in the case of
noncash  property or  securities)  for, the payment or  prepayment of the Senior
Indebtedness in accordance with the terms of the Loan Documents.

     The Agent is hereby  authorized  to demand  specific  performance  of these
provisions,  whether  or not the  Payor  shall  have  complied  with  any of the
provisions hereof applicable to it, at any time when the Payee shall have failed
to comply with any of these provisions.  The Payee hereby irrevocably waives any
defense  based on the adequacy of a remedy at law,  which might be asserted as a
bar to such remedy of specific performance. The Payee will not:

     (a) (i) Cancel or otherwise discharge any of the Subordinated  Indebtedness
(except  upon  payment  in full of the  Senior  Indebtedness);  (ii)  convert or
exchange any of the Subordinated Indebtedness into or for any other Indebtedness
or equity interest; or (iii) subordinate any of the Subordinated Indebtedness to
any Indebtedness of the Payor other than the Senior Indebtedness;

     (b) Sell,  assign,  pledge,  encumber  or  otherwise  dispose of any of the
Subordinated  Indebtedness  other than the pledge of the instruments  evidencing
the Subordinated  Indebtedness to the Agent, on behalf of the Lenders, under the
applicable Security Instruments; or

     (c) Permit the terms of any of the Subordinated  Indebtedness to be changed
in such a manner as to have an adverse  effect upon the rights or  interests  of
the Secured Parties hereunder.

     No  payment or  distribution  to the Agent or any  Lender  pursuant  to the
provisions  hereof shall entitle the Payee to exercise any rights of subrogation
in respect thereof until the Facility Termination Date.

     The  holders of the Senior  Indebtedness  may, at any time and from time to
time,  without any consent of or notice to the Payee or any other  holder of the
Subordinated  Indebtedness and without impairing or releasing the obligations of
the Payee hereunder:

     (a) change the manner,  place or terms of payment,  or change or extend the
time of payment of, or renew payment or change or extend the time or payment of,
or renew or alter, the Senior Indebtedness (including any change

                                                               

<PAGE>



     in the rate of  interest  thereon),  or amend in any manner  any  agreement
under which any of the Senior Indebtedness is outstanding;

     (b) sell,  exchange,  release,  not  perfect  and  otherwise  deal with any
property  at any time  pledged,  assigned  or  mortgaged  to secure  the  Senior
Indebtedness;

     (c) release  anyone  liable in any manner under or in respect of the Senior
Indebtedness;

     (d) exercise or refrain from  exercising any rights against the Payor,  any
other Loan Party or any other Person; and

     (e) apply to the Senior Indebtedness any sums from time to time received.

     The  foregoing  provisions  regarding  subordination  are and are  intended
solely for the purpose of  defining  the  relative  rights of the holders of the
Senior  Indebtedness  on the  one  hand  and  the  holders  of the  Subordinated
Indebtedness  on the other  hand.  Such  provisions  are for the  benefit of the
holders of the Senior  Indebtedness and shall inure to the benefit of, and shall
be  enforceable  by, the Agent,  on behalf of itself and the  Lenders,  directly
against  the  holders  of the  Subordinated  Indebtedness,  and no holder of the
Senior Indebtedness shall be prejudiced in its right to enforce subordination of
any of the  Subordinated  Indebtedness by any act or failure to act by the Payor
or anyone in  custody  of its  property  or  assets.  Nothing  contained  in the
foregoing  provisions is intended to or shall  impair,  as between the Payor and
the holders of the  Subordinated  Indebtedness,  the obligations of the Payor to
such holders.

     The  Payor  agrees to pay on demand  all  costs  and  expenses  (including,
without  limitation,  reasonable  fees and expenses of counsel)  incurred by the
Agent or any Lender in enforcing the provisions hereof

     The  Payor  hereby  waives  presentment  for  payment,  demands,  notice of
dishonor and protest of this  Intercompany  Note and further agrees that none of
the terms or  provisions  hereof may be waived,  altered,  modified  or amended,
except as the Payee may consent in a writing duly signed for and on its behalf.

     No amendment,  waiver or modification of this Intercompany Note (including,
without limitation,  the subordination provisions hereof), and no consent to any
departure here from, shall adversely affect the Agent or any other Lender in any
manner  unless the same shall be in writing and signed by the Agent  and/or such
Lender, and then such waiver, modification or consent shall be effective only in
the specific instance and for the specific purpose for which given.

     No  failure  or  delay on the part of the  Payee in  exercising  any of its
rights,  powers or privileges  hereunder shall operate as a waiver thereof,  nor
shall a single  or  partial  exercise  thereof  preclude  any  other or  further
exercise of any right,  power or  privilege.  The remedies  provided  herein are
cumulative and are not exclusive of any remedies provided by law.

     This  Intercompany  Note shall be governed by and  construed in  accordance
with the laws of the State of Florida.

                                                     By:

                                                     Title:


                                                               

<PAGE>




     ADVANCES AND PAYMENTS OF PRINCIPAL

                         Amount of
          Amount of      Principal Paid       Unpaid Principal          Notation
Date      Advance         or Prepaid             Balance                 Made By









     ENDORSEMENT


PAY TO THE ORDER OF


Dated:                             _____________________________________________


                                                     By:
                                                     Title:




     EXHIBIT J

     Form of Subordination Agreement

     [See Attached]

     EXHIBIT K Form of Interest Rate Selection Notice To: NationsBank,  National
Association, as Agent

                                                               

<PAGE>



         Independence Center, 15th Floor
         NC1-001-15-04
         Charlotte, North Carolina  28255
         Attention:  Agency Services
         Telefacsimile:  (704) 386-9923

     Reference  is hereby made to the Credit  Agreement  dated as of October 30,
1997 (the "Agreement") among BREED TECHNOLOGIES,  INC. , a Delaware  corporation
("BREED"),  and certain  Subsidiaries of BREED  designated as Borrowers  therein
(BREED and such Subsidiaries  being  collectively  called the "Borrowers"),  the
Lenders (as defined in the Agreement), and NationsBank, National Association, as
Agent for the Lenders  ("Agent").  Capitalized terms used but not defined herein
shall have the respective meanings therefor set forth in the Agreement.

The Borrower through its Authorized Representative hereby gives notice to the
Agent of the following selection of a type of Loan  and Interest Period:
Type of Loan                Interest           Aggregate
(check one)                 Period(1)          Amount(2)        Date of Loan(3)
Revolving Loan
Base Rate Loan              ______             _________            ____________
Eurodollar Rate Loan        ______             _________            ____________
Alternative Currency(4)     ______             _________            ____________

Term Loan Segment
Base Rate Loan             ______              _________            ____________
Eurodollar Rate Loan       ______              _________            ____________
Alternative Currency(4)    ______              _________            ____________
--------------------------------------------------

(1)      For any Eurodollar Rate Loan, one, two, or three months.
(2)      Must be $5,000,000 or if greater an integral multiple of $1,000,000,
            unless a Base Rate Refunding Loan.
(3)      At least three (3) Business Days later if a Eurodollar Rate Loan;
(4)      Specify Pounds Sterling, Italian Lire, French Francs, Deutsch Marks,
            or Spanish Pesetas.
                                                        BREED TECHNOLOGIES, INC.

                                          BY:___________________________________
                                                Authorized Representative
                                          DATE:_________________________________

                                                               

<PAGE>



     EXHIBIT L

     Form of Landlord Waiver

     [See Attached]

     EXHIBIT M

     Form of LC Account Agreement

     [See Attached]

     EXHIBIT N

     Form of Lease Assignment

     [See Attached]

     EXHIBIT O-1

     Form of Term Note

     Promissory Note (Term Loan)


$600,000,000                                           Charlotte, North Carolina

                                                                October 30, 1997


     FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having
its principal place of business located in Lakeland,  Florida (the  "Borrower"),
hereby promises to pay to the order of NATIONSBANK,  NATIONAL  ASSOCIATION  (the
"Lender"),  in its individual capacity,  at the office of NATIONSBANK,  NATIONAL
ASSOCIATION, as agent for the Lenders (the "Agent"), located at One Independence
Center, 101 North Tryon Street,  NC1-001-15-04,  Charlotte, North Carolina 28255
(or at such other place or places as the Agent may  designate in writing) at the
times set forth in the Credit Agreement dated as of ____________, 1997 among the
Borrowers,   the  financial  institutions  party  thereto   (collectively,   the
"Lenders")  and the Agent (as  amended,  supplemented  or restated and in effect
from time to time, the "Agreement";  all capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Agreement), in lawful
money of the United States of America or in the applicable Alternative Currency,
as the case may be, in immediately  available funds, the principal amount of SIX
HUNDRED MILLION DOLLARS  ($600,000,000)  or, if less than such principal amount,
the aggregate unpaid principal amount of the Term Loan made by the Lender to the
Borrower  pursuant to the  Agreement on the Term Loan  Termination  Date or such
earlier date as may be required  pursuant to the terms of the Agreement,  and to
pay interest from the date hereof on the unpaid principal amount hereof, in like
money,  at said office,  on the dates and at the rates provided in Article II of
the Agreement.  All or any portion of the principal  amount of Term Loans may be
prepaid as provided in the Agreement.

     If payment of all sums due hereunder is accelerated  under the terms of the
Agreement or under the terms of the other Loan Documents  executed in connection
with the Agreement,  the then remaining  principal amount and accrued but unpaid
interest  shall bear interest  which shall be payable on demand at the rates per
annum set forth in the proviso to

                                                               

<PAGE>



     Section  2.2(a)  of the  Agreement  or the  maximum  rate  permitted  under
applicable  law, if lower,  until such  principal and interest have been paid in
full. Further, in the event of such acceleration,  this Term Note, and all other
indebtedness  of the  Borrower to the Lender shall  become  immediately  due and
payable,  without  presentation,  demand,  protest or notice of any kind, all of
which are hereby waived by the Borrower.

     In the  event  this  Term  Note  is not  paid  when  due at any  stated  or
accelerated  maturity,  the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection,  including reasonable attorneys' fees and
disbursements, and interest due hereunder thereon at the rates set forth above.

     Interest hereunder shall be computed as provided in the Agreement.

     This Term Note is one of the Term Notes referred to in the Agreement and is
issued pursuant to and entitled to the benefits and security of the Agreement to
which  reference is hereby made for a more  complete  statement of the terms and
conditions upon which the Term Loans  evidenced  hereby were or are made and are
to be repaid.  This Term Note is subject to certain  restrictions on transfer or
assignment as provided in the Agreement.

     All Persons  bound on this  obligation,  whether  primarily or  secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent  permitted by law the benefits of all  provisions  of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability  hereon  until  judgment be obtained
and execution  issues against any other of them and returned  satisfied or until
it can be shown  that the  maker  or any  other  party  hereto  had no  property
available for the  satisfaction  of the debt  evidenced by this  instrument,  or
until any other  proceedings  can be had  against  any of them,  and also  their
right,  if any, to require the holder  hereof to hold as security  for this Term
Note any  collateral  deposited  by any of said  Persons as  security.  Protest,
notice of protest, notice of dishonor,  dishonor,  demand or any other formality
are hereby waived by all parties bound hereon.

     IN WITNESS  WHEREOF,  the  Borrower  has caused  this Term Note to be made,
executed and delivered by its duly authorized  representative as of the date and
year first above written, all pursuant to authority duly granted.

                                                     BREED TECHNOLOGIES, INC.
WITNESS:

                                                     By:
                                                     Name:
                                                     Title:


                                                               

<PAGE>



     EXHIBIT O-2

     Form of Revolving Note

     Promissory Note
     (Revolving Loan)



$300,000,000                                           Charlotte, North Carolina
                                                                October 30, 1997


     FOR VALUE RECEIVED, BREED TECHNOLOGIES, INC., a Delaware corporation having
its principal place of business located in Lakeland,  Florida  ("BREED"),  BREED
AUTOMOTIVE  SAFETY  SYSTEMS,  S.L.,  BREED ITALIAN  HOLDINGS,  S.R.L.,  BREED UK
LIMITED, and ICSRD R.F., GMBH (each a "Borrower" and collectively with BREED the
"Borrowers"),  hereby  promise  to pay to the  order  of  NATIONSBANK,  NATIONAL
ASSOCIATION  (the  "Lender"),  in its  individual  capacity,  at the  office  of
NATIONSBANK,  NATIONAL  ASSOCIATION,  as agent for the  Lenders  (the  "Agent"),
located at One  Independence  Center,  101 North  Tryon  Street,  NC1-001-15-04,
Charlotte,  North  Carolina 28255 (or at such other place or places as the Agent
may designate in writing) at the times set forth in the Credit  Agreement  dated
as of October 30, 1997 among the  Borrowers,  the financial  institutions  party
thereto (collectively, the "Lenders") and the Agent (as amended, supplemented or
restated and in effect from time to time, the "Agreement"; all capitalized terms
not otherwise defined herein shall have the respective meanings set forth in the
Agreement), in lawful money of the United States of America or in the applicable
Alternative  Currency,  as the case may be, in immediately  available funds, the
principal  amount of THREE HUNDRED  MILLION DOLLARS  ($300,000,000)  or, if less
than  such  principal  amount,  the  aggregate  unpaid  principal  amount of all
Revolving Loans made by the Lender to the Borrowers pursuant to the Agreement on
the Revolving  Credit  Termination  Date or such earlier date as may be required
pursuant to the terms of the Agreement, and to pay interest from the date hereof
on the unpaid  principal  amount hereof,  in like money, at said office,  on the
dates and at the rates  provided  in  Article  II of the  Agreement.  All or any
portion of the principal amount of Revolving Loans may be prepaid or required to
be prepaid as provided in the Agreement.

     Each Borrower shall be jointly and severally  liable as a primary  obligor;
provided that a Borrower which is a Foreign Subsidiary shall be liable hereunder
only for Obligations  made by or on its behalf together with interest,  fees and
expenses relating thereto as provided in Section 2.1(e) of the Agreement.

     If payment of all sums due hereunder is accelerated  under the terms of the
Agreement or under the terms of the other Loan Documents  executed in connection
with the Agreement,  the then remaining  principal amount and accrued but unpaid
interest  shall bear interest  which shall be payable on demand at the rates per
annum set forth in the proviso to Section 2.2(a) of the Agreement or the maximum
rate permitted under applicable law, if lower, until such principal and interest
have  been  paid in  full.  Further,  in the  event of such  acceleration,  this
Revolving Note, and all other  indebtedness of the Borrowers to the Lender shall
become immediately due and payable,  without  presentation,  demand,  protest or
notice of any kind, all of which are hereby waived by the Borrowers.

     In the event  this  Revolving  Note is not paid  when due at any  stated or
accelerated  maturity,  the Borrowers agree to pay, in addition to the principal
and interest, all costs of collection,  including reasonable attorneys' fees and
disbursements, and interest due hereunder thereon at the rates set forth above.

     Interest hereunder shall be computed as provided in the Agreement.

     This  Revolving  Note  is one of the  Revolving  Notes  referred  to in the
Agreement and is issued pursuant to and entitled to the benefits and security of
the Agreement to which reference is hereby made for a more complete statement of
the terms and conditions upon which the Revolving Loans evidenced hereby were or
are made and are to be repaid.

                                                              

<PAGE>



     This  Revolving  Note is subject to certain  restrictions  on  transfer  or
assignment as provided in the Agreement.

     All Persons  bound on this  obligation,  whether  primarily or  secondarily
liable as principals, sureties, guarantors, endorsers or otherwise, hereby waive
to the full extent  permitted by law the benefits of all  provisions  of law for
stay or delay of execution or sale of property or other satisfaction of judgment
against any of them on account of liability  hereon  until  judgment be obtained
and execution  issues against any other of them and returned  satisfied or until
it can be shown  that the  maker  or any  other  party  hereto  had no  property
available for the  satisfaction  of the debt  evidenced by this  instrument,  or
until any other proceedings can be had against any of them, also their right, if
any, to require the holder  hereof to hold as security for this  Revolving  Note
any collateral deposited by any of said Persons as security.  Protest, notice of
protest, notice of dishonor,  dishonor, demand or any other formality are hereby
waived by all parties bound hereon.

     IN WITNESS  WHEREOF,  the Borrowers  have caused this  Revolving Note to be
made,  executed and delivered by its duly  authorized  representative  as of the
date and year first above written, all pursuant to authority duly granted.

                                                     BREED TECHNOLOGIES, INC.

WITNESS:                                             By:
                                                     Name:
                                                     Title:

                                              BREED AUTOMOTIVE SAFETY SYSTEMS SL

WITNESS:                                             By:
                                                     Name:
                                                     Title:

                                                  BREED ITALIAN HOLDINGS, S.R.L.
WITNESS:
                                                     By:
                                                     Name:
                                                     Title:

                                                     BREED UK LIMITED
WITNESS:
                                                     By:
                                                     Name:
                                                     Title:

                                                     ICSRD R.F. GMBH
WITNESS:
                                                     By:
                                                     Name:
                                                     Title:

     EXHIBIT P-1

     Form of Stock Pledge Agreement (Borrower)

     [See Attached]


                                                              

<PAGE>



     EXHIBIT P-2

     Form of Stock Pledge Agreement (US Subsidiaries)

     [See Attached]

     EXHIBIT P-3

     Form of Stock Pledge Agreement (Breeds)

     [See Attached]

     EXHIBIT Q

     Form of Intercompany Note Pledge Agreement

     [See Attached]

     EXHIBIT R

     Form of Security Agreement

     [See Attached]

     EXHIBIT S-1

     Form of Opinion of US Counsel

     October 30, 1997

NationsBank, National Association, as Agent,
   and each of the Lenders Party to the
  Credit Agreement Referenced Below
NationsBank Corporate Center
Charlotte, North Carolina 28255-0065

     Re:  $500,000,000 Term Loan Facility and $400,000,000  Revolving Credit and
Letter of Credit Facility among NationsBank, National Association, as Agent, the
Lenders  party  thereto,  BREED  Technologies,  Inc.  and  certain  Subsidiaries
designated as Borrowers therein

     Ladies and Gentlemen:

     We  have  acted  as  counsel  to  BREED  Technologies,   Inc.,  a  Delaware
corporation  ("BREED")  and the  Guarantors  in  connection  with the term  loan
facility of $500,000,000  (the "Term Loan") and the revolving credit facility of
up to $400,000,000 (the "Revolving  Loan"),  including the $25,000,000  sublimit
for the Letter of Credit  Facility  constituting  part of the  Revolving  Credit
Facility (the "LC Facility")  and the  $75,000,000  sublimit for  multi-currency
borrowings,  each  being  made  available  to  BREED  and  certain  Subsidiaries
designated as Borrowers  ("Borrowing  Subsidiaries" and referred to collectively
with BREED as the  "Borrowers") on this date pursuant to the Credit Agreement of
even date herewith among you, the Lenders,  BREED and the Borrowing Subsidiaries
(the "Credit  Agreement"),  and the other  transactions  contemplated  under the
Credit Agreement.

                                                              

<PAGE>



     This opinion is being delivered in accordance with the conditions set forth
in Section 6.1 of the Credit  Agreement.  All  capitalized  terms not  otherwise
defined  herein  shall  have  the  meanings  provided  therefor  in  the  Credit
Agreement.

     As such counsel, we have reviewed the following documents:

     1. the Credit Agreement;

     2. the Note;

     3. the Guaranty;

     4. the Security Instruments;

     5. the Financing Statements (as defined herein).

     The documents described in items 1 through 5 immediately above are referred
to herein as the "Loan Documents".

     For  purposes of the  opinions  expressed  below,  we have assumed that all
natural persons  executing the Loan Documents have legal capacity to do so; that
all signatures (other than those of  representatives of BREED and the Guarantors
on the Loan  Documents) on all documents  submitted to us are genuine;  that all
documents  submitted  to us as  originals  (other than the Loan  Documents)  are
authentic;  and  that all  documents  submitted  to us as  certified  copies  or
photocopies  conform to the originals of such  documents,  which  themselves are
authentic.

     In addition,  for purposes of giving this  opinion,  we have  examined such
corporate records of BREED and the Guarantors, certificates of public officials,
certificates  of  appropriate  officials of BREED and the  Guarantors,  and such
other documents, and have made such inquiries as we have deemed appropriate.

     Based upon and subject to the foregoing, it is our opinion that:

     1. BREED is a  corporation  duly  organized,  validly  existing and in good
standing under the laws of its state of  incorporation  and is duly qualified to
transact  business  as a  foreign  corporation  and is in good  standing  in all
jurisdictions in which the nature of its business  requires such  qualification.
BREED has full  corporate  power and authority to own its assets and conduct the
businesses in which it is now engaged and as are expressly  contemplated  by the
Loan Documents, and has full corporate power and authority to enter into each of
the Loan  Documents  to  which  it is a party  and to  perform  its  obligations
thereunder.

     2.  Each of the Loan  Documents  to which  BREED is a party  has been  duly
authorized  by the Board of Directors of BREED (and by any required  shareholder
action),  has been duly executed and  delivered by BREED,  and  constitutes  the
legal, valid and binding obligation, agreement, instrument or conveyance, as the
case  may be,  of  BREED,  enforceable  against  BREED  in  accordance  with its
respective  terms,  except  as the  enforceability  thereof  may be  limited  by
applicable  bankruptcy,  insolvency,   reorganization  and  other  similar  laws
relating to or affecting  creditors'  rights generally and by the application of
general  equitable  principles  (whether  considered in proceedings at law or in
equity).

     3. Each Guarantor is a corporation or partnership,  as the case may be duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
respective state of its formation and is duly qualified to transact  business as
a foreign  entity  and is in good  standing  in all  jurisdictions  in which the
nature of its business  requires such  qualification and in which the failure to
be so  qualified  would  reasonably  be likely to result in a  Material  Adverse
Effect.  Each Guarantor has full corporate power and authority to own its assets
and  conduct  the  businesses  in  which  it is now  engaged  and  as  expressly
contemplated in the Loan  Documents,  and has full corporate power and authority
to enter into each of the Loan

                                                             

<PAGE>



     Documents to which it is a party and to perform its obligations thereunder.

     4. Each of the Loan  Documents to which each  Guarantor is a party has been
duly authorized by the Board of Directors or required partners of such Guarantor
(and by any required  shareholder or partnership action), has been duly executed
and delivered by such Guarantor,  and  constitutes the legal,  valid and binding
obligation,  agreement  or  instrument,  as the case may be, of such  Guarantor,
enforceable  against such  Guarantor in accordance  with its  respective  terms,
except as the  enforceability  thereof may be limited by applicable  bankruptcy,
insolvency,  reorganization  and other  similar  laws  relating to or  affecting
creditors'  rights  generally  and  by  the  application  of  general  equitable
principles (whether considered in proceedings at law or in equity).

     5. Neither the  execution or delivery of, nor  performance  by BREED or any
Guarantor of its obligations under, the Loan Documents (a) does or will conflict
with,  violate or  constitute  a breach of (i) the  Organizational  Documents or
Operating  Documents  of  BREED  or any  Guarantor,  (ii)  any  laws,  rules  or
regulations  applicable to BREED or any other Guarantor,  or (iii) any contract,
agreement,   indenture,  lease,  instrument,  other  document,  judgment,  writ,
determination,  order,  decree or arbitral award to which BREED or any Guarantor
is a party or by which  BREED or any  Guarantor  or any of their  properties  is
bound, (b) requires the prior consent of, notice to, license from or filing with
any Governmental  Authority which has not been duly obtained or made on or prior
to the date hereof,  or (c) does or will result in the creation or imposition of
any lien,  pledge,  charge or  encumbrance of any nature upon or with respect to
any of the  properties of BREED or any  Guarantor,  except for the Liens in your
favor expressly created pursuant to the Loan Documents.

     6.  There  is no  pending  or,  to the best of our  knowledge,  threatened,
action, suit,  investigation or proceeding (including,  without limitation,  any
action,  suit,  investigation,  or proceeding  under any  environmental or labor
law), nor is there any basis  therefor,  before or by any court, or governmental
department,  commission,  board,  bureau,  instrumentality,  agency or  arbitral
authority,  (i) which calls into question the validity or  enforceability of any
of the Loan Documents, or the titles to their respective offices or authority of
any officers of BREED or any Guarantor or (ii) an adverse  result in which would
reasonably be likely to have a Material Adverse Effect.

     7. To the best of our  knowledge  after due inquiry,  neither BREED nor any
Guarantor  (i) is in  default  (which  default  has not been  waived)  under any
agreement,  document or  instrument to which it is a party or by which it or any
of its assets is bound or (ii) is in  violation  of any law,  rule,  regulation,
judgment, writ, determination, order, decree or arbitral award to which BREED or
any  Guarantor  is a party or by which  BREED or any  Guarantor  or any of their
respective properties is bound, which default or violation,  as the case may be,
would  constitute  a Default or Event of Default  under the Credit  Agreement or
otherwise could reasonably be likely to have a Material Adverse Effect.

     8.  None  of  the  transactions   contemplated  by  the  Credit  Agreement,
including, without limitation, the use of the proceeds of the Loans provided for
in the Loan Documents, will violate or result in a violation of Section 7 of the
Securities  Exchange Act of 1934, as amended,  any  regulations  issued pursuant
thereto,  or  regulations  G, T, U or X of the Board of Governors of the Federal
Reserve System.

     9. None of the  provisions  of the Loan  Documents  violate any laws of the
State of Florida relating to interest or usury.

     10.  Once value has been given to BREED by the  Lenders  and  assuming  the
Agent, for the benefit of the Lenders,  has taken possession of the certificates
representing  all of the Pledged  Stock,  as more fully  described in Schedule A
hereto,  and the stock  powers  related  thereto,  for  value in good  faith and
without notice of an adverse claim, so long as the Agent, for the benefit of the
Lenders,  maintains continuous and uninterrupted  possession of the certificates
representing  the Pledged  Stock,  the Pledge  Agreement will create a valid and
perfected  security  interest  in favor of the  Agent,  for the  benefit  of the
Lenders,  in the Pledged  Stock  subject to no other  security  interest,  lien,
encumbrance  or adverse claim (other than  restrictions  on transfer  imposed by
applicable securities laws) and no filings or recordation are

                                                              

<PAGE>



     necessary to perfect the security interests created by the Pledge Agreement
in the Pledged Stock.  Such security  interest will have priority over any other
consensual security interests in the Pledged Stock.

     11.  All of the  shares of Pledged  Stock  which are shares of the  capital
stock of any Domestic Subsidiary  ("Pledged Domestic Subsidiary Stock") are duly
authorized,  validly  issued,  fully  paid  and  nonassessable,  and free of any
preemptive rights. The Certificates listed on Schedule A hereto are now the sole
evidence of the shares of Pledged  Domestic  Subsidiary  Stock and all shares of
Pledged  Domestic  Subsidiary  Stock  have  been duly  delivered  to you with an
appropriate stock power assignment  sufficient to permit the sale or transfer of
the shares of Pledged  Domestic  Subsidiary  Stock by you in accordance with the
terms  of  the  Pledge  Agreement,  subject  to  applicable  federal  and  state
securities  law. The  delivery of physical  possession  of the Pledged  Domestic
Subsidiary Stock to the Agent and the execution and delivery of the stock powers
with respect to the Pledged Domestic  Subsidiary Stock have been duly authorized
by the owner of such Pledged Domestic Subsidiary Stock.

     12.  All of the  shares of Pledged  Stock  which are shares of the  capital
stock of BREED  ("Pledged  BREED Stock") are duly  authorized,  validly  issued,
fully  paid  and   nonassessable,   and  free  of  any  preemptive  rights.  The
Certificates  listed  on  Schedule  A hereto  are now the sole  evidence  of the
Pledged BREED Stock and all shares of Pledged BREED Stock have been delivered to
you with an appropriate stock power assignment  sufficient to permit the sale or
transfer  of the shares of Pledged  BREED  Stock by you in  accordance  with the
terms  of  the  Pledge  Agreement,  subject  to  applicable  federal  and  state
securities  law. The delivery of physical  possession of the Pledged BREED Stock
to the Agent and the  execution and delivery of the stock powers with respect to
the Pledged BREED Stock have been duly authorized by Johnnie C. Breed,  Allen K.
Breed, A. BREED Ltd, a Texas limited partnership,  J. BREED Ltd, a Texas limited
partnership, BREED Charitable Foundation, and [five trusts of which Ms. Breed is
trustee with shared voting and investment power].

     13.  Once value has been given to BREED by the  Lenders and the Receipt and
Certificate of Registrar is executed,  the Collateral  Assignment of Partnership
Interests  will create a valid and perfected  security  interest in favor of the
Agent, for the benefit of the Lenders,  in the Assigned  Interests subject to no
other security  interest,  lien,  encumbrance or adverse claim and no filings or
recordations  are  necessary  to perfect the security  interests  created by the
Collateral Assignment of Partnership  Interests in the Assigned Interests.  Such
security  interest  will  have  priority  over  any  other  consensual  security
interests in the Assigned Interests.  All required consents to the assignment of
the Assigned  Interests  have been obtained.  All of the Assigned  Interests are
duly authorized,  validly issued, fully paid and nonassessable,  and free of any
preemptive rights.

     14. The  Security  Agreement  and the  Collateral  Assignment  of Trademark
License  Agreement are effective to create a valid security interest in favor of
the Agent for the benefit of the Lenders in the  Collateral  described  therein.
The Uniform  Commercial  Code  Financing  Statements on Form UCC-1  described on
Schedule 7.23 of the Credit Agreement (collectively, the "Financing Statements")
have been duly executed and  delivered to the Agent and are in form,  number and
content  sufficient  (together  with the tender of  necessary  filing  fees) for
filing with the respective  filing  offices  described on Schedule 7.23 with the
effect that,  upon such filing,  the Agent shall have a duly perfected  security
interest  in  the  Collateral  described  in  the  Security  Agreement  and  the
Collateral  Assignment  of  Trademark  License  Agreement  to the extent  that a
security interest in such Collateral can be perfected by the filing of financing
statements  under the Uniform  Commercial  Code as in effect in the  appropriate
jurisdictions.  No further  filings or recordation  are necessary to perfect the
security  interests  created  by  the  Security  Agreement  and  the  Collateral
Assignment of Trademark License Agreement.

     Our opinions  contained  herein are rendered  solely in connection with the
transactions contemplated under the Loan Documents and may not be relied upon in
any manner by any Person  other than the  addressees  hereof,  any  successor or
assignee of any addressee  (including  successive  assignees) and any Person who
shall  acquire  a   participation   interest  in  the  interest  of  any  Lender
(collectively,  the "Reliance Parties"),  or by any Reliance Party for any other
purpose.  Our  opinions  herein  shall  not be  quoted  or  otherwise  included,
summarized or referred to in any publication or document, in

                                                              

<PAGE>



     whole or in part, for any purposes  whatsoever,  or furnished to any Person
other  than a  Reliance  Party  (or a Person  considering  whether  to  become a
Reliance  Party),  except as may be required of any Reliance Party by applicable
law or regulation or in  accordance  with any auditing or oversight  function or
request of regulatory agencies to which a Reliance Party is subject.


                                                     Very truly yours,


     Schedule A to Legal Opinion

     Pledged Stock

     EXHIBIT S-2

     Form of Opinion of Intellectual Property Counsel

     October 30, 1997


     NationsBank,  National Association,  as Agent and Each of the Lenders Party
to the Credit Agreement Referenced Below NationsBank Corporate Center Charlotte,
North Carolina 28255-0065

     Re:  $500,000,000 Term Loan Facility and $400,000,000  Revolving Credit and
Letter of Credit Facility among NationsBank, National Association, as Agent, the
Lenders  party  thereto,  BREED  Technologies,  Inc.  and  certain  Subsidiaries
designated as Borrowers therein

     Ladies and Gentlemen:

     We  have  acted  as  special   intellectual   property   counsel  to  BREED
Technologies,  Inc., a Delaware  corporation  ("BREED")  and the  Guarantors  in
connection with the term loan facility of $500,000,000 (the "Term Loan") and the
revolving  credit  facility  of  up  to  $400,000,000  (the  "Revolving  Loan"),
including  the   $25,000,000   sublimit  for  the  Letter  of  Credit   Facility
constituting  part of the Revolving  Credit Facility (the "LC Facility") and the
$75,000,000 sublimit for multi-currency borrowings, each being made available to
BREED and certain Subsidiaries designated as Borrowers ("Borrowing Subsidiaries"
and  referred  to  collectively  with  BREED as the  "Borrowers")  on this  date
pursuant to the Credit  Agreement of even date herewith  among you, the Lenders,
BREED and the Borrowing  Subsidiaries  (the "Credit  Agreement"),  and the other
transactions contemplated under the Credit Agreement.

     This opinion is being delivered in accordance with the conditions set forth
in Section 6.1 of the Credit  Agreement.  All  capitalized  terms not  otherwise
defined  herein  shall  have  the  meanings  provided  therefor  in  the  Credit
Agreement.

     As such counsel, we have reviewed the following documents:

     1. the Credit Agreement;


                                                             

<PAGE>



     2. the Guaranty;

     3. the Intellectual Property Security Agreement; and

     4. the Assignment of Patents, Trademarks, Copyrights and Licenses.


     The documents described in items 1 through 4 immediately above are referred
to herein as the "Loan Documents".

     For  purposes of the  opinions  expressed  below,  we have assumed that all
natural persons  executing the Loan Documents have legal capacity to do so; that
all signatures (other than those of  representatives of BREED and the Guarantors
on the Loan  Documents) on all documents  submitted to us are genuine;  that all
documents  submitted  to us as  originals  (other than the Loan  Documents)  are
authentic;  and  that all  documents  submitted  to us as  certified  copies  or
photocopies  conform to the originals of such  documents,  which  themselves are
authentic.

     In addition,  for purposes of giving this  opinion,  we have  examined such
corporate records of BREED and the Guarantors, certificates of public officials,
certificates  of  appropriate  officials of BREED and the  Guarantors,  and such
other documents, and have made such inquiries as we have deemed appropriate.

     Based upon and subject to the foregoing, it is our opinion that:

     1. The Intellectual  Property  Security  Agreement is effective to create a
valid  security  interest in the right,  title,  and  interest of BREED and each
Guarantor which is a signatory  thereto in the Patents,  Trademarks,  Copyrights
and  Licenses  (as defined in the  Agreement)  with  respect to which a security
interest can be created under Chapter 9 of the Uniform  Commercial  Code and any
applicable federal law.

     2. If the Intellectual  Property Security  Agreement is recorded (i) in the
case of patents  and  trademarks  with the United  States  Patent and  Trademark
Office and there is  attached  to such  recorded  document  (A) with  respect to
trademarks  claimed as collateral a listing naming the correct  grantor as owner
and giving  the  correct  name of the  trademark  and  federal  registration  or
application number of each trademark owned by such grantor, and (B) with respect
to patents  claimed as collateral a listing naming the correct  grantor as owner
and giving  the title of the  invention,  together  with its  associated  patent
number or patent  application  number of each patent owned by such grantor,  and
(ii) in the case of copyrights with the United States Copyright Office and there
is attached to such  recorded  document  with respect to  copyrights  claimed as
collateral a listing specifying the title of the work, the registration  number,
and the  registration  date,  and a Financing  Statement in the form reviewed is
properly filed with the [__________], the security interest of the Secured Party
in such trademarks,  patents,  and copyrights will be perfected if perfection is
determined by [________________] law or any applicable Federal Law.

     Our opinions  contained  herein are rendered  solely in connection with the
transactions contemplated under the Loan Documents and may not be relied upon in
any manner by any Person  other than the  addressees  hereof,  any  successor or
assignee of any addressee  (including  successive  assignees) and any Person who
shall  acquire  a   participation   interest  in  the  interest  of  any  Lender
(collectively,  the "Reliance Parties"),  or by any Reliance Party for any other
purpose.  Our  opinions  herein  shall  not be  quoted  or  otherwise  included,
summarized or referred to in any  publication or document,  in whole or in part,
for any  purposes  whatsoever,  or furnished to any Person other than a Reliance
Party (or a Person  considering  whether to become a Reliance Party),  except as
may be required of any Reliance  Party by  applicable  law or  regulation  or in
accordance  with any  auditing or  oversight  function or request of  regulatory
agencies to which a Reliance Party is subject.


                                                     Very truly yours,

                                                              

<PAGE>



     EXHIBIT S-3

     Form of Opinion of Foreign Counsel

     [See Attached]

     EXHIBIT T

     Compliance Certificate

NationsBank, National Association,
as Agent
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina  28255
Attention: Agency Services
Telefacsimile:  (704) 386-9923


     Reference  is hereby made to the Credit  Agreement  dated as of October 30,
1997 (the "Agreement") among BREED  Technologies,  Inc., a Delaware  corporation
("BREED"),  and certain  Subsidiaries of BREED  designated as Borrowers  therein
(BREED and such Subsidiaries being collectively  referred to as the "Borrowers")
the Lenders (as defined in the Agreement) and NationsBank, National Association,
as Agent for the Lenders  ("Agent").  Capitalized  terms used but not  otherwise
defined  herein  shall have the  respective  meanings  therefor set forth in the
Agreement.   The   undersigned,   a  duly   authorized  and  acting   Authorized
Representative,  hereby  certifies to you as of __________  (the  "Determination
Date") as follows:

     1. Calculations:

     A. Compliance with Section 9.1(a): Consolidated Net Worth

     1.  Required  Consolidated  Net  Worth at the  last day of the most  recent
fiscal quarter $______________

     2. Consolidated Net Income x 0.9 $______________

     3. 100% of the Net Proceeds from any Equity Offering $______________

     3. Sum of A.1 + A.2 + A.3 $______________

     4. Actual Consolidated Net Worth $______________

     Required: A.4 must not be less than A.3

     B. Compliance with Section 9.1(b): Consolidated EBITDA

     1. Consolidated Net Income $______________

     2. Consolidated Interest Expense $______________


                                                              

<PAGE>



     3. Taxes on income $______________

     4. Depreciation $______________

     5. Amortization $______________

     6. Consolidated EBITDA $______________ (B.1 + B.2 + B.3 +B.4 +B.5)

     Required:  B.1 must not be less than  $25,000,000 for the two months ending
12/31/97,  $64,000,000 for the five months ending 3/31/98,  or $107,000,000  for
the eight months ending 6/30/98

     C. Compliance with Section 9.1(c): Capital Expenditures

     1. Capital Expenditures $______________

     Required:  C.1 must not exceed  $17,000,000  in for the two  months  ending
12/31/97, $37,000,000 for the five months ending 3/31/98, or $57,000,000 for the
eight months ending 6/30/98


     2. No Default

     A. Since __________ (the date of the last similar certification), (a) BREED
has not defaulted in the keeping, observance,  performance or fulfillment of its
obligations  pursuant to any of the Loan Documents;  and (b) no Default or Event
of  Default  specified  in  Article  X of  the  Agreement  has  occurred  and is
continuing.

     B. If a Default or Event of Default has occurred since __________ (the date
of the last similar certification),  BREED proposes to take the following action
with respect to such Default or Event of Default: .

     (Note,  if no  Default  or Event  of  Default  has  occurred,  insert  "Not
Applicable").

     The  Determination  Date  is  the  date  of  the  last  required  financial
statements  submitted  to the  Lenders in  accordance  with  Section  8.1 of the
Agreement.


     IN WITNESS  WHEREOF,  I have  executed this  Certificate  this _____ day of
__________, 19___.

                                                     By:
                                                     Authorized Representative
                                                     Name:
                                                     Title:

                                                              

<PAGE>



     EXHIBIT U

     Form of Assumption Letter

     [Date]


To NationsBank, National Association,
 as Agent and the Lenders party to the
Credit Agreement referred to below

Ladies and Gentlemen:

     Reference  is hereby made to the Credit  Agreement  dated as of October 30,
1997 (as the same may be amended,  supplemented  or restated  from time to time,
the "Credit Agreement") among BREED Technologies,  Inc., a Delaware  corporation
("BREED"),  and certain  Subsidiaries of BREED  designated as Borrowers  therein
(BREED and such Subsidiaries being collectively  referred to as the "Borrowers")
the Lenders (as defined in the Agreement) and NationsBank, National Association,
as Agent for the Lenders ("Agent").  Terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.

     1. Borrowing Subsidiary.

     (i) The undersigned,  _________________ (the "Subsidiary") a ______________
corporation  and  a  Subsidiary  of  BREED,  proposes  to  become  a  "Borrowing
Subsidiary" under the Credit Agreement,  and accordingly hereby agrees that from
the date hereof  until the payment in full of the  principal  of and interest on
all Loans made to it or on its behalf under the Credit Agreement and performance
of all of its other obligations  thereunder,  and termination of its status as a
"Borrowing  Subsidiary" as provided below, it shall perform,  comply with and be
bound by each of the  provisions  of the  Credit  Agreement  which are stated to
apply to a "Borrowing  Subsidiary" or a "Borrower".  In addition, the Subsidiary
hereby  represents  and  warrants  that:  (i)  each of the  representations  and
warranties set forth in Article VII of the Credit  Agreement is true and correct
with respect to the  Subsidiary as of the date hereof and (ii) it has heretofore
received  a true  and  correct  copy  of the  Credit  Agreement  (including  any
amendments thereto, modifications thereof or waivers thereunder) as in effect on
the date hereof.

     (ii) So long as the  principal  of and  interest  on all Loans  made to the
Subsidiary or on its behalf under the Credit  Agreement  shall have been paid in
full and all other  obligations  of the  Subsidiary  under the Credit  Agreement
shall have been  fully  performed,  the  Subsidiary  may,  by not less than five
Business  Days' prior notice to the Agent,  terminate its status as a "Borrowing
Subsidiary."


     2. Conditions  Precedent.  No Lender shall make any Loan to or on behalf of
the Subsidiary unless the Subsidiary has furnished to the Agent, with sufficient
copies for all the Lenders, the following items:

     (i) Copies of the Organizational Documents of the Subsidiary, together with
all  amendments,  and a  certificate  of  good  standing  (if  available),  both
certified  by  the  appropriate  governmental  officer  in its  jurisdiction  of
incorporation.

     (ii)  Copies,  certified  by an  appropriate  officer  or  director  of the
Subsidiary, of its Operating Documents and of its Board of Directors resolutions
(and other Organizational Action, if any are deemed necessary by counsel for the
Agent) authorizing the execution of this Assumption Letter and all other

                                                             

<PAGE>



     Loan Documents to which the Subsidiary is a party.

     (iii) An  incumbency  certificate,  executed by an  appropriate  officer or
director of the Subsidiary,  which shall identify by name and title and bear the
signature of the officers or directors of the Subsidiary authorized to sign this
Assumption  Letter  and the other Loan  Documents  to which it is a party and to
request Loans thereunder, upon which certificate the Agent and the Lenders shall
be entitled to rely until informed of any change in writing by the Subsidiary.

     (iv) A favorable written opinion of counsel to the Subsidiary, addressed to
the Lenders, in form and substance satisfactory to the Agent.

     (v) Notes issued by the Subsidiary to the order of each of the Lenders.

     (vi) Written money  transfer  instructions,  in  substantially  the form of
Exhibit "A" attached  hereto  addressed to the Agent on behalf of the Subsidiary
and signed by duly  authorized  officer,  together with such other related money
transfer authorizations as the Agent may have reasonably requested.

     (vii) Stock Pledge Agreement pledging 100% of the capital stock and related
interests and rights of any Subsidiary of the Borrowing Subsidiary and any other
document required under Article IV of the Credit Agreement.

     (viii) Such other  documents  as the Agent or its  counsel  may  reasonably
request.


     3.  Representations.  The Subsidiary further represents and warrants to the
Lenders as follows:

     (i) Existence and Power. The Subsidiary and each of its Subsidiaries:

     (a)  is a  corporation,  partnership  or  limited  liability  company  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its incorporation;

     (b) has the power and authority and governmental licenses,  authorizations,
consents and approvals to own its assets,  carry on its business and to execute,
deliver,  and perform its obligations  under this Assumption Letter and the Loan
Documents;

     (c) is duly  qualified and is licensed and in good standing  under the laws
of each jurisdiction where its ownership,  lease or operation of property or the
conduct of its business requires such qualification or license; and

     (d) is in  compliance  in all material  respects  with all laws,  rules and
regulations and all other valid requirements of any Governmental Authority.

     (ii)  Authorization;   No  Contravention.   The  execution,   delivery  and
performance by the Subsidiary and its Subsidiaries of this Assumption Letter and
each  other  Loan  Document  to which  such  Subsidiary  is party have been duly
authorized by all necessary action and do not and will not:

     (a) contravene the terms of any such Subsidiary's  Organizational Documents
or Operating Documents; or

     (b) conflict with or result in a material  breach or  contravention  of, or
the creation of any Lien

                                                              

<PAGE>



     under,  any  Material  Contract or any  document  evidencing  any  material
contractual  obligation  to  which  such  Subsidiary  is a party  or any  order,
injunction,  writ  or  decree  of  any  Governmental  Authority  to  which  such
Subsidiary or its property is subject.

     (iii)  Governmental   Authorization.   No  approval,   consent,  exemption,
authorization,   or  other  action  by,  or  notice  to,  or  filing  with,  any
Governmental   Authority  is  necessary  or  required  in  connection  with  the
execution, delivery or performance by, or enforcement against, the Subsidiary or
any of its Subsidiaries of this Assumption Letter or any other Loan Document.

     (iv) Binding Effect. This Assumption Letter and each other Loan Document to
which the Subsidiary or any of its Subsidiaries is a party constitute the legal,
valid and binding  obligations of the Subsidiary and any of its  Subsidiaries to
the extent it is a party thereto,  enforceable against such Person in accordance
with  their  respective  terms  (except  as  enforceability  may be  limited  by
applicable bankruptcy,  insolvency, or similar laws affecting the enforcement of
creditors'   rights   generally   or  by   equitable   principles   relating  to
enforceability).

     (v) Filing.  To ensure the  enforceability  or admissibility in evidence of
this Assumption  Letter,  the Notes issued by the Subsidiary or any of the other
Loan Documents in the Subsidiary's  country of organization or incorporation and
country which is its principal place of business (each, a "Subject Country"), it
is not  necessary  that  this  Assumption  Letter  or such  Notes  or any  other
documents be filed or recorded with any court or other  authority in any Subject
Country or that any stamp or similar  tax be paid in respect of this  Assumption
Letter or such Notes or any other documents.  The qualification by any Lender or
the Agent for  admission  to do business  under the laws of any Subject  Country
does not  constitute  a  condition  to, and the  failure to so qualify  does not
affect,  the  exercise  by any Lender or the Agent of any right,  privilege,  or
remedy afforded to any Lender or the Agent in connection with the Loan Documents
or the enforcement of any such right,  privilege,  or remedy. The performance by
any  Lender or the Agent of any  action  required  or  permitted  under the Loan
Documents  will not violate any law or regulation of any Subject  Country or any
political   subdivision  thereof  or  result  in  any  tax  liability  or  other
unfavorable  consequence  to such party pursuant to the laws of any such Subject
Country or  political  subdivision  or taxing  authority  thereof or any rule or
regulation of any  federation or  organization  or similar  entity of which such
Subject Country is a member.

     (vi) No Immunity.  Neither the Subsidiary nor any of its assets is entitled
to  immunity  from suit,  execution,  attachment  or other  legal  process.  The
Subsidiary's execution and delivery of this Assumption Letter and the other Loan
Documents to which it is a party constitute,  and the exercise of its rights and
performance of and  compliance  with its  obligations  under such Loan Documents
will constitute,  private and commercial acts done and performed for private and
commercial purposes.

     (vii)  Regulation U. Margin stock (as defined in Regulation U)  constitutes
less than 25% of those assets of the Subsidiary and its  Subsidiaries  which are
subject to any limitation on sale, pledge, or other restriction hereunder.

     4. BREED  Guaranty of Subsidiary  Obligations.  BREED  expressly  agrees as
follows:

     (i)  Direct  Obligations.  BREED  hereby  unconditionally  and  irrevocably
affirms to the Lenders its direct  liability for, and guarantees to the Lenders,
the  due  and  punctual  payment  of  all  obligations  and  liabilities  of the
Subsidiary to the Lenders,  whether  arising under this Assumption  Letter,  the
Credit  Agreement,  the other  Loan  Documents  or any other  documents  related
thereto (collectively,  the "Borrowing Subsidiary  Obligations")  including, but
not limited to, the due and punctual payment of

                                                              

<PAGE>



     principal  of and  interest  on the  Notes  issued by the  Subsidiary,  and
punctual payment of all other sums now or hereafter owed by the Subsidiary under
this Assumption  Letter,  the Credit  Agreement,  the Loan  Documents,  any Note
issued by the Subsidiary and any other document  related thereto as and when the
same shall become due (whether by  acceleration  or otherwise)  and according to
the terms hereof and thereof. In case of failure by the Subsidiary punctually to
pay any Borrowing Subsidiary Obligation,  BREED hereby unconditionally agrees to
cause such payment to be made  punctually  as and when the same shall become due
and payable,  whether at maturity or by declaration or otherwise, and as if such
payment were made by the Subsidiary.

     (ii)  Obligations  Unconditional.  The  obligations  of  BREED  under  this
Assumption Letter shall be irrevocable,  unconditional and absolute and, without
limiting the generality of the foregoing,  shall not be released,  discharged or
otherwise affected by:

     (a) any extension,  renewal, settlement,  compromise,  waiver or release in
respect of any obligation of the Subsidiary (or any other Borrowing  Subsidiary)
or under any Note or other  agreement  issued or entered into by any  Subsidiary
(or any other Borrowing Subsidiary), by operation of law or otherwise;

     (b) any  modification  or amendment  of or  supplement  to this  Assumption
Letter or any Loan Document;

     (c) any compromise, settlement,  modification,  amendment, waiver, release,
non-perfection or invalidity of or to any direct or indirect security, guarantee
or other  liability of any third party with respect to any Borrowing  Subsidiary
Obligation;

     (d) any change in the corporate existence,  structure,  or ownership of, or
any  insolvency,   bankruptcy,   reorganization  or  other  similar   proceeding
affecting, the Subsidiary (or any other Borrowing Subsidiary) or their assets or
any resulting release or discharge of any Borrowing Subsidiary Obligation;

     (e) the existence of any claim, set-off or other right which BREED may have
at any time against the  Subsidiary  (or any other  Borrowing  Subsidiary),  the
Agent, any Lender or any other Person, whether or not arising in connection with
this  Assumption  Letter or any other Loan  Document;  provided,  however,  that
nothing herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;

     (f)  any  invalidity  or  unenforceability   relating  to  or  against  the
Subsidiary (or any other Borrowing Subsidiary) for any reason of this Assumption
Letter or any Loan  Document,  or any provision of applicable  law or regulation
purporting  to prohibit the payment by the  Subsidiary  (or any other  Borrowing
Subsidiary) of the principal of or interest on any Note issued by the Subsidiary
(or  any  other  Borrowing  Subsidiary)  or  any  other  amount  payable  by the
Subsidiary (or any other Borrowing Subsidiary) under this Assumption Letter, the
Credit Agreement or any Loan Document; or

     (g) any other act or omission to act or delay of any kind by the Subsidiary
(or any other Borrowing  Subsidiary),  the Agent, any Lender or any other Person
or any other circumstance  whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the obligations of BREED
under this Assumption Letter, the Credit Agreement or any Loan Document.


                                                             

<PAGE>



     (iii)  Discharge  Only  Upon  Payment  in Full;  Reinstatement  in  Certain
Circumstances.  BREED's  obligations  hereunder  shall  remain in full force and
effect until each  Revolving  Credit  Commitment  and Term Loan  Commitment  has
expired or is terminated  and the principal of and interest on the Notes and all
other  Obligations  payable under this Assumption  Letter and the Loan Documents
shall have been paid in full.  If at any time any payment of the principal of or
interest on any Note issued by the Subsidiary or any other amount payable by the
Subsidiary  under this  Assumption  Letter or any Loan  Document is rescinded or
must be  otherwise  restored  or returned  upon the  insolvency,  bankruptcy  or
reorganization  of the Subsidiary or otherwise,  BREED's  obligations under this
Assumption  Letter with respect to such payment shall be reinstated at such time
as though such  payment had become due but had not been made at such time.  This
provision  shall  survive  the  termination  of this  Assumption  Letter and the
payment in full of the Obligations.

     (iv) Waiver.  BREED  irrevocably  waives  acceptance  hereof,  presentment,
demand,  protest  and  any  notice  not  provided  for  herein,  as  well as any
requirement  that at any time any  action  be taken by any  Person  against  the
Subsidiary or any other Person.  BREED waives any benefit of the collateral,  if
any, which may from time to time secure the  Obligations or any part thereof and
authorizes  the Agent or the Lenders to take any action,  or exercise any remedy
with  respect  thereto,  which the  Agent or the  Lenders  in its or their  sole
discretion shall determine, without notice to BREED. In the event the Lenders in
their sole  discretion  elect to give notice of any action  with  respect to the
collateral,  if any,  securing the  Obligations  or any part thereof,  ten days'
written notice mailed to BREED by certified mail at the address set forth in the
Credit  Agreement shall be deemed  reasonable  notice of any matter contained in
such notice.

     (v) Stay of  Acceleration.  If  acceleration of the time for payment of any
amount payable by the Subsidiary under this Assumption Letter or any of the Loan
Documents is stayed upon the  insolvency,  bankruptcy or  reorganization  of the
Subsidiary  or  any  other  Person,   all  such  amounts  otherwise  subject  to
acceleration  under the  terms of this  Assumption  Letter or any Loan  Document
shall  nonetheless  be payable  by BREED  hereunder  forthwith  on demand by the
Agent.

     (vi) Payments. All payments to be made by BREED pursuant to this Assumption
Letter  shall  be  made  at the  times  and in the  manner  and in the  currency
prescribed for payments in the Credit Agreement.

     (vii) Delay of Subrogation. Until BREED's obligations under this Assumption
Letter have been paid in full and terminated, BREED shall not exercise any right
of  subrogation  with  respect  to  payments  made  by  BREED  pursuant  to this
Assumption Letter.

     5. Notice.  Any notice to be given to the  Subsidiary may be given to BREED
(and shall  conclusively  be deemed to have been received by the Subsidiary when
received,  or deemed  received,  by BREED) in the manner set forth in the Credit
Agreement.  The  Subsidiary  agrees  that  BREED  may  give  notice  under  this
Assumption  Letter and the Loan Documents on behalf of the Subsidiary,  and that
any such notice given by BREED on behalf of the Subsidiary shall be binding upon
the Subsidiary.

     6. Jurisdiction and Governing Law.

     (i)  Without  limiting  the  provisions  of  Section  12.14  of the  Credit
Agreement,  the  Subsidiary  and  BREED  each  irrevocably  and  unconditionally
submits,  for itself and its property,  to the nonexclusive  jurisdiction of the
United States federal court and any Florida state court sitting in the county of
Hillsborough,  State of Florida,  United  States of America,  and any  appellate
court from any thereof,  in any action or proceeding  arising out of or relating
to this Assumption  Letter,  the Credit  Agreement or any other Loan Document or
for recognition or enforcement of any judgment relating thereto, and the

                                                              

<PAGE>



     Subsidiary and BREED each irrevocably and  unconditionally  agrees that all
claims in respect of any such action or proceeding  may be heard and  determined
in any such court. The Subsidiary and BREED each agrees that a final judgment in
any such action or proceeding  shall be conclusive  and may be enforced in other
jurisdictions  by suit on the judgment or in any other  manner  provided by law.
Nothing in this Assumption  Letter shall affect any right that any Lender or the
Agent may  otherwise  have to bring any action or  proceeding  relating  to this
Assumption Letter, the Credit Agreement or any other Loan Document in the courts
of any jurisdiction.

     (ii)  This  Assumption  Letter  shall be  governed  by,  and  construed  in
accordance  with,  the internal laws (and not the law of conflicts) of the State
of  Florida;  provided  that the Agent and the Lenders  shall  retain all rights
arising under federal law.

     [signatures  follow]

     IN WITNESS  WHEREOF,  the  Subsidiary  has duly executed and delivered this
Assumption Letter as of the date and year first above written.

                                                  [NAME OF BORROWING SUBSIDIARY]
                                                   By
                                                   Name:
                                                   Title:

                                                   Agreed and Consented to:

                                                  BREED TECHNOLOGIES, INC.
                                                   By:
                                                   Name:
                                                   Title:

                                     NATIONSBANK, NATIONAL ASSOCIATION, as Agent
                                                   By:
                                                   Name:
                                                   Title:


     EXHIBIT "A"

     LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION

To NationsBank, National Association
as Agent (the "Agent") under the Credit
Agreement Described Below

     RE:  Credit  Agreement  dated as of  October  30,  1997 (as the same may be
amended,  supplemented  or  restated,  the  "Credit  Agreement"),   among  BREED
Technologies,  Inc., a Delaware corporation ("BREED"),  and certain Subsidiaries
of BREED  designated as Borrowers  therein  (BREED and such  Subsidiaries  being
collectively  referred  to as the  "Borrowers")  the  Lenders (as defined in the
Agreement)  and  NationsBank,  National  Association,  as Agent for the  Lenders
("Agent").  Terms used herein and not otherwise  defined shall have the meanings
assigned thereto in the Credit Agreement.

     The Agent is specifically authorized and directed to act upon the following
standing  money transfer  instructions  with respect to the proceeds of Loans or
other  extensions  of credit  from time to time until  receipt by the Agent of a
specific  written   revocation  of  such  instructions  by  [Name  of  Borrowing
Subsidiary] (the "Borrowing

                                                             

<PAGE>



     Entity"), provided, however, that the Agent may otherwise transfer funds as
hereafter directed in writing by the Borrowing Entity in accordance with Section
12.2  of the  Credit  Agreement  or  based  on any  telephonic  notice  made  in
accordance with any other applicable provision of the Credit Agreement.

Facility Identification Number(s)_______________________________________________

Customer/Account Name___________________________________________________________

Transfer Funds to_______________________________________________________________

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

For Account No._________________________________________________________________

Reference/Attention To__________________________________________________________

Authorized Officer (Customer Representative)         Date_______________________

-------------------------                    -----------------------------------
(Please Print)                                         (Signature)

Bank Officer Name                                    Date_______________________

-------------------------                    -----------------------------------
(Please Print)                                          (Signature)

     (Deliver Completed Form to Credit Support Staff For Immediate Processing)

                                                              

<PAGE>



     Schedule 1.1(a)

     Borrowing Subsidiaries

Name of Subsidiary                                            Jurisdiction
BREED Automotive Safety Systems SL                            Spain
BREED Italian Holdings, Srl                                            Italy
BREEDUK Limited                                      United Kingdom
ICSRD R.F., GmbH                                              Germany

     Schedule 1.1(b)

                                                   Initial Advance Allocation
Borrower                                             Initial Advance
BREED Technologies, Inc.                                      $     718,000,000
BREED Automotive Safety Systems SL                            $      15,000,000
BREED Italian Holdings, Srl                                   $      49,000,000
BREED UK Limited                                              $      17,000,000
BREED R.F., GmbH                                              $       1,000,000
                                                              $     800,000,000

     Schedule 7.4

     Subsidiaries and Investments in Other Persons

     Schedule 7.6

     Indebtedness

     Schedule 7.7

     Liens

     Schedule 7.10

     Litigation

     Schedule 7.19

     Employment Matters

     Schedule 7.23

     Financing Statements and Other Filings

     Schedule 8.5

     Insurance