FIVE-YEAR CREDIT AGREEMENT

         CREDIT AGREEMENT, dated as of the 30th day of April, 1997, by and among
BREED  TECHNOLOGIES,  INC., a corporation  organized  under the laws of Delaware
("BREED"),  and the  Subsidiaries  thereof  designated as Borrowers  herein,  as
Borrowers (collectively,  including BREED, the "Borrowers"), BREED, as Guarantor
(the  "Guarantor"),  the Lenders who are or may become a party to this Agreement
(collectively,  the "Lenders"), FIRST UNION NATIONAL BANK OF FLORIDA, a national
banking   association,   as   Administrative   Agent   for  the   Lenders   (the
"Administrative  Agent"),  and THE CHASE  MANHATTAN  BANK,  a  national  banking
association, as Documentation Agent for the Lenders (the "Documentation Agent").

                              STATEMENT OF PURPOSE

         The Borrowers have  requested,  and the Lenders have agreed,  to extend
certain  credit  facilities to the Borrowers on the terms and conditions of this
Agreement.

         BREED,  as parent of the other  Borrowers,  will  benefit  directly and
indirectly from the extension of such credit facilities to such other Borrowers.
As a precondition to making any extensions of credit hereunder, the Lenders have
required,  and BREED has agreed,  to execute this  Agreement as Guarantor on the
terms and conditions of this Agreement.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:


                                    ARTICLE I

                                   DEFINITIONS

         SECTION  1.1  Definitions.  The  following  terms  when  used  in  this
Agreement shall have the meanings assigned to them below:

         "364-Day Credit  Agreement"  means the 364-Day Credit Agreement of even
date  herewith by and among the  Borrowers,  the  Guarantor,  the  Lenders,  the
Administrative  Agent  and  the  Documentation  Agent,  as  amended,   restated,
supplemented or otherwise modified from time to time.



<PAGE>



         "A/C Borrowers"  means the Borrowers  listed as such on Schedule 1.1(a)
attached hereto.

         "Administrative   Agent"   means  First   Union  in  its   capacity  as
Administrative Agent hereunder,  and any successor thereto appointed pursuant to
Section 12.9.

         "Administrative Agent's Correspondent" means First Union National Bank,
London  Branch,   or  any  other   financial   institution   designated  by  the
Administrative  Agent to act as its correspondent  hereunder with respect to the
distribution and payment of Alternative Currency Loans.

         "Administrative  Agent's Office" means the office of the Administrative
Agent  specified in or determined in accordance  with the  provisions of Section
13.1.

         "Affiliate"  means, with respect to any Person, any other Person (other
than  a  Subsidiary)   which   directly  or  indirectly   through  one  or  more
intermediaries,  controls, or is controlled by, or is under common control with,
such first Person or any of its  Subsidiaries.  The term "control" means (a) the
power to vote  five  percent  (5%) or more of the  securities  or  other  equity
interests of a Person  having  ordinary  voting  power,  or (b) the  possession,
directly or  indirectly,  of any other power to direct or cause the direction of
the management  and policies of a Person,  whether  through  ownership of voting
securities, by contract or otherwise; provided that Integrated Sensor Solutions,
Inc., a California corporation,  shall not be deemed to be an Affiliate of BREED
for the purposes of this Agreement.

         "Aggregate  Commitment"  means the  aggregate  amount  of the  Lenders'
Commitments hereunder,  as such amount may be reduced or modified at any time or
from time to time  pursuant  to the  terms  hereof.  On the  Closing  Date,  the
Aggregate Commitment shall be Two Hundred Million Dollars ($200,000,000).

         "Agreement"  means  this  Credit  Agreement,   as  amended,   restated,
supplemented or otherwise modified from time to time.

         "Alternative  Currency" means Pounds Sterling,  Italian Lire,  Deutsche
Marks  and,  except  as  otherwise  expressly  excluded  under the terms of this
Agreement,   Finnish  Marks,   and,  with  the  prior  written  consent  of  the
Administrative  Agent and the Lenders,  which consent shall not be  unreasonably
withheld, any other lawful


<PAGE>



currency (other than Dollars) which is readily transferable and convertible into
Dollars in the United States currency market and readily available to all of the
Lenders in the London interbank  deposit market.  Except as otherwise  expressly
set forth  herein,  any  reference to an  "Alternative  Currency"  shall include
Finnish Marks.

         "Alternative  Currency  Amount" means with respect to each Loan made or
continued (or to be made or continued) in an Alternative Currency, the amount of
such Alternative Currency which is equivalent to the principal amount in Dollars
of such  Loan  at the  most  favorable  spot  exchange  rate  determined  by the
Administrative Agent to be available to its London branch at approximately 11:00
a.m.  (Charlotte  time)  two  (2)  Business  Days  before  such  Loan is made or
continued (or to be made or continued).  When used with respect to any other sum
expressed in Dollars,  "Alternative  Currency  Amount"  shall mean the amount of
such  Alternative  Currency  which is  equivalent  to the amount so expressed in
Dollars  at  the  most   favorable   spot  exchange   rate   determined  by  the
Administrative Agent to be available to it at the relevant time.

         "Alternative   Currency   Commitment"   means  Fifty  Million   Dollars
($50,000,000),  as such  amount may be reduced or  modified  at any time or from
time to time pursuant to the terms hereof.

         "Alternative  Currency  Loan"  means  (i)  any  Revolving  Credit  Loan
denominated  in an Alternative  Currency and (ii) except as otherwise  expressly
set forth herein, any Finnish Mark Loan.

         "Applicable  Law" means all  applicable  provisions of consti  tutions,
statutes,  laws,  rules,  treaties,  regulations and orders of all  Governmental
Authorities and all orders and decrees of all courts and arbitrators.

         "Applicable Margin" shall have the meaning assigned thereto in
Section 3.1(c).

         "Assignment and Acceptance" shall have the meaning assigned
thereto in Section 13.10.

         "Base Rate" means, at any time, the higher of (a) the Prime Rate or (b)
the  Federal  Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
effect  simultaneously  with the corre  sponding  change or changes in the Prime
Rate or the Federal Funds Rate.


<PAGE>



         "Base Rate Loan" means any Loan  bearing  interest at a rate based upon
the Base Rate as provided in Section 3.1(a).

         "Borrowers" means the collective reference to BREED and the
other A/C Borrowers.

         "BREED" means BREED Technologies,  Inc., a corporation  organized under
the laws of Delaware, and its successors.

         "Business  Day" means (a) for all  purposes  other than as set forth in
clause (b)  below,  any day other than a  Saturday,  Sunday or legal  holiday on
which  banks in  Charlotte,  North  Carolina  are open for the  conduct of their
domestic and international  commercial banking business, and (b) with respect to
all notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan,  any day (i) that is a Business Day  described
in  clause  (a) and  that is also a day for  trading  by and  between  banks  in
deposits for the applicable  Permitted  Currency in the London  interbank market
and  (ii) on  which  banks  are  open for the  conduct  of  their  domestic  and
international  banking business in the place where the  Administrative  Agent or
the  Administrative  Agent's  Correspondent  shall make available  Loans in such
Permitted Currency.

         "Capital Lease" means, with respect to BREED and its Subsidiaries,  any
lease of any property that should,  in accordance  with GAAP, be classified  and
accounted  for as a capital lease on a  Consolidated  balance sheet of BREED and
its Subsidiaries.

         "Change in Control" shall have the meaning assigned thereto in
Section 11.1(i).

         "Closing Date" means the date of this Agreement.

         "Code"  means  the  Internal  Revenue  Code of 1986,  and the rules and
regulations thereunder, each as amended or supplemented from time to time.

         "Collateral"   means  any  assets  pledged  by  BREED  or  any  of  its
Subsidiaries to the Administrative  Agent, for the ratable benefit of itself and
the Lenders, in order to secure the Obligations or any portion thereof.

         "Commitment" means, as to any Lender, the obligation of such
Lender to make Loans to the Borrowers hereunder in an aggregate


<PAGE>



principal  or face amount at any time  outstanding  not to exceed the amount set
forth opposite such Lender's name on Schedule 1.1(b) hereto,  as the same may be
reduced  or  modified  at any time or from  time to time  pursuant  to the terms
hereof.

         "Commitment  Percentage" means, as to any Lender at any time, the ratio
of (a) the  amount  of the  Commitment  of  such  Lender  to (b)  the  Aggregate
Commitment of all of the Lenders.

         "Consolidated"  means, when used with reference to financial statements
or financial  statement items of BREED and its Subsidiaries,  such statements or
items on a  consolidated  basis in  accordance  with  applicable  principles  of
consolidation under GAAP.

         "Contingent   Obligation"   means,   with  respect  to  BREED  and  its
Subsidiaries,  without duplication, any obligation,  contingent or otherwise, of
any such  Person  pursuant  to which such  Person  has  directly  or  indirectly
guaranteed  any  Debt or other  obligation  of any  other  Person  and,  without
limiting the generality of the foregoing,  any  obligation,  direct or indirect,
contingent or  otherwise,  of any such Person (a) to purchase or pay (or advance
or supply  funds for the  purchase or payment of) such Debt or other  obligation
(whether  arising by virtue of  partnership  arrangements,  by agreement to keep
well, to purchase assets, goods,  securities or services, to take-or-pay,  or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose  of  assuring  in any other  manner  the  obligee  of such Debt or other
obligation  of the payment  thereof or to protect such  obligee  against loss in
respect  thereof  (in whole or in part);  provided,  that,  except to the extent
Breed or any of its  Subsidiaries  shall be advised or required to  establish or
maintain reserves therefor, the term Contingent Obligation shall not include (i)
endorsements for collection or deposit in the ordinary course of business,  (ii)
warranty  obligations  in the  ordinary  course of business  related to products
supplied  by  BREED  and  its  Subsidiaries,  including  defense  and  indemnity
obligations  pursuant thereto and (iii) Contingent  Obligations  incurred in the
ordinary  course of business  for which a specific  dollar  amount of  liability
cannot be  determined  but which,  in the  aggregate,  would not have a Material
Adverse Effect.

         "Convertible  Preferred  Stock" means any  preferred  stock issued by a
Subsidiary  of  BREED  formed  pursuant  to  Section  9.4(e)  that is  otherwise
permitted  hereunder,  for so long as such preferred  stock is not accounted for
under stockholder's  equity in the Consolidated  financial  statements of BREED;
provided that such Convertible


<PAGE>



Preferred  Stock shall be subject to the  satisfaction of each of the conditions
set forth in subsections (i) through (iii) below:

                  (i)  Under  the  terms  and  conditions  of  the   Convertible
         Preferred Stock, the applicable Subsidiary shall have the right, in its
         sole  discretion,  to defer  payment of  interest or  dividends  on the
         Convertible  Preferred Stock for up to twenty (20) consecutive quarters
         (the "Deferral Period");

             (ii)          GAAP shall not require that the Convertible
         Preferred Stock be included as a liability on the Consolidated
         financial statements of BREED; and

            (iii)  If a  Subsidiary  elects  to defer  payment  of  interest  or
         dividends,  after any such  deferral at least five (5)  quarters  shall
         remain in the Deferral Period;

In the event any of the above conditions is not satisfied, the
Convertible Preferred Stock shall thereafter constitute
Subordinated Debt and not preferred stock.

         "Credit  Facility"  means the  revolving  credit  facility  established
pursuant to Article II hereof.

         "Credit  Facility  Termination  Date"  means the  earliest of the dates
referred to in Section 2.8.

         "Debt" means,  with respect to any Person and its  Subsidiaries  at any
date and without duplication,  the sum of the following calculated in accordance
with GAAP: (a) all liabilities,  obligations and indebtedness for borrowed money
including but not limited to obligations evidenced by bonds,  debentures,  notes
or other similar  instruments of any such Person, (b) all obligations to pay the
deferred  purchase price of property or services of any such Person  (including,
without limitation,  all obligations under non-competition  agreements),  except
trade  payables  arising in the  ordinary  course of business  not more than one
hundred  twenty (120) days past due, (c) all  obligations  of any such Person as
lessee under Capital Leases,  (d) all Debt of any other Person secured by a Lien
on any asset of any such  Person,  (e) all  Contingent  Obligations  of any such
Person,  (f) all  obligations,  contingent  or  otherwise,  of any  such  Person
relative  to the face  amount  of  letters  of  credit,  whether  or not  drawn,
including,  without limitation,  any banker's acceptances issued for the account
of any such Person and (g) all obligations to redeem, repurchase,


<PAGE>



exchange,  defease or  otherwise  make  payments in respect of capital  stock or
other securities of such Person.

         "Default" means any of the events  specified in Section 11.1 which with
the  passage  of time,  the  giving  of notice  or any  other  condition,  would
constitute an Event of Default.

         "Deutsche Marks or DEM" means, at any time of  determination,  the then
official currency of Germany.

         "Documentation Agent" means The Chase Manhattan Bank in its
capacity as Documentation Agent hereunder.

         "Dollars" or "$" means, unless otherwise  qualified,  dollars in lawful
currency of the United States.

         "Dollar  Amount"  means (a) with respect to each Loan made or continued
(or to be made or continued) in Dollars,  the principal  amount  thereof and (b)
with respect to each Loan made or continued  (or to be made or  continued) in an
Alternative Currency, the amount of Dollars which is equivalent to the principal
amount of such Loan at the most favorable  spot exchange rate  determined by the
Administrative  Agent at  approximately  11:00  a.m.  (Charlotte  time)  two (2)
Business  Days  before  such  Loan  is  made  or  continued  (or to be  made  or
continued).  When used with respect to any other sum expressed in an Alternative
Currency,  "Dollar  Amount" shall mean the amount of Dollars which is equivalent
to the amount so expressed in such  Alternative  Currency at the most  favorable
spot exchange rate determined by the Administrative  Agent to be available to it
at the relevant time.

         "Domestic Subsidiary" means any Subsidiary of BREED organized under the
laws of any State of the United States or the District of Columbia.

         "EBIT"  means,  with  respect  to BREED  and its  Subsidiaries  for any
period,  the sum of (a) Net  Income  for  such  period,  plus (b) the sum of the
following to the extent deducted in the determination of Net Income:  (i) income
and franchise taxes and (ii) Interest Expense.

         "EBITDA"  means,  with  respect to BREED and its  Subsidiaries  for any
period,  the sum of (a) Net  Income  for  such  period,  plus (b) the sum of the
following to the extent deducted in the determination of Net Income:  (i) income
and franchise taxes, (ii) Interest Expense


<PAGE>



and (iii)  amortization,  depreciation  and other  non-cash  charges  (including
amortization  of goodwill,  transaction  expenses,  covenants not to compete and
other  intangible  assets).  EBITDA  shall be  adjusted  in a manner  reasonably
satisfactory to the  Administrative  Agent to include on a pro forma basis as of
the first day of any calculation period any acquisition  consummated during such
period and exclude on a pro forma  basis as of the first day of any  calculation
period any Subsidiary or assets sold during such period.

         "Eligible  Assignee"  means,  with  respect  to any  assignment  of the
rights,  interest and obligations of a Lender hereunder, a Person that is at the
time of such  assignment (a) a commercial  bank organized  under the laws of the
United  States or any state  thereof,  having  combined  capital  and surplus in
excess of  $500,000,000,  (b) a commercial  bank organized under the laws of any
other country that is a member of the  Organization of Economic  Cooperation and
Development,  or a political  subdivision of any such country,  having  combined
capital and surplus in excess of $500,000,000,  (c) a finance company, insurance
company or other financial  institution which in the ordinary course of business
extends  credit of the type  extended  hereunder  and that has  total  assets in
excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original
party to this Agreement or as the assignee of another Lender), (e) the successor
(whether by transfer of assets, merger or otherwise) to all or substantially all
of the commercial  lending  business of the assigning  Lender,  or (f) any other
Person  that has been  approved  in writing  as an  Eligible  Assignee  by BREED
(unless  an  Event  of  Default  has  occurred  and  is   continuing)   and  the
Administrative Agent.

         "Employee  Benefit  Plan" means any  employee  benefit  plan within the
meaning of Section 3(3) of ERISA which is  maintained  for employees of BREED or
any ERISA Affiliate.

         "Environmental  Laws"  means  any  and  all  federal,  foreign,  state,
provincial and local laws, statutes,  ordinances,  rules, regulations,  permits,
licenses,  approvals,  interpretations  and  orders of  courts  or  Governmental
Authorities,  relating to the  protection  of human  health or the  environment,
including,  but not  limited to,  requirements  pertaining  to the  manufacture,
processing,  distribution,  use, treatment,  storage, disposal,  transportation,
handling,  reporting,  licensing,  permitting,  investigation  or remediation of
Hazardous Materials.



<PAGE>



         "Equity  Issuance"  means the issuance,  sale or other  disposition  by
BREED or any of its Subsidiaries of its capital stock,  any rights,  warrants or
options to purchase or acquire  any shares of its  capital  stock,  or any other
security or instrument  representing,  convertible  into or exchangeable  for an
equity  interest  in BREED or any of its  Subsidiaries  other  than  Convertible
Preferred Stock.

         "ERISA" means the Employee  Retirement Income Security Act of 1974, and
the rules and regulations  thereunder,  each as amended or modified from time to
time.

         "ERISA  Affiliate"  means any Person who together with BREED is treated
as a single employer  within the meaning of Section  414(b),  (c), (m) or (o) of
the Code or Section 4001(b) of ERISA.

         "Event of Default"  means any of the events  specified in Section 11.1;
provided,  that any  requirement for passage of time,  giving of notice,  or any
other condition, has been satisfied.

         "Existing Credit  Agreement" means the Revolving Credit Agreement dated
as of December 7, 1995 by and among BREED, as Borrower,  Chemical Bank, as agent
and lender,  NBD Bank, as lender,  and First Union National Bank of Florida,  as
lender, as amended, modified or supplemented.

         "FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.

         "Federal  Funds Rate" means,  the rate per annum (rounded  upwards,  if
necessary,  to the next higher 1/100th of 1%)  representing  the daily effective
federal  funds  rate as quoted by the  Administrative  Agent  and  confirmed  in
Federal  Reserve  Board  Statistical  Release  H.15  (519) or any  successor  or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not  available,  then "Federal  Funds Rate" shall mean a daily rate
which is determined,  in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national  federal funds
market at 9:00 a.m.  (Charlotte  time).  Rates for weekends or holidays shall be
the same as the rate for the most immediate preceding Business Day.

         "Finnish Mark Aggregate  Commitment"  means the aggregate amount of the
Finnish  Mark  Commitments  of the Finnish Mark  Lenders,  as such amount may be
reduced or modified at any time or from time to


<PAGE>



time pursuant to the terms hereof.  On the Closing Date, the
Finnish Mark Aggregate Commitment shall be Ten Million Dollars
($10,000,000).

         "Finnish Mark  Commitment"  means,  as to any Finnish Mark Lender,  the
obligation  of such  Finnish  Mark Lender to make  Finnish Mark Loans to the A/C
Borrowers hereunder in an aggregate Dollar Amount at any time outstanding not to
exceed the amount set forth opposite such Finnish Mark Lender's name on Schedule
1.1(c)  hereto,  as the same may be reduced or modified at any time or from time
to time pursuant to the terms hereof.

         "Finnish  Mark  Commitment  Percentage"  means,  as to any Finnish Mark
Lender at any time,  the ratio of (a) the amount of the Finnish Mark  Commitment
of such Finnish Mark Lender to (b) the Finnish Mark Aggregate  Commitment of all
of the Finnish Mark Lenders.

         "Finnish Mark Lenders"  means each Lender listed on Schedule  1.1(c) in
its capacity as a Finnish Mark lender hereunder.

         "Finnish  Mark  Loans"  means the Loans in  Finnish  Marks  made by the
Finnish Mark Lenders to the applicable A/C Borrower or A/C Borrowers pursuant to
Section 2.2.

         "Finnish Mark Notes" means the separate  Finnish Mark Notes made by the
applicable  A/C Borrowers  indicated on Schedule  1.1(a) payable to the order of
each Finnish Mark Lender,  substantially in the form of Exhibit A-2 hereto,  and
any amendments and  modifications  thereto,  any substitutes  therefor,  and any
replacements,  restatements, renewals or extension thereof, in whole or in part;
"Finnish Mark Note" means any of such Finnish Mark Notes.

         "Finnish Marks or FIM" means,  at any time of  determination,  the then
official currency of Finland.

         "First Union" means First Union  National  Bank of Florida,  a national
banking association, and its successors.

         "Fiscal  Year"  means the  fiscal  year of BREED  and its  Subsidiaries
ending on June 30.

         "Foreign  Subsidiary" means any Subsidiary of BREED not organized under
the laws of any State of the United States or the District of Columbia.


<PAGE>



         "GAAP" means generally accepted accounting principles, as recognized by
the  American  Institute  of  Certified  Public  Accountants  and the  Financial
Accounting Standards Board,  consistently applied and maintained on a consistent
basis  for  BREED and its  Subsidiaries  throughout  the  period  indicated  and
consistent  with the prior  financial  practice of BREED and, to the extent each
Subsidiary was a Subsidiary of BREED, each such Subsidiary.

         "Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of,  registrations and filings with, and reports to, all
Governmental Authorities.

         "Governmental Authority" means any nation, province, state or political
subdivision  thereof,  and any  government or any Person  exercising  executive,
legislative,   regulatory  or  administrative  functions  of  or  pertaining  to
government,  and any  corporation or other entity owned or  controlled,  through
stock or capital owner ship or otherwise, by any of the foregoing.

         "Guaranteed Obligations" shall have the meaning assigned
thereto in Section 10.1.

         "Guarantor" means BREED in its capacity as guarantor under
Article X.

         "Guaranty" means the unconditional guaranty agreement of BREED
set forth in Article X.

         "Hazardous  Materials"  means any substances or materials (a) which are
or  become  defined  as  hazardous  wastes,  hazardous  substances,  pollutants,
contaminants,  chemical  substances  or mixtures or toxic  substances  under any
Environmental  Law,  (b)  which  are  toxic,  explosive,  corrosive,  flammable,
infectious, radioactive,  carcinogenic,  mutagenic or otherwise harmful to human
health  or the  environment  and are or  become  regulated  by any  Governmental
Authority,  (c) the presence of which require investigation or remediation under
any Environmental Law or common law, (d) the discharge or emission or release of
which  requires  a  permit  or  license  under  any  Environmental  Law or other
Governmental Approval, (e) which are deemed to constitute a nuisance, a trespass
or pose a health or safety  hazard to persons  or  neighboring  properties,  (f)
which are materials  consisting of  underground  or  aboveground  storage tanks,
whether  empty,  filled or  partially  filled with any  substance,  or (g) which
contain,  without  limitation,   asbestos,   polychlorinated   biphenyls,   urea
formaldehyde


<PAGE>



foam insulation, petroleum hydrocarbons,  petroleum derived substances or waste,
crude oil, nuclear fuel, natural gas or synthetic gas.

         "Hedging  Agreement"  means any  agreement  with respect to an interest
rate swap,  collar,  cap, floor or a forward rate  agreement or other  agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrowers  under this  Agreement,  and
any  confirming  letter  executed  pursuant to such  hedging  agreement,  all as
amended, restated, supplemented or otherwise modified from time to time.

         "Intercompany  Trust  Debt"  shall  mean  Debt of BREED  issued  to any
Subsidiary  referred to in Section  9.4(e) in  consideration  of the issuance of
Convertible  Preferred  Stock  (which  Debt may or may not be  convertible  into
common stock of BREED) and which is  subordinate  to the  Obligations;  provided
that such Debt shall not be deemed  Intercompany Trust Debt if at any time it is
distributed to any person other than BREED or a Subsidiary.

         "Interest  Expense" means,  with respect to BREED and its  Subsidiaries
for any period,  the gross  interest  expense  (including,  without  limitation,
interest expense attributable to Capital Leases, all net obligations pursuant to
Hedging  Agreements  and all  interest  paid  under  or in  connection  with the
Convertible  Preferred Stock) of BREED and its Subsidiaries,  all determined for
such period on a Consolidated  basis and,  except as otherwise set forth in this
definition, in accordance with GAAP.

         "Interest Period" shall have the meaning assigned thereto in
Section 3.1(b).

         "Italian  Lire or ITL" means,  at any time of  determination,  the then
official currency of Italy.

         "Lender"  means  each  Person  executing  this  Agreement  as a  lender
(including, as applicable,  each Finnish Mark Lender) set forth on the signature
pages hereto and each Person that hereafter becomes a party to this Agreement as
a lender pursuant to Section 13.10.

         "Lending  Office"  means (a) with respect to any Lender,  the office of
such Lender maintaining such Lender's Commitment  Percentage of the Loans or (b)
with respect to any Finnish Mark


<PAGE>



Lender,  the office of such  Finnish Mark Lender  maintaining  such Finnish Mark
Lender's Finnish Mark Commitment Percentage.

         "Leverage Ratio" means the ratio calculated in accordance with
Section 8.1.

         "LIBOR" means the rate of interest per annum determined on the basis of
the rate for deposits in Dollars in minimum  amounts of at least  $5,000,000 (or
the  Alternative  Currency Amount thereof with respect to a borrowing to be made
in an Alternative Currency) for a period equal to the applicable Interest Period
which  appears on the Telerate  Page 3750 at  approximately  11:00 a.m.  (London
time) two (2) Business  Days prior to the first day of the  applicable  Interest
Period  (rounded  upward,  if  necessary,  to the nearest  one-sixteenth  of one
percent (1/16%)). If, for any reason, such rate does not appear on Telerate Page
3750,  then "LIBOR" shall be determined  by the  Administrative  Agent to be the
arithmetic average (rounded upward, if necessary,  to the nearest  one-sixteenth
of one percent (1/16%)) of the rate per annum at which deposits in the Permitted
Currency in which the applicable  Loan is denominated  would be offered by first
class banks in the London interbank market to the  Administrative  Agent (or the
Administrative  Agent's Correspondent) at approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of the applicable  Interest  Period
for a period equal to such Interest Period and in an amount  substantially equal
to the amount of the applicable Loan.

         "LIBOR Rate" means a rate per annum (rounded upwards, if necessary,  to
the next higher 1/16th of 1%) determined by the Administrative Agent pursuant to
the following formula:

         LIBOR Rate =              LIBOR
                                      1.00 - Reserve Percentage

         "LIBOR Rate Loan" means any Loan bearing  interest at a rate based upon
the LIBOR Rate as provided in Section 3.1(a).

         "Lien" means,  with respect to any asset, any mortgage,  lien,  pledge,
charge,  security interest,  hypothecation or encumbrance of any kind in respect
of such asset.  For the purposes of this Agreement,  a Person shall be deemed to
own  subject to a Lien any asset which it has  acquired or holds  subject to the
interest of a vendor or lessor under any  conditional  sale  agreement,  Capital
Lease or other title retention agreement relating to such asset.



<PAGE>



         "Loan" means any Revolving Credit Loan,  Finnish Mark Loan or Swingline
Loan made to any Borrower pursuant to Section 2.1, 2.2 or 2.3, and "Loans" means
all such Loans collectively as the context requires.

         "Loan Documents" means,  collectively,  this Agreement,  the Notes, any
Hedging  Agreement  executed  by any  Lender,  the  Security  Documents  and any
supplements  thereto and each other document,  instrument and agreement executed
and delivered by any Borrower or any Subsidiary  thereof in connection with this
Agreement or otherwise referred to herein or contemplated  hereby, all as may be
amended, supplemented, restated or otherwise modified from time to time.

         "Loan Parties" means the collective reference to the Borrowers, each of
the Subsidiary  Guarantors and each entity whose stock is pledged  pursuant to a
Pledge Agreement and "Loan Party" means any one of such Persons.

         "Material  Adverse Effect" means,  with respect to the Borrowers or any
of  their  Subsidiaries,  a  material  adverse  effect  on (a)  the  properties,
business,  prospects,  operations  or condition  (financial or otherwise) of the
Borrower  and its  Subsidiaries  taken  as a whole  or (b)  the  ability  of the
Borrower and its Subsidiaries  taken as a whole to perform its obligations under
the Loan Documents or Material Contracts.

         "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.

         "Material  Domestic  Subsidiary"  means any direct or indirect Domestic
Subsidiary of BREED which is a Material Subsidiary.

         "Material  Foreign  Subsidiary"  means any direct or  indirect  Foreign
Subsidiary of BREED which is a Material Subsidiary.

         "Material  Subsidiary" means any direct or indirect Subsidiary of BREED
which has total assets equal to or in excess of $15,000,000;  provided, however,
that  notwithstanding  the foregoing,  BREED and the Subsidiaries of BREED which
comprise "Material  Subsidiaries"  shall at all times have total assets equal to
or greater than ninety percent (90%) of the  Consolidated  total assets of BREED
and its Subsidiaries.


<PAGE>



         "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 within the preceding six years.

         "Net Income" means,  with respect to BREED and its Subsidiaries for any
period,  the Consolidated net income (or loss) of BREED and its Subsidiaries for
such period  determined in accordance with GAAP;  provided,  that there shall be
excluded  from net  income  (or  loss):  (a) the  income (or loss) of any Person
(other than a  Subsidiary  of such Person) in which such Person has an ownership
interest unless received by such Person in a cash  distribution,  (b) the income
(or loss) of any Person accrued prior to the date it became a Subsidiary of such
first Person or is merged into or consolidated  with such first Person,  and (c)
to the  extent  not  included  in  clauses  (a) and  (b)  above,  any  after-tax
extraordinary gains and non-cash losses.

         "Net  Proceeds"  means the  proceeds in cash or other cash  equivalents
received by BREED and its  Subsidiaries in connection with any permitted sale or
disposition  of assets  pursuant  to  Section  9.6(e)  net of (a)  direct  costs
relating to such permitted sale or disposition,  excluding any amount payable to
Affiliates  of BREED and its  Subsidiaries  other than upon fair and  reasonable
arm's  length  terms  approved  by  disinterested  members  of BREED,  (b) sale,
transfer, excise, use and other transaction taxes paid or payable as a result of
such permitted sale or disposition  and (c) any temporary  escrows or retainages
required in  connection  therewith  provided  that all such  amounts  ultimately
returned  to Breed or any of its  Subsidiaries  will  immediately  be applied to
reduce the Total Aggregate Commitment as required herein.

         "Net Worth" means,  with respect to BREED and its  Subsidiaries  at any
date, the sum of (a) Consolidated stockholders' equity, calculated in accordance
with GAAP, and (b) Convertible Preferred Stock.

         "Non-Core  Assets"  shall  mean  any  assets  of  BREED  or  any of its
Subsidiaries not related to steering wheels,  sensors,  electronics,  inflators,
airbag modules or complete airbag sensors.

         "Notes" means the Revolving  Credit Notes,  the Finnish Mark Notes, the
Swingline Note, or any combination  thereof,  made by the applicable Borrower or
Borrowers payable to the order of each Lender; "Note" means any of such Notes.


<PAGE>



         "Notice of Account Designation" shall have the meaning assigned thereto
in Section 4.2(f)(i).

         "Notice of Borrowing" shall have the meaning assigned thereto
in Section 2.4(a).

         "Notice of Conversion/Continuation" shall have the meaning
assigned thereto in Section 3.2.

         "Notice of Prepayment" shall have the meaning assigned thereto
in Section 2.5(d).

         "Obligations"  means,  in  each  case,  whether  now  in  existence  or
hereafter  arising:  (a) the  principal of and interest on  (including  interest
accruing after the filing of any bankruptcy or similar  petition) the Loans, (b)
all payment and other  obligations  owing by a Borrower to any Lender  under any
Hedging Agreement  permitted pursuant to Section 9.1, (c) the obligations of the
Guarantor  pursuant  to  Article  X,  and (d) all  other  fees  and  commissions
(including  attorney's  fees),  charges,   indebtedness,   loans,   liabilities,
financial accommodations,  obligations, covenants and duties owing by a Borrower
or the Guarantor to the Lenders or the Administrative Agent, under or in respect
of this Agreement,  any Note or any of the other Loan Documents,  of every kind,
nature and description,  direct or indirect,  absolute or contingent,  due or to
become due, contractual or tortious, liquidated or unliquidated,  and whether or
not evidenced by any note, and whether or not for the payment of money.

         "Officer's  Compliance  Certificate"  shall have the  meaning  assigned
thereto in Section 6.2.

         "Other Taxes" shall have the meaning assigned thereto in
Section 3.13(b).

         "PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.

         "Pension  Plan"  means  any  Employee   Benefit  Plan,   other  than  a
Multiemployer  Plan,  which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which is  maintained  for  employees of BREED or any
ERISA Affiliates.

         "Permitted Currency" means Dollars or any Alternative Currency, or each
such currency, as the context requires.


<PAGE>



         "Person" means an individual,  corporation,  partnership,  association,
trust, business trust, joint venture, joint stock company, pool, syndicate, sole
proprietorship, unincorporated organization, Governmental Authority or any other
form of entity or group thereof.

         "Pledge  Agreement"  means each of the Pledge  Agreements  executed  by
BREED or a Subsidiary thereof, as pledgor, in favor of the Administrative  Agent
for the ratable benefit of the Lenders,  substantially  in the form of Exhibit H
hereto (with any and all necessary  modifications  for each  applicable  foreign
jurisdiction),  as amended,  restated,  supplemented or otherwise  modified from
time to time,  pursuant to which the capital stock of the Subsidiaries listed on
Schedule  1.1(d) and the  capital  stock of those  Subsidiaries  required  to be
pledged  under  Section  7.12 is  pledged  to the  Administrative  Agent for the
ratable benefit of the Lenders.

         "Pounds Sterling or GBP" means, at any time of determination,  the then
official currency of the United Kingdom.

         "Prime  Rate"  means,  at any  time,  the rate of  interest  per  annum
publicly  announced  from time to time by First  Union as its prime  rate.  Each
change in the Prime Rate shall be effective as of the opening of business on the
day such change in the Prime Rate occurs.  The parties hereto  acknowledge  that
the rate announced publicly by First Union as its Prime Rate is an index or base
rate and shall  not  necessarily  be its  lowest  or best  rate  charged  to its
customers or other banks.

         "Register" shall have the meaning assigned thereto in Section
13.10(d).

         "Required Lenders" means, at any date, any combination of holders of at
least fifty-one percent (51%) of the aggregate unpaid principal Dollar Amount of
the Revolving Credit Notes at such date, or if no amounts are outstanding  under
the  Revolving  Credit  Notes,  any  combination  of  Lenders  whose  Commitment
Percentages aggregate at least fifty-one percent (51%).

         "Reserve   Percentage"  means  the  maximum  daily  arithmetic  reserve
requirement  imposed by the Board of Governors of the Federal Reserve System (or
any successor)  under  Regulation D on  Eurocurrency  liabilities (as defined in
Regulation  D) for the  applicable  Interest  Period as of the first day of such
Interest Period, but subject to any changes in such reserve requirement


<PAGE>



becoming  effective during the Interest Period.  For purposes of calculating the
Reserve Percentage,  the reserve requirement shall be as set forth in Regulation
D  without  benefit  of credit  for  prorations,  exemptions  or  offsets  under
Regulation D, and further  without regard to whether or not any Lender elects to
actually fund any Loan or portion thereof with  Eurocurrency  liabilities.  Each
calculation  by the  Administrative  Agent of the LIBOR Rate shall be conclusive
and binding for all purposes, absent manifest error.

         "Revolving  Credit  Loans"  means  the  collective   reference  to  the
revolving credit loans made pursuant to Section 2.1.

         "Revolving Credit Notes" means the separate Revolving Credit Notes made
by the  applicable  Borrower or  Borrowers  payable to the order of each Lender,
substantially  in the form of Exhibit A-1 hereto with respect to each  Borrower,
and any amendments and modifications  thereto, any substitutes therefor, and any
replacements,  restatements, renewals or extension thereof, in whole or in part;
"Revolving Credit Note" means any of such Revolving Credit Notes.

         "Security  Documents"  means the  collective  reference  to the  Pledge
Agreements,  the  Subsidiary  Guaranty  Agreement  and each other  agreement  or
writing  pursuant to which BREED or any Subsidiary  thereof  pledges or grants a
security  interest  in the  Collateral  or any  other  collateral  securing  the
Obligations  or any such Person  guaranties  the payment or  performance  of the
Obligations or any portion thereof.

         "Senior Debt" means all Debt of the Borrower other than
Subordinated Debt.

         "Solvent" means, as to BREED and its Subsidiaries on a particular date,
that any such Person (a) has capital  sufficient  to carry on its  business  and
transactions  and all business and  transactions  in which it is about to engage
and is able to pay its debts as they mature,  (b) owns property  having a value,
both at fair  valuation  and at present fair  saleable  value,  greater than the
amount required to pay its probable liabilities (including  contingencies),  and
(c) does not believe that it will incur debts or liabilities  beyond its ability
to pay such debts or liabilities as they mature.

         "Subordinated Debt" means the collective reference to Debt on
Schedule 5.1(t) hereof designated as Subordinated Debt and any


<PAGE>



other Debt of Breed or any of its Subsidiaries subordinated in right and time of
payment to the Obligations on terms (including,  without  limitation,  terms and
conditions  relating to maturity  and  covenants)  satisfactory  to the Required
Lenders.

         "Subsidiary" means as to any Person,  any corporation,  partner ship or
other entity of which more than fifty percent (50%) of the  outstanding  capital
stock or other  ownership  interests  having  ordinary  voting  power to elect a
majority  of the  board of  directors  or other  managers  of such  corporation,
partnership or other entity is at the time, directly or indirectly,  owned by or
the management is otherwise  controlled by such Person (irrespective of whether,
at the time,  capital  stock of any other  class or classes of such  corporation
shall  have or  might  have  voting  power by  reason  of the  happening  of any
contingency).   Unless  otherwise  qualified,   references  to  "Subsidiary"  or
"Subsidiaries"  herein  shall  refer to those of BREED and its  Subsidiaries.  A
Subsidiary  shall also include any  statutory  business  trust  created to issue
Convertible  Preferred  Stock provided that a majority of the common  securities
thereof are owned, directly or indirectly, by BREED.

         "Subsidiary Guarantor" means each of the Material Domestic Subsidiaries
of BREED listed on Schedule 1.1(e) and each other Material  Domestic  Subsidiary
of BREED which becomes party to the Subsidiary  Guaranty Agreement in accordance
with Section 7.12.

         "Subsidiary  Guaranty  Agreement"  means  the  unconditional   guaranty
agreement  executed by each  Subsidiary  Guarantor party thereto in favor of the
Administrative  Agent  for the  ratable  benefit  of  itself  and  the  Lenders,
substantially  in  the  form  of  Exhibit  I  hereto,   as  amended,   restated,
supplemented or otherwise modified from time to time.

         "Swingline  Commitment" means the lesser of (a) Fifteen Million Dollars
($15,000,000) and (b) the Aggregate Commitment.

         "Swingline Lender" means First Union in its capacity as
swingline lender hereunder.

         "Swingline  Loan" means any swingline loan made by the Swingline Lender
to BREED pursuant to Section 2.3, and all such Loans collectively as the context
requires.

         "Swingline Note" means the separate Note made by BREED payable
to the order of the Swingline Lender, substantially in the form of


<PAGE>



Exhibit  A-3  hereto,  and  any  amendments  and  modifications   thereto,   any
substitutes therefor, and any replacements,  restatements, renewals or extension
thereof, in whole or in part.

         "Swingline  Rate"  means a rate to be agreed  upon from time to time by
BREED and the Swingline Lender.

         "Swingline  Termination  Date"  means the  earlier  to occur of (a) the
resignation  of First  Union as the  Administrative  Agent  in  accordance  with
Section 12.9 without a substitute  being  appointed as provided  therein and (b)
the Credit Facility Termination Date.

         "Taxes" shall have the meaning assigned thereto in Section
3.13(a).

         "Termination  Event"  means:  (a) a  "Reportable  Event"  described  in
Section 4043 of ERISA,  or (b) 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 (c) 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 (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Pension Plan by the PBGC,  or (e) any other event
or condition which 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 (f) the partial or complete  withdrawal of BREED or any ERISA Affiliate
from a  Multiemployer  Plan, or (g) the imposition of a Lien pursuant to Section
412 of the Code or Section  302 of ERISA,  or (h) any event or  condition  which
results  in the  reorganization  or  insolvency  of a  Multiemployer  Plan under
Sections 4241 or 4245 of ERISA,  or (i) any event or condition  which results in
the  termination  of a  Multiemployer  Plan under  Section 4041A of ERISA or the
institution  by PBGC of  proceedings  to  terminate a  Multiemployer  Plan under
Section 4042 of ERISA.

         "Total  Aggregate  Commitment"  means the  collective  reference to the
Aggregate  Commitment  under this  Agreement  and the Aggregate  Commitment  (as
defined in the 364-Day Credit Agreement) under the 364-Day Credit Agreement.

         "Trust  Preferred  Guarantee" means a guarantee by BREED of payments on
Convertible  Preferred  Stock but only to the  extent  the  Subsidiary  that has
issued such Convertible Preferred Stock has


<PAGE>



funds available therefor, and which guarantee is subordinated to the Obligations
on terms and conditions acceptable to the Required Lenders.

         "UCC" means the Uniform Commercial Code as in effect in the
State of North Carolina.

         "United States" means the United States of America.

         "Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of
the shares of capital stock or other ownership  interests of which are, directly
or  indirectly,  owned  or  controlled  by  BREED  and/or  one  or  more  of its
Wholly-Owned Subsidiaries.

         SECTION 1.2 General.  Unless otherwise  specified,  a reference in this
Agreement  to  a  particular  section,  subsection,  Schedule  or  Exhibit  is a
reference to that section,  subsection,  Schedule or Exhibit of this  Agreement.
Terms defined in this  Agreement and in the 364-Day  Credit  Agreement  shall be
construed  consistently,  and  no  term  defined  herein  shall  be  limited  or
restricted by any similar  definition in the 364-Day Credit  Agreement nor shall
any such term limit or restrict  any similar  definition  in the 364-Day  Credit
Agreement. Wherever from the context it appears appropriate, each term stated in
either the  singular or plural  shall  include  the  singular  and  plural,  and
pronouns  stated in the  masculine,  feminine or neuter gender shall include the
masculine, the feminine and the neuter. Any reference herein to "Charlotte time"
shall refer to the applicable time of day in Charlotte, North Carolina.

         SECTION 1.3                Other Definitions and Provisions.

         (a) Use of Capitalized  Terms.  Unless otherwise  defined therein,  all
capitalized terms defined in this Agreement shall have the defined meanings when
used  in  this  Agreement,  the  Notes  and  the  other  Loan  Documents  or any
certificate,  report  or  other  document  made or  delivered  pursuant  to this
Agreement.

         (b)  Miscellaneous.  The words  "hereof",  "herein" and "hereunder" and
words  of  similar  import  when  used in this  Agreement  shall  refer  to this
Agreement as a whole and not to any particular provision of this Agreement.

         (c)      Knowledge of Borrowers.  The words "to the best of the
Borrowers' knowledge", "to the best of BREED's knowledge", "to the


<PAGE>



best  knowledge of the  Borrowers and their  Subsidiaries"  and words of similar
import when used in this  Agreement  shall mean to the best knowledge and belief
of the applicable  Person after reasonable and due  investigation  and review of
all matters pertinent to the subject matter thereof.


                                   ARTICLE II

                                 CREDIT FACILITY

         SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions
of this Agreement,  each Lender  severally agrees to make Revolving Credit Loans
in a Permitted  Currency (other than Finnish Marks,  Loans with respect to which
shall only be made by the Finnish Mark Lenders in  accordance  with the terms of
Section 2.2) to the applicable  Borrower or Borrowers from time to time from the
Closing Date through the Credit  Facility  Termination  Date as requested by the
applicable  Borrower or Borrowers in  accordance  with the terms of Section 2.4;
provided,  that, based upon the Dollar Amount of all outstanding  Loans, (a) the
Dollar Amount of the aggregate  principal  amount of all  outstanding  Revolving
Credit Loans (after giving effect to any amount  requested) shall not exceed the
Aggregate  Commitment  less  the  sum  of the  Dollar  Amount  of the  aggregate
principal  amount of all  outstanding  Finnish  Mark  Loans  less the sum of the
Dollar Amount of the aggregate  principal  amount of all  outstanding  Swingline
Loans, (b) the sum of (i) the Dollar Amount of the aggregate principal amount of
all outstanding  Revolving  Credit Loans made in Alternative  Currencies  (other
than Finnish Marks) and (ii) the Dollar Amount of the aggregate principal amount
of all outstanding Finnish Mark Loans shall not exceed the Alternative  Currency
Commitment  and (c) the Dollar Amount of the aggregate  principal  amount of all
outstanding Revolving Credit Loans from any Lender to the Borrowers shall not at
any time exceed such Lender's Commitment. Each Revolving Credit Loan by a Lender
shall be in a principal amount equal to such Lender's  Commitment  Percentage of
the Dollar Amount of the aggregate  principal  amount of Revolving  Credit Loans
requested on such occasion.  Revolving Credit Loans to be made in an Alternative
Currency  (other than  Finnish  Marks) shall be funded in an amount equal to the
Alternative  Currency  Amount of such Revolving  Credit Loan.  Revolving  Credit
Loans to BREED may be denominated  in Dollars or in the  applicable  Alternative
Currency  (other than Finnish  Marks) as set forth on Schedule 2.1 and Revolving
Credit Loans to each other A/C Borrower shall be denominated in the


<PAGE>



applicable  Alternative  Currency  (other  than  Finnish  Marks) as set forth on
Schedule  2.1.  Subject to the terms and  conditions  hereof,  the Borrowers may
borrow,  repay and reborrow  Revolving  Credit Loans  hereunder until the Credit
Facility Termination Date.

         SECTION 2.2                Finnish Mark Loans.

         (a)  Availability.   Subject  to  the  terms  and  conditions  of  this
Agreement,  the Finnish Mark Lenders  severally agree to make Finnish Mark Loans
to the  applicable  A/C  Borrower  or A/C  Borrowers  from time to time from the
Closing Date through the Credit  Facility  Termination  Date as requested by the
applicable A/C Borrower or A/C Borrowers in accordance with the terms of Section
2.4; provided,  that, based upon the Dollar Amount of all outstanding Loans, (a)
the Dollar Amount of the aggregate  principal amount of all outstanding  Finnish
Mark Loans (after  giving effect to any amount  requested)  shall not exceed the
lesser of (i) the Aggregate  Commitment less the sum of the Dollar Amount of the
aggregate  principal  amount of all outstanding  Revolving Credit Loans less the
sum of the Dollar Amount of the aggregate  principal  amount of all  outstanding
Swingline Loans and (ii) the Finnish Mark Aggregate  Commitment,  (b) the sum of
(i) the  Dollar  Amount of the  aggregate  principal  amount of all  outstanding
Finnish Mark Loans and (ii) the Dollar Amount of the aggregate  principal amount
of all  outstanding  Alternative  Currency Loans made in Alternative  Currencies
(other than Finnish Marks) shall not exceed the Alternative  Currency Commitment
and (c) the Dollar Amount of the aggregate  principal  amount of all outstanding
Finnish Mark Loans from any Finnish Mark Lender to the A/C  Borrowers  shall not
at any time exceed such Lender's Finnish Mark Commitment. Each Finnish Mark Loan
by a Finnish  Mark Lender  shall be in a principal  amount equal to such Finnish
Mark  Lender's  Commitment  Percentage  of the  Dollar  Amount of the  aggregate
principal amount of Finnish Mark Loans requested on such occasion.  Finnish Mark
Loans shall be funded in an amount equal to the  Alternative  Currency Amount of
such  Finnish  Mark  Loan.  Subject  to the terms  and  conditions  hereof,  the
Borrowers may borrow,  repay and reborrow Finnish Mark Loans hereunder until the
Credit Facility Termination Date.

         (b)      Refunding of Finnish Mark Loans.

                  (i) Upon the occurrence and during the continuance of an Event
of Default,  each Finnish Mark Loan may, at the discretion of the Administrative
Agent,  be  converted  immediately  to a Base Rate Loan funded in Dollars by the
Lenders in an amount equal to the


<PAGE>



Dollar Amount of such Finnish Mark Loan for the remainder of the Interest Period
applicable  to such Finnish Mark Loan.  Such Base Rate Loan shall  thereafter be
reflected as a Revolving  Credit Loan of the Lenders on the books and records of
the  Administrative  Agent.  Each Lender  shall fund its  respective  Commitment
Percentage  of such Base Rate  Loan as  required  to repay  Finnish  Mark  Loans
outstanding  to the Finnish Mark Lenders upon such demand by the  Administrative
Agent in no event later than 2:00 p.m.  (Charlotte  time) on the next succeeding
Business  Day after such  demand is made.  No  Lender's  obligation  to fund its
respective  Commitment  Percentage  of any Base Rate Loan required to repay such
Finnish  Mark Loan shall be affected by any other  Lender's  failure to fund its
Commitment  Percentage of such Base Rate Loan, nor shall any Lender's Commitment
Percentage  be  increased as a result of any such failure of any other Lender to
fund its Commitment Percentage of such Base Rate Loan.

             (ii) The Borrowers shall pay to the  Administrative  Agent, for the
account of the Finnish Mark  Lenders,  on demand the amount of such Finnish Mark
Loans to the  extent  that the  Lenders  fail to refund in full the  outstanding
Finnish  Mark Loans  requested  or required to be  refunded.  In  addition,  the
Borrowers hereby authorize the  Administrative  Agent or any Finnish Mark Lender
to charge any account maintained by any Borrower with the  Administrative  Agent
or any  Finnish  Mark  Lender (up to the amount  available  therein) in order to
immediately  pay the Finnish  Mark Lenders the amount of such Finnish Mark Loans
to the extent  amounts  received from the Lenders are not sufficient to repay in
full the outstanding Finnish Mark Loans requested or required to be refunded. If
any  portion  of any such  amount  paid to the  Finnish  Mark  Lenders  shall be
recovered by or on behalf of the Borrowers from the Administrative  Agent or the
Finnish  Mark  Lenders in  bankruptcy  or  otherwise,  the loss of the amount so
recovered shall be ratably shared among all the Lenders in accordance with their
respective Commitment Percentages.

            (iii) Each Lender  acknowledges  and agrees that its  obligation  to
refund  Finnish Mark Loans in  accordance  with the terms of this Section 2.2 is
absolute  and  unconditional  and  shall  not be  affected  by any  circumstance
whatsoever;  provided, that if prior to the refunding of any outstanding Finnish
Mark Loans pursuant to this Section 2.2, one of the events  described in Section
11.1(j) or (k) shall have occurred, each Lender will, on the date the applicable
Revolving  Credit Loan would have been made to refund such  Finnish  Mark Loans,
purchase an undivided


<PAGE>



participating  interest  in such  Finnish  Mark Loans in an amount  equal to its
Commitment  Percentage of the aggregate  amount of such Finnish Mark Loan.  Each
Lender will immediately transfer to the Administrative Agent, for the account of
the Finnish Mark Lenders, in immediately  available funds in Dollars, the amount
of its  participation  and upon receipt  thereof the  Administrative  Agent will
deliver to such Lender a certificate  evidencing  such partici  pation dated the
date of receipt of such funds and for such amount.  Whenever,  at any time after
the   Administrative   Agent  has  received   from  any  Lender  such   Lender's
participating  interest in the refunded Finnish Mark Loans,  the  Administrative
Agent or any Finnish Mark Lender  receives any payment on account  thereof,  the
Administrative Agent or such Finnish Mark Lender, as applicable, will distribute
to  such  Lender  its  participating  interest  in  such  amount  (appropriately
adjusted, in the case of interest payments, to reflect the period of time during
which such Lender's participating interest was outstanding and funded).

         SECTION 2.3                Swingline Loans.

         (a)  Availability.   Subject  to  the  terms  and  conditions  of  this
Agreement,  the Swingline  Lender agrees to make  Swingline  Loans to BREED from
time to time from the Closing  Date  through  the  Swingline  Termination  Date;
provided,  that (i) all Swingline Loans shall be denominated in Dollars and (ii)
the aggregate principal amount of all outstanding  Swingline Loans (after giving
effect to any amount requested) shall not exceed the lesser of (A) the Aggregate
Commitment less the sum of the Dollar Amount of the aggregate  principal  amount
of all outstanding  Revolving  Credit Loans less the sum of the Dollar Amount of
the aggregate principal amount of all outstanding Finnish Mark Loans and (B) the
Swingline Commitment.

         (b)      Refunding.

                  (i) Swingline Loans shall be refunded by the Lenders on demand
to the Swingline Lender and at the sole discretion of the Swingline Lender. Such
refundings  shall be made by the  Lenders in  accordance  with their  respective
Commitment  Percentages  and shall  thereafter be reflected as Revolving  Credit
Loans of the Lenders on the books and records of the Administrative  Agent. Each
Lender shall fund its respective Commitment Percentage of Revolving Credit Loans
as required to repay  Swingline Loans  outstanding to the Swingline  Lender upon
demand by the Swingline  Lender but in no event later than 2:00 p.m.  (Charlotte
time) on the next succeeding


<PAGE>



Business  Day after such  demand is made.  No  Lender's  obligation  to fund its
respective  Commitment  Percentage of a Swingline  Loan shall be affected by any
other Lender's  failure to fund its Commitment  Percentage of a Swingline  Loan,
nor shall any  Lender's  Commitment  Percentage  be increased as a result of any
such  failure  of any  other  Lender  to fund  its  Commitment  Percentage  of a
Swingline Loan.

             (ii) BREED shall pay to the  Swingline  Lender on demand the amount
of such Swingline Loans to the extent that the Lenders fail to repay in full the
outstanding  Swingline Loans requested or required to be refunded.  In addition,
BREED  hereby  authorizes  the  Administrative   Agent  to  charge  any  account
maintained  by BREED  with the  Swingline  Lender  (up to the  amount  available
therein) in order to  immediately  pay the  Swingline  Lender the amount of such
Swingline  Loans  to the  extent  amounts  received  from  the  Lenders  are not
sufficient  to  repay in full  the  outstanding  Swingline  Loans  requested  or
required to be refunded. If any portion of any such amount paid to the Swingline
Lender shall be recovered by or on behalf of BREED from the Swingline  Lender in
bankruptcy  or otherwise,  the loss of the amount so recovered  shall be ratably
shared  among all the Lenders in  accordance  with their  respective  Commitment
Percentages.

            (iii) Each Lender  acknowledges  and agrees that its  obligation  to
refund  Swingline  Loans in  accordance  with the terms of this  Section  2.3 is
absolute  and  unconditional  and  shall  not be  affected  by any  circumstance
whatsoever;  provided,  that  if  prior  to the  refunding  of  any  outstanding
Swingline  Loans  pursuant to this Section  2.3, one of the events  described in
Section  11.1(j) or (k) shall have  occurred,  each Lender will, on the date the
applicable  Revolving  Credit Loan would have been made to refund such Swingline
Loan, purchase an undivided  participating interest in such Swingline Loan in an
amount  equal to its  Commitment  Percentage  of the  aggregate  amount  of such
Swingline Loan. Each Lender will immediately  transfer to the Swingline  Lender,
in immediately available funds, the amount of its participation and upon receipt
thereof  the  Swingline  Lender  will  deliver  to  such  Lender  a  certificate
evidencing  such  participation  dated the date of receipt of such funds and for
such amount.  Whenever, at any time after the Swingline Lender has received from
any Lender  such  Lender's  participating  interest  in a  Swingline  Loan,  the
Swingline Lender receives any payment on account  thereof,  the Swingline Lender
will  distribute  to such  Lender  its  participating  interest  in such  amount
(appropriately adjusted, in the case of interest payments, to


<PAGE>



reflect the period of time during which such Lender's participating interest was
outstanding and funded).

         SECTION 2.4                Procedure for Advances of Revolving Credit
Loans, Finnish Mark Loans and Swingline Loans.

         (a) Requests for Borrowing.  The applicable Borrower or Borrowers shall
give the  Administrative  Agent  irrevocable  prior  written  notice in the form
attached hereto as Exhibit B (a "Notice of Borrowing") not later than 12:00 noon
(Charlotte  time) (i) on the same Business Day as each Swingline  Loan,  (ii) at
least one  Business  Day before  each Base Rate Loan,  (iii) at least  three (3)
Business  Days  before each LIBOR Rate Loan  denominated  in Dollars and (iv) at
least four (4)  Business  Days  before  each LIBOR Rate Loan  denominated  in an
Alternative  Currency,  of its or their intention to borrow,  specifying (A) the
date of such borrowing,  which shall be a Business Day, (B) whether such Loan is
to be a Revolving  Credit Loan,  Finnish Mark Loan or a Swingline  Loan,  (C) if
such Loan is a Revolving Credit Loan,  whether such Loan shall be denominated in
Dollars or in an Alternative  Currency,  (D) if denominated in Dollars,  whether
the Loans are to be LIBOR Rate Loans or Base Rate Loans,  (E) the amount of such
borrowing,  which shall be (u) with respect to LIBOR Rate Loans  denominated  in
Dollars in an aggregate  principal  amount of $10,000,000 or a whole multiple of
$1,000,000 in excess thereof,  (v) with respect to LIBOR Rate Loans  denominated
in an Alternative  Currency (other than Finnish Marks) in an aggregate principal
Alternative  Currency Amount of $10,000,000 or a whole multiple of $1,000,000 in
excess  thereof,  (x) with  respect to LIBOR Rate Loans  denominated  in Finnish
Marks in an aggregate principal  Alternative  Currency Amount of $2,000,000 or a
whole  multiple  of $100,000 in excess  thereof,  (y) with  respect to Base Rate
Loans in an aggregate  principal  amount of  $1,000,000  or a whole  multiple of
$500,000  in excess  thereof,  and (z) with  respect  to  Swingline  Loans in an
aggregate  principal  amount of $100,000 or a whole multiple  thereof and (F) in
the case of a LIBOR Rate Loan,  the duration of the Interest  Period  applicable
thereto.  Notices  received  after 12:00 noon  (Charlotte  time) shall be deemed
received on the next  Business  Day.  The  Administrative  Agent shall  promptly
notify (i) the Lenders of each Notice of  Borrowing  with respect to a Revolving
Credit Loan and (ii) the Finnish Mark  Lenders of each Notice of Borrowing  with
respect to a Finnish Mark Loan.

         (b)      Disbursement of Revolving Credit Loans Denominated in
Dollars and Swingline Loans.  Not later than 2:00 p.m. (Charlotte


<PAGE>



time) on the proposed  borrowing date for any Loan  denominated in Dollars,  (i)
each Lender will make available to the Administrative  Agent, for the account of
BREED, at the office of the Administrative Agent in Dollars in funds immediately
available to the Administrative  Agent, such Lender's  Commitment  Percentage of
the requested  Revolving  Credit Loan to be made on such borrowing date and (ii)
the Swingline  Lender will make available to the  Administrative  Agent, for the
account of BREED, at the office of the Administrative  Agent in Dollars in funds
immediately  available to the  Administrative  Agent,  the Swingline Loans to be
made to BREED on such borrowing date.  BREED hereby  irrevocably  authorizes the
Administrative  Agent to  disburse  the  proceeds  of each  borrowing  requested
pursuant to this Section 2.4 in  immediately  available  funds by crediting such
proceeds to a deposit account of BREED maintained with the Administrative  Agent
or by wire  transfer  from such  deposit  account to  another  account as may be
requested by BREED by prior written notice to the Administrative  Agent. Subject
to Section 3.7  hereof,  the  Administrative  Agent  shall not be  obligated  to
disburse  the  portion of the  proceeds of any Loan  requested  pursuant to this
Section  2.4 to the  extent  that  any  Lender  has not  made  available  to the
Administrative  Agent its Commitment  Percentage of such Loan.  Revolving Credit
Loans to be made for the purpose of refunding  Swingline  Loans shall be made by
the Lenders as provided in Section 2.3(b) hereof.

         (c) Disbursement of Alternative Currency Loans (other than Finnish Mark
Loans).  Not later  than  10:00  a.m.  (the time of the  Administrative  Agent's
Correspondent) on the proposed borrowing date for any Alternative  Currency Loan
(other  than  Finnish  Mark  Loans),  each  Lender  will make  available  to the
Administrative  Agent for the  account of the  applicable  A/C  Borrower  or A/C
Borrowers  at the  office of the  Administrative  Agent's  Correspondent  in the
requested   Alternative   Currency  in  funds   immediately   available  to  the
Administrative  Agent,  such  Lender's  Commitment  Percentage  of the requested
borrowing to be  denominated  in such  Alternative  Currency.  The A/C Borrowers
hereby irrevocably  authorize the Administrative  Agent to disburse the proceeds
of  each  borrowing  requested  pursuant  to  this  Section  2.4 in  immediately
available  funds by crediting  such proceeds to an account of the applicable A/C
Borrower  maintained with the  Administrative  Agent's  Correspondent or by wire
transfer  from such  deposit  account to another  account as may be requested by
such A/C Borrower by prior written notice to the Administrative  Agent.  Subject
to Section 3.7  hereof,  the  Administrative  Agent  shall not be  obligated  to
disburse the portion of the proceeds of any Loan requested pursuant to this


<PAGE>



Section  2.4 to the  extent  that  any  Lender  has not  made  available  to the
Administrative Agent its Commitment Percentage of such Loan.

         (d)  Disbursement of Finnish Mark Loans. Not later than 10:00 a.m. (the
time of the Administrative Agent's Correspondent) on the proposed borrowing date
for any Finnish Mark Loan,  each Finnish Mark Lender will make  available to the
Administrative  Agent for the  account of the  applicable  A/C  Borrower  or A/C
Borrowers at the office of the Administrative  Agent's  Correspondent in Finnish
Marks in funds immediately  available to the Administrative  Agent, such Finnish
Mark Lender's Commitment Percentage of the requested borrowing to be denominated
in  Finnish  Marks.   The  A/C  Borrowers  hereby   irrevocably   authorize  the
Administrative  Agent to  disburse  the  proceeds  of each  borrowing  requested
pursuant to this Section 2.4 in  immediately  available  funds by crediting such
proceeds  to an account  of the  applicable  A/C  Borrower  maintained  with the
Administrative  Agent's  Correspondent  or by wire  transfer  from such  deposit
account to another  account as may be  requested  by such A/C  Borrower by prior
written notice to the Administrative  Agent.  Subject to Section 3.7 hereof, the
Administrative  Agent  shall not be  obligated  to  disburse  the portion of the
proceeds of any Finnish Mark Loan requested  pursuant to this Section 2.4 to the
extent that any Finnish Mark Lender has not made available to the Administrative
Agent its Commitment Percentage of such Finnish Mark Loan.

         SECTION 2.5                Repayment of Revolving Credit Loans, Finnish
Mark Loans and Swingline Loans.

         (a) Repayment. The applicable Borrower or Borrowers shall repay (i) the
principal Dollar Amount of all outstanding Revolving Credit Loans in full in the
currency in which each such Revolving Credit Loan was initially funded, together
with all accrued but unpaid interest thereon, on the Credit Facility Termination
Date, (ii) the principal Dollar Amount of all outstanding  Finnish Mark Loans in
full in Finnish Marks, together with all accrued but unpaid interest thereon, on
the Credit  Facility  Termination  Date (or in accordance with Section 2.2(b) if
earlier) and (iii) the principal  amount of all  outstanding  Swingline Loans in
full,  together with all accrued but unpaid interest thereon, in accordance with
Section 2.3(b).



<PAGE>



         (b)      Mandatory Repayment of Excess Loans.

              (i)  Aggregate  Commitment.  If at any time (as  determined by the
Administrative  Agent  under  Section  2.5(b)(iv)),  and  for  any  reason,  the
aggregate  principal  Dollar Amount of all outstanding  Revolving  Credit Loans,
Finnish  Mark Loans and  Swingline  Loans  exceeds one hundred and five  percent
(105%) of the Aggregate  Commitment,  the applicable Borrower or Borrowers shall
(A)  first,  if  (and  to  the  extent)  necessary  to  eliminate  such  excess,
immediately repay outstanding Revolving Credit Loans that are Base Rate Loans by
the Dollar  Amount of such  excess in the  currency  in which each such Loan was
initially funded (and/or reduce any pending request for a Base Rate Loan on such
day by the Dollar Amount of such excess) and (B) second,  if (and to the extent)
necessary to eliminate  such excess,  immediately  repay LIBOR Rate Loans in the
currency in which each such Loan was initially funded (and/or reduce any pending
requests for a borrowing or  continuation  or conversion of such Loans submitted
in  respect of such  Loans on such day) by the  Dollar  Amount of any  remaining
excess.

             (ii) Excess  Finnish Mark Loans.  If at any time and for any reason
the outstanding  principal amount of all outstanding  Finnish Mark Loans exceeds
the  lesser  of (A) the  Aggregate  Commitment  less the sum of the  outstanding
principal  Dollar  Amount  of all  Revolving  Credit  Loans  less the sum of the
outstanding  principal  Dollar Amount of all Swingline Loans and (B) the Finnish
Mark Aggregate  Commitment,  such excess shall be immediately  repaid in Finnish
Marks by the  applicable  A/C Borrower or A/C  Borrowers  to the  Administrative
Agent for the account of the Finnish Mark Lenders.

            (iii) Excess  Swingline Loans. If at any time and for any reason the
outstanding  principal  amount of all  outstanding  Swingline  Loans exceeds the
lesser of (A) the Aggregate Commitment less the sum of the outstanding principal
Dollar  Amount of all  Revolving  Credit  Loans less the sum of the  outstanding
principal  Dollar  Amount  of all  Finnish  Mark  Loans  and (B)  the  Swingline
Commitment,   such  excess  shall  be   immediately   repaid  by  BREED  to  the
Administrative Agent for the account of the Swingline Lender.

             (iv)          Compliance and Payments.  Each Borrower's compliance
with this Section 2.5(b) shall be tested from time to time by the
Administrative Agent at its sole discretion, but in any event on
each day an interest payment is due under Section 3.1(e).  All


<PAGE>



payments  pursuant to this  Section  2.5(b) shall be  accompanied  by any amount
required to be repaid under Section 3.11.

         (c)      Other Mandatory Repayments.  The Borrowers shall repay
the Loans in accordance with Section 2.7 in connection with any
permanent reduction in the Aggregate Commitment.

         (d) Optional Repayments.  Any Borrower may at any time and from time to
time repay the Loans made  thereto in the  currency  in which each such Loan was
initially  funded,  in whole or in  part,  with  respect  to  LIBOR  Rate  Loans
denominated  in  an  Alternative  Currency,   upon  irrevocable  notice  to  the
Administrative  Agent  made no later than  12:00  noon  (Charlotte  time) on the
Business Day that is at least four (4) Business Days' prior to such  prepayment,
upon at least three (3) Business Days' irrevocable  notice to the Administrative
Agent with respect to LIBOR Rate Loans denominated in Dollars,  one (1) Business
Day's irrevocable  notice with respect to Base Rate Loans, and same Business Day
irrevocable  notice with respect to Swingline Loans, in the form attached hereto
as  Exhibit C (a  "Notice  of  Prepayment"),  specifying  the date and amount of
repayment  and whether the  repayment is of LIBOR Rate Loans  denominated  in an
Alternative Currency (including,  without limitation, Finnish Mark Loans), LIBOR
Rate Loans  denominated  in Dollars,  Base Rate  Loans,  Swingline  Loans,  or a
combination  thereof,  and, if of a combination thereof, the amount allocable to
each.  Upon  receipt of such notice,  the  Administrative  Agent shall  promptly
notify each Lender.  If any such notice is given,  the amount  specified in such
notice  shall be due and payable on the date set forth in such  notice.  Partial
repayments  shall be in an aggregate amount of $1,000,000 or a whole multiple of
$500,000 in excess  thereof  with respect to Base Rate Loans,  $10,000,000  or a
whole  multiple of $1,000,000 in excess thereof with respect to LIBOR Rate Loans
(or with respect to  Alternative  Currency  Loans other than Finnish Mark Loans,
the Alternative  Currency Amount  thereof),  the Alternative  Currency Amount of
$2,000,000  or a whole  multiple of $100,000 in excess  thereof  with respect to
Finnish Mark Loans,  and a whole  multiple of $100,000 with respect to Swingline
Loans.  Each such repayment  shall be  accompanied by any amount  required to be
paid pursuant to Section 3.11 hereof.

         (e) Limitation on Repayment of LIBOR Rate Loans.  No Borrower may repay
any  LIBOR  Rate  Loan  (including,  without  limitation,  any  LIBOR  Rate Loan
denominated in an Alternative Currency) on any day other than on the last day of
the Interest Period applicable


<PAGE>



thereto unless such  repayment is accompanied by any amount  required to be paid
pursuant to Section 3.11 hereof.

         SECTION 2.6                Notes.

         (a) Revolving  Credit Notes.  Each Lender's  Revolving Credit Loans and
the  obligation of each Borrower to repay such  Revolving  Credit Loans shall be
evidenced by a Revolving  Credit Note executed by each  Borrower  payable to the
order of such Lender  representing  each such Borrower's  obligation to pay such
Lender's  Commitment or, if less, the aggregate  unpaid  principal amount of all
Revolving  Credit  Loans  made and to be made by such  Lender  to such  Borrower
hereunder,  plus  interest  and all other fees,  charges  and other  amounts due
thereon.  Each  Revolving  Credit  Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable  interest
rate per annum specified in Section 3.1.

         (b) Finnish Mark Notes.  Each Finnish Mark Lender's  Finnish Mark Loans
and the  obligation of each  applicable  A/C Borrower to repay such Finnish Mark
Loans shall be evidenced  by a Finnish  Mark Note  executed by such A/C Borrower
payable  to the  order  of  such  Finnish  Mark  Lender  representing  such  A/C
Borrower's  obligation to pay such Finnish Mark Lender's Finnish Mark Commitment
or, if less,  the aggregate  unpaid  principal  amount of all Finnish Mark Loans
made and to be made by such Finnish Mark Lender to such A/C Borrower  hereunder,
plus interest and all other fees,  charges and other  amounts due thereon.  Each
Finnish Mark Note shall be dated the date hereof and shall bear  interest on the
unpaid  principal  amount  thereof  at the  applicable  interest  rate per annum
specified in Section 3.1.

         (c) Swingline Notes. The Swingline Loans and the obligation of BREED to
repay such Swingline  Loans shall be evidenced by the Swingline Note executed by
BREED  payable  to  the  order  of the  Swingline  Lender  representing  BREED's
obligation to pay the Swingline  Commitment  or, if less,  the aggregate  unpaid
principal  amount of all  Swingline  Loans made and to be made by the  Swingline
Lender to BREED hereunder,  plus interest and all other fees,  charges and other
amounts due thereon. The Swingline Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable  interest
rate specified in Section 3.1.



<PAGE>



         SECTION 2.7       Permanent Reduction of the Aggregate Commitment.

         (a) Voluntary Reduction. The Borrowers shall have the right at any time
and from time to time,  upon at least  five (5)  Business  Days'  prior  written
notice to the Administrative  Agent, to permanently reduce, in whole at any time
or in part  from  time to  time,  without  premium  or  penalty,  the  Aggregate
Commitment in an aggregate  principal  amount not less than  $10,000,000  or any
whole multiple of $1,000,000 in excess thereof. To the extent that the Aggregate
Commitment is reduced to an amount below the Alternative  Currency Commitment or
the Finnish Mark Aggregate Commitment,  there shall be a corresponding permanent
reduction of the Alternative  Currency  Commitment or the Finnish Mark Aggregate
Commitment,  as  applicable,  to the amount of the  Aggregate  Commitment  as so
reduced.

         (b)      Mandatory Permanent Reductions.

                  (i) Incurrence of Debt. The Total Aggregate  Commitment  shall
         be permanently reduced by an amount equal to one hundred percent (100%)
         of the amount of any Debt  incurred  pursuant to Section  9.1(j),  such
         application to the Aggregate Commitment under this Agreement and/or the
         364-Day  Credit  Agreement to be  determined  by the Borrowers in their
         sole  discretion.  Such  reduction  shall  be made  promptly  upon  the
         incurrence of such Debt.

             (ii)  Sale of  Assets.  The  Total  Aggregate  Commitment  shall be
         permanently  reduced by an amount equal to fifty  percent  (50%) of the
         aggregate Net Proceeds from any sale or disposition of assets permitted
         pursuant  to  Section  9.6(e),   such   application  to  the  Aggregate
         Commitment  under this Agreement and/or the 364-Day Credit Agreement to
         be determined by the Borrowers in their sole discretion. Such reduction
         shall be made  promptly  upon  the  consummation  of any  such  sale or
         disposition.

         (c) Additional Payments. Each permanent reduction permitted or required
pursuant to this  Section  2.7 shall be  accompanied  by a payment of  principal
sufficient to reduce the aggregate  principal  Dollar Amount of the  outstanding
Loans of the Lenders  after such  reduction to the  Aggregate  Commitment  as so
reduced.  All prepayments required by this Section 2.7(b) shall be applied first
to the aggregate outstanding principal amount of Swingline Loans,


<PAGE>



second to the aggregate  outstanding  principal amount of Finnish Mark Loans and
third to the aggregate  outstanding  principal amount of Revolving Credit Loans.
Any permanent reduction of the Aggregate Commitment to zero shall be accompanied
by payment of all outstanding  Obligations  and, if such reduction is permanent,
termination of the Commitments and the Credit Facility.  If the reduction of the
Aggregate  Commitment  requires  the  repayment  of any LIBOR  Rate  Loan,  such
reduction may be made only on the last day of the then current  Interest  Period
applicable  thereto unless such repayment is accompanied by any amount  required
to be paid pursuant to Section 3.11 hereof.

         SECTION 2.8 Termination of Credit  Facility.  The Credit Facility shall
terminate  on the  earliest of (a) April __,  2002,  (b) the date of a permanent
reduction of the  Aggregate  Commitment in whole  pursuant to Section  2.7(a) or
Section  2.7(b),  and (c)  the  date  of  termination  in  accordance  with  the
provisions of Section 11.2(a).

         SECTION 2.9 Use of Proceeds.  The  Borrowers  shall use the proceeds of
the Loans (a) to finance  investments  and  acquisitions  permitted by the terms
hereof,  (b) for  working  capital  and general  corporate  requirements  of the
Borrowers,  including  the  payment of certain  fees and  expenses  incurred  in
connection  with  the  transactions  contemplated  hereby  and (c) to  refinance
existing debt.

         SECTION 2.10 Nature of  Obligations.  Except as otherwise  set forth in
the other Loan  Documents,  the  obligations of the Borrowers  under the Note or
Notes  executed  thereby and the other  Obligations  of the  Borrowers  shall be
several and not joint and several among the Borrowers.

         SECTION  2.11  Security.  The  Obligations  of each Loan Party shall be
secured in accordance with the terms of the applicable Security Documents.



<PAGE>



                                   ARTICLE III

                             GENERAL LOAN PROVISIONS

         SECTION 3.1                Interest.

         (a) Interest  Rate Options.  Subject to the  provisions of this Section
3.1, at the election of the applicable  Borrower or Borrowers,  Revolving Credit
Loans  denominated  in Dollars shall bear interest at the Base Rate or the LIBOR
Rate plus, in each case, the Applicable Margin as set forth below, and Revolving
Credit Loans denominated in an Alternative Currency and Finnish Mark Loans shall
bear interest at the LIBOR Rate plus the  Applicable  Margin as set forth below.
Each  Swingline  Loan shall bear interest at the Swingline  Rate. The applicable
Borrower or Borrowers shall select the rate of interest and Interest Period,  if
any,  applicable to any Revolving Credit Loan or Finnish Mark Loan at the time a
Notice of Borrowing is given  pursuant to Section 2.4 or at the time a Notice of
Conversion/Continuation  is given  pursuant to Section 3.2. Each Loan or portion
thereof bearing  interest based on the Base Rate shall be a "Base Rate Loan" and
each Loan or portion thereof bearing interest based on the LIBOR Rate shall be a
"LIBOR Rate Loan".  Any Loan or any portion  thereof as to which the  applicable
Borrower or Borrowers has not duly specified an interest rate as provided herein
shall be deemed a Base Rate Loan denominated in Dollars.

         (b) Interest  Periods.  In  connection  with each LIBOR Rate Loan,  the
applicable  Borrower or Borrowers,  by giving  notice at the times  described in
Section 3.1(a),  shall elect an interest period (each, an "Interest  Period") to
be applicable to such Loan,  which Interest Period shall be a period of one (1),
two (2),  three (3), six (6), or if made available by the  Administrative  Agent
and the Lenders (in their sole  discretion),  twelve (12) months with respect to
each LIBOR Rate Loan; provided, that:

                        (i) the Interest  Period  shall  commence on the date of
         advance of or  conversion  to any LIBOR  Rate Loan and,  in the case of
         immediately  successive  Interest  Periods,  each  successive  Interest
         Period shall commence on the date on which the next preceding  Interest
         Period expires;

                       (ii) if any Interest Period would  otherwise  expire on a
         day that is not a Business Day,  such  Interest  Period shall expire on
         the next succeeding Business Day; provided,


<PAGE>



         that if any Interest Period would otherwise expire on a day that is not
         a  Business  Day  but is a day of the  month  after  which  no  further
         Business Day occurs in such month, such Interest Period shall expire on
         the next preceding Business Day;

                      (iii) any Interest Period that 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 the  relevant  calendar
         month at the end of such Interest Period;

                       (iv) no Interest Period shall extend beyond the
         Credit Facility Termination Date; and

                        (v) there shall be no more than eight (8) Interest
         Periods outstanding at any time.

         (c)      Applicable Margin.  The Applicable Margin provided for in
Section 3.1(a) with respect to the Loans (the "Applicable Margin")
shall:

                  (i) for the period  commencing  on the Closing Date and ending
         on  the  date  immediately  preceding  the  fifth  (5th)  Business  Day
         following  receipt  by  the  Administrative   Agent  of  the  financial
         statements of BREED and its  Subsidiaries for the fiscal quarter ending
         March 31, 1997 and the accompanying  Officer's Compliance  Certificate,
         be  determined  based on the Leverage  Ratio set forth in the Financial
         Condition  Certificate  delivered  pursuant  to Section  4.2(e)(ii)  in
         accordance with the chart below;

             (ii) for the period  commencing  on the fifth  (5th)  Business  Day
         following  receipt  by  the  Administrative   Agent  of  the  financial
         statements of BREED and its  Subsidiaries for the fiscal quarter ending
         June 30, 1997 and the accompanying Officer's Compliance Certificate and
         continuing through and including the Credit Facility  Termination Date,
         be determined  by reference to the Leverage  Ratio as of the end of the
         fiscal  quarter  immediately  preceding the delivery of the  applicable
         Officer's Compliance Certificate in accordance with the chart below:

                           Applicable Margin Per Annum


<PAGE>



         Leverage Ratio            Base Rate +                LIBOR Rate +

         Greater than 3.25         0.00%                      0.950%

         Less than or equal
         to 3.25 and greater
         than 3.00                 0.00%                      0.700%

         Less than or equal
         to 3.00 and greater
         than 2.50                 0.00%                      0.500%

         less than or equal
         to 2.50 but greater
         than 2.00                 0.00%                      0.375%

         less than or equal
         to 2.00                   0.00%                      0.300%


Adjustments,   if  any,  in  the   Applicable   Margin  shall  be  made  by  the
Administrative  Agent on the tenth (10th) Business Day (the  "Adjustment  Date")
after receipt by the Administrative  Agent of quarterly financial statements for
BREED and its Subsidiaries and the accompanying Officer's Compliance Certificate
setting  forth the  Leverage  Ratio as of the most recent  fiscal  quarter  end.
Subject to  Section  3.1(d),  in the event the  Borrowers  fail to deliver  such
financial  statements  and  certificate  within the time required by Section 6.2
hereof,  the Applicable Margin shall be the highest  Applicable Margin set forth
above until the delivery of such financial statements and certificate.

         Notwithstanding anything to the contrary contained herein, in the event
the  Interest  Coverage  Ratio (as  determined  pursuant  to Section 8.3 of this
Agreement) is less than 3.00 to 1.00 during the  applicable  period set forth in
such Section 8.3, the  Applicable  Margin set forth in this Section 3.1 shall be
deemed to be 1.000%  with  respect to LIBOR Rate Loans  (unless  the  Applicable
Margin with respect to LIBOR Rate Loans is determined  to be 1.250%  pursuant to
the terms of this Section 3.1(c)).

         (d)      Default Rate.  Upon the occurrence and during the
continuance of an Event of Default, (i) the Borrowers shall no
longer have the option to request LIBOR Rate Loans, (ii) all
outstanding LIBOR Rate Loans shall bear interest at a rate per


<PAGE>



annum two  percent  (2%) in excess of the rate  then  applicable  to LIBOR  Rate
Loans,  as  applicable,  until the end of the  applicable  Interest  Period  and
thereafter  at a rate  equal to two  percent  (2%) in  excess  of the rate  then
applicable  to Base  Rate  Loans,  and  (iii) all  outstanding  Base Rate  Loans
(including,  without limitation,  Swingline Loans) shall bear interest at a rate
per annum equal to two  percent  (2%) in excess of the rate then  applicable  to
Base Rate Loans. Interest shall continue to accrue on the Notes after the filing
by or against any Borrower of any petition  seeking any relief in  bankruptcy or
under any act or law pertaining to insolvency or debtor  relief,  whether state,
federal or foreign.

         (e) Interest Payment and  Computation.  Interest on each Base Rate Loan
and each  Swingline Loan shall be payable in arrears on the last Business Day of
each fiscal  quarter  commencing  June 30, 1997 and  interest on each LIBOR Rate
Loan  shall  be  payable  on the  last day of each  Interest  Period  applicable
thereto,  and if such Interest Period extends over three (3) months,  at the end
of each three (3) month  interval  during such  Interest  Period.  All  interest
rates, fees and commissions provided hereunder shall be computed on the basis of
a 360-day  year and assessed for the actual  number of days  elapsed;  provided,
that (i) interest  rates on each Loan  denominated  in Pounds  Sterling shall be
computed  on the basis of a 365-day  year and (ii)  interest  rates on each Base
Rate  Loan  and  each  Swingline  Loan  shall  be  computed  on the  basis  of a
365/366-day year.

         (f) Maximum  Rate.  In no  contingency  or event  whatsoever  shall the
aggregate  of all amounts  deemed  interest  hereunder or under any of the Notes
charged or collected  pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible  under any Applicable Law which
a  court  of  competent  jurisdiction  shall,  in a  final  determination,  deem
applicable  hereto.  In the event that such a court  determines that the Lenders
have charged or received interest  hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate  permitted by Applicable  Law and the Lenders  shall at the  Administrative
Agent's  option  promptly  refund to the  applicable  Borrower or Borrowers  any
interest received by Lenders in excess of the maximum lawful rate or shall apply
such excess to the principal balance of the Obligations. It is the intent hereof
that  the   Borrowers  not  pay  or  contract  to  pay,  and  that  neither  the
Administrative Agent nor any Lender receive or contract to receive,  directly or
indirectly in


<PAGE>



any  manner  whatsoever,  interest  in excess  of that  which may be paid by the
Borrowers under Applicable Law.

         SECTION  3.2  Notice  and  Manner  of  Conversion  or  Continuation  of
Revolving Credit Loans and Finnish Mark Loans. Provided that no Default or Event
of Default has occurred and is then  continuing,  the  Borrowers  shall have the
option to (a)  convert at any time all or any  portion of any  outstanding  Base
Rate  Loans that are  Revolving  Credit  Loans in a  principal  amount  equal to
$10,000,000  or any whole  multiple of $1,000,000 in excess  thereof into one or
more LIBOR Rate Loans  denominated  in Dollars,  (b) upon the  expiration of any
Interest  Period,  convert all or any part of any  outstanding  LIBOR Rate Loans
denominated  in Dollars in a principal  amount  equal to  $1,000,000  or a whole
multiple of $500,000 in excess  thereof into Base Rate Loans that are  Revolving
Credit Loans, (c) upon the expiration of any Interest Period, continue any LIBOR
Rate Loan denominated in any Permitted  Currency (other than Finnish Marks) in a
principal  amount of  $10,000,000  or any whole multiple of $1,000,000 in excess
thereof  (or with  respect  to LIBOR Rate Loans  denominated  in an  Alternative
Currency other than Finnish Marks, the Alternative  Currency Amount in each case
thereof)  as a LIBOR Rate Loan in the same  Permitted  Currency  or (d) upon the
expiration of any Interest  Period,  continue any LIBOR Rate Loan denominated in
Finnish Marks in a principal  Alternative  Currency  Amount of $2,000,000 or any
whole  multiple of  $100,000  in excess  thereof as a LIBOR Rate Loan in Finnish
Marks. Whenever any Borrower or Borrowers desire to convert or continue Loans as
provided above, such Borrower or Borrowers shall give the  Administrative  Agent
irrevocable prior written notice in the form attached as Exhibit D (a "Notice of
Conversion/Continuation")  not later than 11:00 a.m.  (Charlotte  time) four (4)
Business Days (with respect to any Loan denominated in an Alternative  Currency)
and three (3) Business  Days (with respect to any Loan  denominated  in Dollars)
before the day on which a proposed conversion or continuation of such Loan is to
be effective specifying (A) the Loans to be converted or continued,  and, in the
case of any LIBOR Rate Loan to be converted or continued, the Permitted Currency
in which  such  Loan is  denominated  and the last  day of the  Interest  Period
therefor, (B) the effective date of such conversion or continuation (which shall
be a Business  Day),  (C) the principal  amount of such Loans to be converted or
continued,  and (D) the Interest  Period to be applicable  to such  converted or
continued  LIBOR Rate Loan. The  Administrative  Agent shall promptly notify the
Lenders of such Notice of Conversion/Continuation.



<PAGE>



         SECTION 3.3                Fees.

         (a) Facility Fee. The Borrowers shall pay to the Administrative  Agent,
for the account of the  Lenders,  a  non-refundable  facility  fee at a rate per
annum equal to the applicable  percentage set forth below in this Section 3.3(a)
on the amount of the Aggregate Commitment.  The facility fee shall be payable in
arrears on the last Business Day of each fiscal  quarter during the term of this
Agreement commencing June 30, 1997, and on the Credit Facility Termination Date.
Such  facility  fee  shall be  distributed  by the  Administrative  Agent to the
Lenders  pro  rata  in  accordance  with  the  Lenders'  respective   Commitment
Percentages. The facility fee rate shall:

                  (i) for the period  commencing  on the Closing Date and ending
         on  the  date  immediately  preceding  the  fifth  (5th)  Business  Day
         following  receipt  by the  Administrative  Agent  of the  Consolidated
         financial  statements of BREED for the fiscal  quarter ending March 31,
         1997  and  the  accompanying  Officer's  Compliance   Certificate,   be
         determined  based on the  Leverage  Ratio  set  forth in the  Financial
         Condition  Certificate  delivered  pursuant  to Section  4.2(e)(ii)  in
         accordance with the chart below;

             (ii) for the period  commencing  on the fifth  (5th)  Business  Day
         following  receipt  by the  Administrative  Agent  of the  Consolidated
         financial  statements of BREED for the fiscal  quarter  ending June 30,
         1997  and  the  accompanying   Officer's  Compliance   Certificate  and
         continuing through and including the Credit Facility  Termination Date,
         be  determined  by  reference  to the  Leverage  Ratio of BREED and its
         Subsidiaries as of the end of the fiscal quarter immediately  preceding
         the delivery of the  applicable  Officer's  Compliance  Certificate  in
         accordance with the chart below:

         Leverage Ratio                                       Facility Fee Rate

         Greater than 3.25                                              0.300%

         Less than or equal
         to 3.25 and greater
         than 3.00                                                      0.300%

         Less than or equal
         to 3.00 and greater


<PAGE>



         than 2.50                                                      0.250%

         less than or equal
         to 2.50 but greater
         than 2.00                                                      0.250%

         less than or equal
         to 2.00                                                        0.200%


Adjustments,   if  any,  in  the   facility  fee  rate  shall  be  made  by  the
Administrative  Agent on the tenth (10th) Business Day (the  "Adjustment  Date")
after receipt by the Administrative  Agent of quarterly financial statements for
BREED and its Subsidiaries and the accompanying Officer's Compliance Certificate
setting forth the Leverage  Ratio of BREED and its  Subsidiaries  as of the most
recent  fiscal  quarter  end. In the event the  Borrowers  fail to deliver  such
financial  statements  and  certificate  within the time required by Section 6.2
hereof,  the facility fee rate shall be the highest  facility fee rate set forth
above until the delivery of such financial statements and certificate.

         Notwithstanding anything to the contrary contained herein, in the event
the  Interest  Coverage  Ratio (as  determined  pursuant  to Section 8.3 of this
Agreement) is less than 3.00 to 1.00 during the  applicable  period set forth in
such  Section  8.3, the Facility Fee Rate set forth in this Section 3.3 shall be
deemed to be .300%.

         (b)  Administrative  Agent's and Other Fees. In order to compensate the
Administrative  Agent for  structuring,  syndicating and arranging the Loans and
for its obligations hereunder,  the Borrowers agree to pay to the Administrative
Agent,  for its sole  account,  the fees set forth in the  separate  fee  letter
agreement executed by BREED and the Administrative Agent dated March 18, 1997.

         SECTION 3.4                Manner of Payment.

         (a) Loans Denominated in Dollars.  Each payment  (including  repayments
described  in Article  II) by any  Borrower  on account of the  principal  of or
interest on the Loans denominated in Dollars or of any fee,  commission or other
amounts  payable to the Lenders under this  Agreement or any Note (except as set
forth in  Section  3.4(b))  shall be made in  Dollars  not later  than 1:00 p.m.
(Charlotte time) on the date specified for payment under this


<PAGE>



Agreement to the Administrative  Agent at the Administrative  Agent's Office for
the  account  of the  Lenders  pro  rata in  accordance  with  their  respective
Commitment  Percentages in immediately available funds and shall be made without
any set-off,  counterclaim or deduction  whatsoever.  Any payment received after
such time but before  2:00 p.m.  (Charlotte  time) on such day shall be deemed a
payment  on such  date for the  purposes  of  Section  11.1,  but for all  other
purposes shall be deemed to have been made on the next succeeding  Business Day.
Any payment  received after 2:00 p.m.  (Charlotte  time) shall be deemed to have
been made on the next succeeding Business Day for all purposes.

         (b)  Loans   Denominated  in  Alternative   Currencies.   Each  payment
(including repayments described in Article II) by any A/C Borrower on account of
the  principal  of or  interest  on the  Loans  denominated  in any  Alternative
Currency  shall be made in such  Alternative  Currency not later than 12:00 noon
(the time of the Administrative Agent's Correspondent) on the date specified for
payment  under this  Agreement to the  Administrative  Agent's  account with the
Administrative  Agent's Correspondent for the account of the Lenders pro rata in
accordance with their  respective  Commitment  Percentages  (or, with respect to
Finnish  Mark Loans,  for the account of the  Finnish  Mark  Lenders pro rata in
accordance  with  their  respective  Finnish  Mark  Commitment  Percentages)  in
immediately available funds, and shall be made without any set-off, counterclaim
or deduction  whatsoever.  Any payment  received after such time but before 1:00
p.m. (the time of the Administrative Agent's Correspondent) on such day shall be
deemed a payment  on such date for the  purposes  of Section  11.1,  but for all
other purposes shall be deemed to have been made on the next succeeding Business
Day.  Any  payment  received  after  1:00 p.m.  (the time of the  Administrative
Agent's  Correspondent) shall be deemed to have been made on the next succeeding
Business Day for all purposes.

         (c) Pro Rata  Treatment.  Upon receipt by the  Administrative  Agent of
each such payment,  the Administrative  Agent shall distribute to each Lender or
Finnish Mark Lender, as applicable,  at its address for notices set forth herein
its pro rata share of such payment in accordance with the Commitment  Percentage
of such  Lender or Finnish  Mark  Commitment  Percentage  of such  Finnish  Mark
Lender,  as  applicable,  and shall wire  advice of the amount of such credit to
each Lender or each  Finnish  Mark Lender,  as  applicable.  Each payment to the
Administrative Agent of the Swingline Lender's fees or commissions shall be made
in like manner, but for the account of the Swingline Lender. Each payment to the
Administrative Agent of


<PAGE>



Administrative  Agent's  fees or  expenses  shall be made for the account of the
Administrative  Agent and any amount  payable to any Lender under Sections 3.10,
3.11, 3.12, 3.13, 12.2, and 13.2 shall be paid to the  Administrative  Agent for
the account of the applicable Lender or Finnish Mark Lender.  Subject to Section
3.1(b)(ii),  if any payment under this  Agreement or any Note shall be specified
to be made upon a day which is not a Business  Day, it shall be made on the next
succeeding  day which is a Business Day and such extension of time shall in such
case be included in computing any interest if payable along with such payment.

     SECTION 3.5  Crediting  of  Payments  and  Proceeds.  In the event that any
Borrower shall fail to pay any of the  Obligations  when due and the Obligations
have been  accelerated  pursuant to Section 11.2,  all payments  received by the
Lenders upon the Notes and the other  Obligations  and all net proceeds from the
enforcement  of the  Obligations  shall be applied to all expenses  then due and
payable by the Borrowers hereunder,  then to all indemnity  obligations then due
and payable by the Borrowers hereunder,  then to all Administrative Agent's fees
then due and payable, then to all commitment and other fees and commissions then
due and payable,  then to accrued and unpaid  interest on the Swingline  Note to
the  Swingline  Lender,  then to the  principal  amount  outstanding  under  the
Swingline Note to the Swingline Lender, then to the principal amount outstanding
and accrued and unpaid  interest on the Finnish Mark Notes,  then to accrued and
unpaid interest on the Revolving  Credit Notes,  then to the principal amount of
the Revolving Credit Notes, then to any termination payments due in respect of a
Hedging  Agreement  with any Lender  permitted  pursuant to Section 9.1 (pro-
rata in accordance with all such amounts due), in that order. 

         SECTION 3.6                Adjustments.

         (a) If any Lender (a "Benefitted Lender") shall at any time receive any
payment of all or part of its Revolving Credit Loans, or interest thereon, or if
any Lender shall at any time receive any  collateral in respect to its Revolving
Credit Loans (whether voluntarily or involuntarily,  by set-off or otherwise) in
a greater  proportion  than any such payment to and  collateral  received by any
other Lender, if any, in respect of such other Lender's  Revolving Credit Loans,
or interest  thereon,  such  Benefitted  Lender shall purchase for cash from the
other Lenders such portion of each such other Lender's  Revolving  Credit Loans,
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


<PAGE>



share the excess payment or benefits of such collateral or proceeds ratably with
each of the Lenders; provided, 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 each Lender so
purchasing a portion of another Lender's Revolving Credit Loans may exercise all
rights of  payment  (including,  without  limitation,  rights of  set-off)  with
respect to such  portion as fully as if such  Lender  were the direct  holder of
such portion.

         (b) If any Finnish Mark Lender (a  "Benefitted  Finnish  Mark  Lender")
shall at any time  receive any payment of all or part of its Finnish Mark Loans,
or interest thereon, or if any Finnish Mark Lender shall at any time receive any
collateral  in  respect  to its  Finnish  Mark  Loans  (whether  voluntarily  or
involuntarily,  by set-off or otherwise) in a greater  proportion  than any such
payment to and collateral  received by any other Finnish Mark Lender, if any, in
respect of such other  Finnish Mark  Lender's  Finnish  Mark Loans,  or interest
thereon,  such  Benefitted  Finnish Mark Lender shall purchase for cash from the
other Finnish Mark Lenders such portion of each such other Finnish Mark Lender's
Finnish Mark Loans,  or shall  provide such other  Finnish Mark Lenders with the
benefits of any such collateral,  or the proceeds thereof, as shall be necessary
to cause such  Benefitted  Finnish  Mark  Lender to share the excess  payment or
benefits of such  collateral  or proceeds  ratably with each of the Finnish Mark
Lenders; provided, that if all or any portion of such excess payment or benefits
is thereafter  recovered from such Benefitted Finnish Mark 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 each Finnish
Mark Lender so  purchasing a portion of another  Finnish Mark  Lender's  Finnish
Mark Loans may exercise all rights of payment  (including,  without  limitation,
rights of set-off)  with respect to such portion as fully as if such Lender were
the direct holder of such portion.

         SECTION  3.7  Nature  of  Obligations  of  Lenders   Regarding   Loans;
Assumption by the  Administrative  Agent.  The  obligations of the Lenders under
this  Agreement  to make the  Loans are  several  and are not joint or joint and
several.  Unless the  Administrative  Agent  shall have  received  notice from a
Lender  prior to a  proposed  borrowing  date  that  such  Lender  will not make
available  to the  Administrative  Agent such  Lender's  ratable  portion of the
amount to be borrowed on such date (which notice shall not release such


<PAGE>



Lender of its obligations  hereunder),  the Administrative Agent may assume that
such Lender has made such portion available to the  Administrative  Agent on the
proposed borrowing date in accordance with Section 2.4(b) and the Administrative
Agent may, in reliance upon such  assumption,  make  available to the applicable
Borrower or Borrowers  on such date a  corresponding  amount.  If such amount is
made available to the Administrative  Agent on a date after such borrowing date,
such  Lender  or  Finnish  Mark  Lender,   as  applicable,   shall  pay  to  the
Administrative  Agent on demand an amount, until paid, equal to (a) with respect
to a Loan  denominated  in  Dollars,  the  amount  of such  Lender's  Commitment
Percentage of such  borrowing and interest  thereon at a rate equal to the daily
average   Federal   Funds  Rate  during  such  period  as   determined   by  the
Administrative  Agent,  (b) with respect to an Alternative  Currency Loan (other
than Finnish Mark Loans), such Lender's Commitment  Percentage of such borrowing
at a rate per annum equal to the Administrative  Agent's aggregate marginal cost
(including the cost of maintaining  any required  reserves or deposit  insurance
and of any  fees,  penalties,  overdraft  charges  or other  costs  or  expenses
incurred by the Administrative Agent as a result of the failure to deliver funds
hereunder)  of carrying such amount and (c) with respect to a Finnish Mark Loan,
such Finnish Mark Lender's Finnish Mark Commitment  Percentage of such borrowing
at a rate per annum equal to the Administrative  Agent's aggregate marginal cost
(including the cost of maintaining  any required  reserves or deposit  insurance
and of any  fees,  penalties,  overdraft  charges  or other  costs  or  expenses
incurred by the Administrative Agent as a result of the failure to deliver funds
hereunder) of carrying such amount.  A certificate of the  Administrative  Agent
with respect to any amounts  owing under this  Section 3.7 shall be  conclusive,
absent  manifest  error.  If the  Commitment  Percentage  of such  Lender or the
Finnish Mark Commitment  Percentage of such Finnish Mark Lender,  as applicable,
of such  borrowing  is not made  available to the  Administrative  Agent by such
Lender or Finnish Mark Lender, as applicable,  within three (3) Business Days of
such borrowing date, the Administrative  Agent shall be entitled to recover such
amount made available by the  Administrative  Agent with interest thereon at the
rate then  applicable to such Loan  hereunder,  on demand,  from the  applicable
Borrower or  Borrowers.  The failure of any Lender or Finnish  Mark  Lender,  as
applicable,  to make  its  Commitment  Percentage  or  Finnish  Mark  Commitment
Percentage,  as applicable,  of any Loan  available  shall not relieve it or any
other Lender or Finnish Mark Lender, as applicable,  of its obligation,  if any,
hereunder  to  make  its  Commitment   Percentage  or  Finnish  Mark  Commitment
Percentage, as applicable, of such Loan available on


<PAGE>



such borrowing date, but no Lender or Finnish Mark Lender, as applicable,  shall
be  responsible  for the failure of any other Lender or Finnish Mark Lender,  as
applicable,  to make  its  Commitment  Percentage  or  Finnish  Mark  Commitment
Percentage, as applicable, of such Loan available on the borrowing date.

         SECTION 3.8   Mandatory Redenomination of Alternative Currency Loans.


         (a) If any LIBOR Rate Loan is required to be  converted  to a Base Rate
Loan pursuant to Sections 2.2, 3.1(d),  3.10 or any other  applicable  provision
hereof,  such Loan shall be funded in  Dollars in an amount  equal to the Dollar
Amount of such Loan,  all  subject to the  provisions  of  Section  2.5(b).  The
applicable  Borrower or Borrowers  shall  reimburse  the Lenders or Finnish Mark
Lenders, as applicable,  upon any such conversion for any amounts required to be
paid under Section 3.11.

         (b) If any Alternative  Currency becomes  unavailable to any Lender for
any reason (including,  without limitation,  any conversion,  discontinuation or
replacement  of such  currency  arising out of or in  connection  with any event
associated  with  economic and monetary  union in the  European  Community)  all
outstanding   Loans  in  such   Alternative   Currency   shall  be   immediately
redenominated and converted into Dollars in an amount equal to the Dollar Amount
of such Loan, all subject to the provisions of Section 2.5(b).

         SECTION  3.9  Regulatory  Limitation.  In the  event,  as a  result  of
increases in the value of Alternative  Currencies  against the Dollar or for any
other  reason,  the  obligation of any of the Lenders to make Loans (taking into
account the Dollar Amount of the Obligations and all other indebtedness required
to  be  aggregated  under  12  U.S.C.A.   ss.84,  as  amended,  the  regulations
promulgated  thereunder  and any other  Applicable  Law) is  determined  by such
Lender to exceed its then  applicable  legal  lending  limit  under 12  U.S.C.A.
ss.84, as amended,  and the  regulations  promulgated  thereunder,  or any other
Applicable Law, the amount of additional Loans such Lender shall be obligated to
make or issue or  participate in hereunder  shall  immediately be reduced to the
maximum  amount  which such Lender may legally  advance (as  determined  by such
Lender),  the  obligation of each of the remaining  Lenders  hereunder  shall be
proportionately  reduced,  based on their applicable  Commitment  Percentages or
Finnish Mark Commitment Percentages, as applicable, and, to the extent necessary
under such laws and regulations (as determined by each of the Lenders, with


<PAGE>



respect  to the  applicability  of such laws and  regulations  to  itself),  the
Borrowers  shall  reduce,  or  cause  to be  reduced,  complying  to the  extent
practicable with the remaining  provisions hereof,  the Obligations  outstanding
hereunder by an amount sufficient to comply with such maximum amounts.

         SECTION 3.10               Changed Circumstances.

         (a)  Circumstances   Affecting  LIBOR  Rate  and  Alternative  Currency
Availability. If with respect to any Interest Period the Administrative Agent or
any Lender (after  consultation with the  Administrative  Agent) shall determine
that (i) by reason of circumstances affecting the foreign exchange and interbank
markets  generally,  deposits in eurodollars  or an Alternative  Currency in the
applicable amounts are not being quoted via Telerate Page 3750 or offered to the
Administrative Agent or such Lender for such Interest Period, (ii) a fundamental
change has occurred in the foreign exchange or interbank markets with respect to
any Alternative Currency (including,  without limitation, changes in national or
international  financial,  political or economic conditions or currency exchange
rates  or  exchange  controls)  or  (iii)  it has  become  otherwise  materially
impractical for the Administrative  Agent or the Lenders to make such Loan in an
Alternative Currency,  then the Administrative Agent shall forthwith give notice
thereof to the Borrowers.  Thereafter,  until the Administrative  Agent notifies
the Borrowers  that such  circumstances  no longer exist,  the obligation of the
Lenders to make LIBOR Rate Loans or Alternative  Currency  Loans, as applicable,
and the right of the  Borrowers to convert any Loan to or continue any Loan as a
LIBOR Rate Loan or to convert any Loan to or continue any Loan as an Alternative
Currency Loan, as applicable, shall be suspended, and the applicable Borrower or
Borrowers  shall  repay  in full  (or  cause  to be  repaid  in  full)  the then
outstanding  principal  amount  of each  such  LIBOR  Rate  Loan or  Alternative
Currency Loan, as applicable,  together with accrued  interest  thereon,  on the
last day of the then current Interest Period  applicable to such LIBOR Rate Loan
or Alternative  Currency Loan, as  applicable,  or convert the then  outstanding
principal  amount of each such LIBOR Rate Loan or Alternative  Currency Loan, as
applicable, to a Base Rate Loan as of the last day of such Interest Period.



<PAGE>



         (b) Laws Affecting  LIBOR Rate and Alternative  Currency  Availability.
If, after the date hereof, the introduction of, or any change in, any Applicable
Law 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 any of
their respective  Lending Offices) with any request or directive (whether or not
having the force of law) of any such  Governmental  Authority,  central  bank or
comparable  agency,  shall make it unlawful or impossible for any of the Lenders
(or any of their respective Lending Offices) to honor its obligations  hereunder
to make or maintain any LIBOR Rate Loan or any  Alternative  Currency Loan, such
Lender shall  promptly give notice thereof to the  Administrative  Agent and the
Administrative  Agent shall  promptly give notice to the Borrowers and the other
Lenders.  Thereafter, until the Administrative Agent notifies the Borrowers that
such  circumstances  no longer exist, (i) the obligations of the Lenders to make
LIBOR Rate Loans or Alternative Currency Loans, as applicable,  and the right of
the  Borrowers  to convert any Loan to or continue any Loan as a LIBOR Rate Loan
or convert any Loan to or continue any Loan as an Alternative  Currency Loan, as
applicable, shall be suspended and thereafter the Borrowers may select only Base
Rate Loans denominated in Dollars hereunder,  and (ii) if any of the Lenders may
not lawfully  continue to maintain a LIBOR Rate Loan or an Alternative  Currency
Loan, as applicable,  to the end of the then current Interest Period  applicable
thereto as a LIBOR Rate Loan or as an Alternative  Currency Loan, as applicable,
the applicable LIBOR Rate Loan or Alternative Currency Loan shall immediately be
converted  to a Base  Rate  Loan  for  the  remainder  of such  Interest  Period
(provided  that the  Borrower  and the  Lenders  shall  enter  into  good  faith
negotiations  promptly  upon such  conversion  to determine a new interest  rate
index similar to that applicable to LIBOR Rate Loans).

         (c) Increased Costs. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or 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 of the
Lenders  (or any of  their  respective  Lending  Offices)  with any  request  or
directive  (whether  or not  having  the  force  of law)  of  such  Governmental
Authority, central bank or comparable agency:

                  (i)      shall subject any of the Lenders (or any of their
respective Lending Offices) to any tax, duty or other charge with


<PAGE>



respect to any LIBOR Rate Loans, Alternative Currency Loans or any Note or shall
change the basis of  taxation of payments to any of the Lenders (or any of their
respective  Lending  Offices) of the  principal of or interest on any LIBOR Rate
Loan, any  Alternative  Currency Loan or any Note or any other amounts due under
this Agreement in respect  thereof (except for changes in the rate of tax on the
overall  net  income of any of the  Lenders or any of their  respective  Lending
Offices  imposed by the  jurisdiction in which such Lender is organized or is or
should be qualified to do business or such Lending Office is located); or

             (ii)  shall  impose,   modify  or  deem   applicable   any  reserve
(including,  without  limitation,  any imposed by the Board of  Governors of the
Federal  Reserve  System),  special  deposit,  insurance  or  capital or similar
requirement  against  assets of,  deposits with or for the account of, or credit
extended by any of the Lenders (or any of their  respective  Lending Offices) or
shall impose on any of the Lenders (or any of their respective  Lending Offices)
or the foreign exchange and interbank markets any other condition  affecting any
LIBOR Rate Loan, any Alternative Currency Loan or any Note;

and the result of any of the  foregoing  is to increase  the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or any Alternative  Currency Loan, as
applicable,  or to reduce the yield or amount of any sum received or  receivable
by any of the Lenders  under this  Agreement  or under the Notes in respect of a
LIBOR Rate Loan or an Alternative Currency Loan, as applicable, then such Lender
shall, within ninety (90) days thereafter,  notify the Administrative Agent, and
the  Administrative  Agent shall promptly  notify the Borrowers of such fact and
demand compensation  therefor and, within fifteen (15) days after such notice by
the Administrative Agent, the applicable Borrower or Borrowers shall pay to such
Lender  such  additional  amount or amounts as will  compensate  such  Lender or
Lenders for such  increased  cost or reduction.  The  Administrative  Agent will
promptly  notify the Borrowers of any event of which it has knowledge which will
entitle such Lender to compensation pursuant to this Section 3.10(c);  provided,
that the Administrative Agent shall incur no liability whatsoever to the Lenders
or the Borrowers in the event it fails to do so. The amount of such compensation
shall be determined, in the applicable Lender's sole discretion,  based upon the
assumption  that such Lender funded its Commitment  Percentage of the LIBOR Rate
Loans or Alternative  Currency  Loans,  as applicable,  in the London  interbank
market and using any reasonable attribution or averaging


<PAGE>



methods which such Lender deems appropriate and practical. A certificate of such
Lender setting forth the basis for determining such amount or amounts  necessary
to  compensate  such Lender  shall be  forwarded  to the  Borrowers  through the
Administrative Agent and shall be presumed to be correct save for manifest error
or reasonable evidence to the contrary.

         SECTION 3.11  Indemnity.  The applicable  Borrower or Borrowers  hereby
indemnify each of the Lenders  against any loss or expense  (including,  without
limitation,  any foreign  exchange  costs) which may arise or be attributable to
each  Lender's  obtaining,  liquidating  or  employing  deposits  or other funds
acquired  to  effect,  fund or  maintain  any Loan (a) as a  consequence  of any
failure by such Borrower or Borrowers to make any payment when due of any amount
due  hereunder in connection  with a LIBOR Rate Loan,  (b) due to any failure of
such Borrower or Borrowers to borrow on a date specified therefor in a Notice of
Borrowing  or  Notice  of  Continuation/Conversion  or (c)  due to any  payment,
prepayment  or  conversion  of any LIBOR Rate Loan on a date other than the last
day of the Interest Period therefor. The amount of such loss or expense shall be
determined,  in  the  applicable  Lender's  sole  discretion,   based  upon  the
assumption  that such Lender funded its Commitment  Percentage of the LIBOR Rate
Loans in the London  interbank  market and using any  reasonable  attribution or
averaging  methods  which  such  Lender  deems  appropriate  and  practical.   A
certificate of such Lender setting forth the basis for  determining  such amount
or amounts  necessary  to  compensate  such  Lender  shall be  forwarded  to the
Borrowers through the  Administrative  Agent and shall be presumed to be correct
save for manifest error or reasonable evidence to the contrary.

         SECTION 3.12 Capital  Requirements.  If either (a) the introduction of,
or any  change  in,  or in the  interpretation  of,  any  Applicable  Law or (b)
compliance  with any  guideline or request  from any central bank or  comparable
agency or other Governmental Authority (whether or not having the force of law),
has or would have the effect of  reducing  the rate of return on the capital of,
or has affected or would affect the amount of capital  required to be maintained
by, any Lender or any corporation  controlling  such Lender as a consequence of,
or with reference to the Commitments and other  commitments of this type,  below
the rate which the Lender or such other  corporation could have achieved but for
such  introduction,  change or  compliance,  then within five (5) Business  Days
after written demand by any such Lender,  the Borrowers shall pay to such Lender
from time to time as specified by such Lender


<PAGE>



additional amounts sufficient to compensate such Lender or other corporation for
such reduction.  A certificate as to such amounts submitted to the Borrowers and
the Administrative Agent by such Lender, shall, in the absence of manifest error
or reasonable  evidence to the  contrary,  be presumed to be correct and binding
for all purposes.

         SECTION 3.13               Taxes.

         (a)      Payments Free and Clear.

                           (i) Any and all payments by the  Borrowers  hereunder
         or under  the  Notes  shall  be made  free  and  clear  of and  without
         deduction  for any and all present or future  taxes,  levies,  imposts,
         deductions,  charges or withholding,  and all liabilities  with respect
         thereto (including,  without limitation,  all claims, penalties,  costs
         and  expenses  resulting  from any  failure to  withhold or pay, or any
         delay  in  withholding  or  paying,   any  of  the  foregoing  amounts)
         excluding, (A) in the case of each Lender and the Administrative Agent,
         income and franchise taxes imposed by the  jurisdiction  under the laws
         of which such Lender or the  Administrative  Agent (as the case may be)
         is  organized  or is or  should  be  qualified  to do  business  or any
         political  subdivision thereof (it being expressly  acknowledged by the
         Borrowers  that each Agent and each Lender  shall not be required to be
         or become  qualified,  for purposes of this Section  3.13(a) or for any
         other  Section  of  this  Agreement,  to do  business  in any  specific
         jurisdiction or any political  subdivision thereof) and (B) in the case
         of each Lender,  income and franchise taxes imposed by the jurisdiction
         of such Lender's  Lending Office or any political  subdivision  thereof
         (all such non-excluded taxes,  levies,  imposts,  deductions,  charges,
         withholdings and liabilities being hereinafter referred to as "Taxes").

                           (ii) If any  Borrower  shall  be  required  by law to
         deduct or withhold (A) any Taxes payable to any Governmental  Authority
         other  than the  United  States  Internal  Revenue  Service  from or in
         respect of any sum payable hereunder or under any Note to any Lender or
         the Administrative  Agent or (B) any Taxes payable to the United States
         Internal  Revenue  Service  from  or in  respect  of  any  sum  payable
         hereunder or under any Note to any Lender organized under the laws of a
         jurisdiction other than the United States, subject to the


<PAGE>



         United  States  Internal  Revenue  Service  Form  4224 or Form 1001 (as
         applicable  and  the  Internal  Revenue  Service  Form  W-8 or W- 9 (as
         applicable)  previously delivered to the Administrative Agent, then, in
         either such event,  (1) the sum payable  shall be  increased  as may be
         necessary so that after making all required  deductions or withholdings
         (including  deductions or  withholdings  applicable to additional  sums
         payable  under this  Section  3.13) such  Lender or the  Administrative
         Agent (as the case may be)  receives an amount equal to the amount such
         party would have received had no such deductions or  withholdings  been
         made, (2) such Borrower shall make such deductions or withholdings, (3)
         such  Borrower  shall pay the full  amount  deducted or withheld to the
         relevant  taxing  authority  or  other  authority  in  accordance  with
         applicable   law,  and  (4)  such   Borrower   shall   deliver  to  the
         Administrative  Agent  evidence of such payment to the relevant  taxing
         authority or other authority in the manner provided in Section 3.13(d).
         If, for any reason,  any Borrower or Borrowers do not pay or remit such
         Taxes or do not for any reason pay any  additional  sums payable to any
         Lender or any Agent under this Section  3.13,  the interest  payable by
         such Borrower or Borrowers  under this  Agreement  will be increased to
         the rate or rates  necessary to yield and remit to such Lender or Agent
         the  principal sum advanced  together  with interest at the  applicable
         rate or rates  specified in this Agreement  after provision for payment
         of such Taxes.  The  Borrowers  shall,  from time to time,  execute and
         deliver any and all further  documents as may be necessary or advisable
         to give full force and effect to such  increase in the rate or rates of
         interest.

         Each Lender agrees that if it subsequently  recovers, or receives a net
tax benefit with respect to, any amount of Taxes (i)  previously  paid by it and
as to which it has been  indemnified  by or on behalf of the  Borrowers  or (ii)
previously  deducted or withheld by the Borrowers,  such Lender shall  reimburse
the  Borrowers to the extent of the amount of any such recovery or permanent net
tax benefit (but only to the extent of indemnity  payments  made,  or additional
amounts paid, by or on behalf of the Borrowers  under this Section  3.13(a) with
respect  to  Taxes  giving  rise to such  recovery  or tax  benefit);  provided,
however, that the Borrowers,  upon the request of such Lender, agree to repay to
such Lender the amount paid over to the Borrowers  (together with any penalties,
interest or other  charges),  in the event such Lender is required to repay such
amount to the relevant taxing  authority or other  Governmental  Authority.  The
determination by any Lender of the


<PAGE>



amount of any such recovery or net tax benefit shall, in the absence of manifest
error or reasonable evidence to the contrary, be conclusive and binding.

         (b) Stamp and Other Taxes.  In addition,  the  Borrowers  shall pay any
present or future stamp,  registration,  recordation or documentary taxes or any
other similar fees or charges or excise or property taxes,  levies of the United
States or any state or political  subdivision  thereof or any applicable foreign
jurisdiction  which arise from any payment made hereunder or from the execution,
delivery or registration  of, or otherwise with respect to, this Agreement,  the
Loans,  the other Loan  Documents,  or the  perfection of any rights or security
interest in respect thereto (hereinafter referred to as "Other Taxes").

         (c)  Indemnity.  The  Borrowers  shall  indemnify  each  Lender and the
Administrative  Agent for the full amount of Taxes and Other  Taxes  (including,
without  limitation,  any Taxes and Other Taxes imposed by any  jurisdiction  on
amounts   payable   under  this  Section  3.13)  paid  by  such  Lender  or  the
Administrative  Agent  (as  the  case  may  be)  and  any  liability  (including
penalties,  interest and expenses)  arising  therefrom or with respect  thereto,
whether or not such Taxes or Other  Taxes were  correctly  or legally  asserted.
Such  indemnification  shall be made within  thirty (30) days from the date such
Lender or the  Administrative  Agent (as the case may be) makes  written  demand
therefor.

         (d) Evidence of Payment.  Within thirty (30) days after the date of any
payment of Taxes or Other Taxes,  the  affected  Borrower  shall  furnish to the
Administrative  Agent, at its address  referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.

         (e) Survival.  Without prejudice to the survival of any other agreement
of the Borrowers  hereunder,  the  agreements  and  obligations of the Borrowers
contained  in  this  Section  3.13  shall  survive  the  payment  in full of the
Obligations and the termination of the Commitments.

         SECTION 3.14               Replacement Lenders.

         (a)      Affected Lender.  If (i) any Lender requests compensation
pursuant to Section 3.10(c), 3.12 or 3.13(a)(ii)(B) or (ii) the
obligation of the Lenders to make LIBOR Rate Loans or to continue,


<PAGE>



or to convert Base Rate Loans into, LIBOR Rate Loans shall be suspended pursuant
to Section 3.10(a) or (b) due to an event affecting any Lender, then, so long as
there does not then exist any Default or Event of  Default,  the  Borrowers  may
demand  that such  Lender  (the  "Affected  Lender"),  and upon such  demand the
Affected  Lender  shall  promptly,  assign  its  Commitment  (and  Finnish  Mark
Commitment,  if  applicable) to an Eligible  Assignee  selected by the Borrowers
(which Eligible  Assignee shall have consented to such  assignment),  subject to
and in  accordance  with  Section  13.10(b),  for a purchase  price equal to the
Dollar Amount of the aggregate  principal  amount of the Loans then owing to the
Affected Lender plus any accrued but unpaid interest thereon, accrued but unpaid
fees  and  any  other  amounts  owing  to the  Affected  Lender  hereunder.  The
Administrative  Agent shall  cooperate in  effectuating  the  replacement  of an
Affected  Lender  under  this  Section  3.14(a),   but  at  no  time  shall  the
Administrative  Agent be  obligated in any way  whatsoever  to initiate any such
replacement.  The  exercise by the  Borrowers of their rights under this Section
3.14(a)  shall be at the  Borrowers'  sole cost and  expense,  and at no cost or
expense of the  Administrative  Agent,  the Affected  Lender or any of the other
Lenders.

         (b) Failed  Lender.  In the event any Lender  shall fail to meet any of
its  obligations  under Sections 2.1, 2.2, 2.3 or 2.4 (a "Failed  Lender"),  the
Borrowers  may demand  that the Failed  Lender,  and upon such demand the Failed
Lender shall promptly,  assign its Commitment (and Finnish Mark  Commitment,  if
applicable) to an Eligible  Assignee  selected by the Borrowers  (which Eligible
Assignee shall have consented to such assignment),  subject to and in accordance
with Section  13.10(b),  for a purchase  price equal to the Dollar Amount of the
aggregate principal amount of the Loans then owing to the Failed Lender plus any
accrued  but unpaid  interest  thereon,  accrued  but unpaid  fees and any other
amounts owing to the Failed Lender  hereunder.  The  Administrative  Agent shall
cooperate in effectuating  the replacement of a Failed Lender under this Section
3.14(b),  but at no time shall the Administrative  Agent be obligated in any way
whatsoever  to initiate any such  replacement.  The exercise by the Borrowers of
their rights under this Section 3.14(b) shall be at the Borrowers' sole cost and
expense,  and at no cost or expense of the  Administrative  Agent,  the Affected
Lender or any of the other Lenders.



<PAGE>




                                   ARTICLE IV

                  CLOSING; CONDITIONS OF CLOSING AND BORROWING

         SECTION 4.1  Closing.  The  closing  shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street, Suite 4200,
Charlotte,  North  Carolina  28202 at 10:00 a.m. on April __,  1997,  or on such
other date as the parties hereto
shall mutually agree.

         SECTION 4.2 Conditions to Closing and Initial Loans.  The obligation of
the Lenders to close this  Agreement  and to make the initial Loan is subject to
the satisfaction of each of the following conditions:

         (a)      Executed Loan Documents.  The following Loan Documents,
in form and substance satisfactory to the Administrative Agent and
each Lender:

              (i)          this Agreement;

             (ii)          the 364-Day Credit Agreement;

            (iii)          the Revolving Credit Notes;

             (iv)          the Finnish Mark Notes;

              (v)          the Swingline Note;

             (vi)          the Pledge Agreements; and

            (vii)          the Subsidiary Guaranty Agreement;

shall have been duly authorized,  executed and delivered by the parties thereto,
shall be in full force and effect and no default or event of default shall exist
thereunder, and the Borrowers shall have delivered original counterparts thereof
to the  Administrative  Agent.  Notwithstanding  the  foregoing,  in  the  event
Applicable Laws or practices in the foreign  jurisdictions set forth on Schedule
4.2(a) attached hereto preclude or prevent the completion of a Pledge  Agreement
on or prior to the Closing Date,  the Borrower  shall not be required to deliver
the  Pledge  Agreements  set forth on  Schedule  4.2(a)  attached  hereto on the
Closing Date; provided that the Borrower shall deliver the Pledge Agreements set
forth on


<PAGE>



Schedule  4.2(a) attached hereto as soon as possible after the Closing Date and,
in any event, within ninety (90) days of the Closing Date.

         (b)      Closing Certificates; etc.

     (i) Officers's Certificate of the Borrowers. The Administrative Agent shall
have received a signed  certificate  from the chief  executive  officer or chief
financial  officer  of  BREED,  in  form  and  substance   satisfactory  to  the
Administrative Agent, to the effect that to the best of such officer's knowledge
all  representations and warranties of the Borrowers contained in this Agreement
and the other Loan Documents are true, correct and complete;  that the Borrowers
are not in violation of any of the covenants contained in this Agreement and the
other Loan Documents; that, after giving effect to the transactions contemplated
by  this  Agreement,  no  Default  or  Event  of  Default  has  occurred  and is
continuing;   and  that  the  Borrowers  have  satisfied  each  of  the  closing
conditions.

     (ii) Certificate of Secretary of each Loan Party. The Administrative  Agent
shall have received a signed certificate of the secretary or assistant secretary
of each Loan Party  certifying that attached thereto is a true and complete copy
of the articles of incorporation  or other charter  documents of such Loan Party
and all  amendments  thereto,  certified as of a recent date by the  appropriate
Governmental  Authority in its  jurisdiction  of  incorporation;  that  attached
thereto  is a true and  complete  copy of the  bylaws of such  Loan  Party as in
effect on the date of such  certification;  that,  with respect to each Borrower
and each Subsidiary  Guarantor,  attached thereto is a true and complete copy of
resolutions  duly  adopted by the Board of  Directors  of such  Borrower or such
Subsidiary Guarantor authorizing the borrowings  contemplated  hereunder and the
execution,  delivery  and  performance  of this  Agreement  and the  other  Loan
Documents to which it is a party;  and,  with respect to each  Borrower and each
Subsidiary  Guarantor,  as to the incumbency and genuineness of the signature of
each  officer of such  Borrower  or such  Subsidiary  Guarantor  executing  Loan
Documents to which it is a party.  Notwithstanding the foregoing,  to the extent
any such organizational documents described in this subsection (b)(ii) cannot be
provided due to their  unavailability  under the Applicable Laws or practices in
the foreign  jurisdictions  set forth on Schedule  4.2(b) attached  hereto,  the
applicable  Borrower  shall  not be  required  to  deliver  such  organizational
documents but shall deliver such evidence of its due


<PAGE>



     incorporation  and valid  existence as shall be required in the  reasonable
discretion of the Administrative Agent.

            (iii) Certificates of Good Standing.  The Administrative Agent shall
have  received  certificates  as of a recent  date of the good  standing of each
Borrower  and  Subsidiary   Guarantor   under  the  laws  of  their   respective
jurisdictions of organization and each other jurisdiction where such Borrower or
such  Subsidiary  Guarantor is qualified  to do  business.  Notwithstanding  the
foregoing,  to the extent any such  certificates  described  in this  subsection
(b)(iii)  cannot be provided due to their  unavailability  under the  Applicable
Laws or  practices  in the foreign  jurisdictions  set forth on Schedule  4.2(b)
attached hereto,  the applicable  Borrower shall not be required to deliver such
certificates but shall deliver such evidence of its qualification to do business
in such  jurisdiction  as shall be required in the reasonable  discretion of the
Administrative Agent.

             (iv)  Opinions  of  Counsel.  The  Administrative  Agent shall have
received favorable opinions of United States, United Kingdom,  Italian,  German,
Finnish,   and  Canadian   counsel  to  the  Loan   Parties   addressed  to  the
Administrative  Agent and the Lenders with respect to the Loan Parties, the Loan
Documents and such other matters as the Lenders shall request,  each in form and
substance satisfactory to the Administrative Agent and the Lenders.

         (c)      Collateral.

                  (i) Pledged Stock or Equivalent  Security.  The Administrative
Agent shall have received,  as applicable,  original stock certificates or other
equivalent  security  interest  (or  the  equivalent  taking  into  account  the
Applicable Laws and practices of any relevant foreign  jurisdiction) of each A/C
Borrower and each  Material  Subsidiary  evidencing  the capital  stock  pledged
pursuant to the Pledge  Agreements  executed by the  applicable  A/C Borrower or
Material  Subsidiary,  together with an appropriate undated stock power for each
certificate duly executed in blank by the registered owner thereof.

             (ii) Filings and  Recordings.  All filings,  recordations,  and any
other  actions  that are  necessary  to perfect the  security  interests  of the
Lenders in the  Collateral  described in the Pledge  Agreements  shall have been
filed in all  appropriate  locations  and the  Administrative  Agent  shall have
received evidence satisfactory


<PAGE>



to the Administrative  Agent that such security  interests  constitute valid and
perfected first priority Liens therein.

            (iii) Foreign Security  Interests and Filings.  Notwithstanding  the
provisions of the foregoing  subsections (c)(i) and (c)(ii),  with regard to any
Foreign  Subsidiary  whose stock is to be pledged  hereunder,  the Borrowers may
evidence their  compliance with such  subsections by providing a perfected first
priority security interest (or the equivalent thereof pursuant to the Applicable
Laws and practices of any relevant foreign jurisdiction) in the relevant indicia
of ownership of such  Foreign  Subsidiary;  provided  that the  Borrowers  shall
provide  an  opinion  of  counsel  in form  and  substance  satisfactory  to the
Administrative  Agent as to the  perfection,  validity and binding nature of the
security  interest  so  obtained.  Moreover,  in the  event  Applicable  Laws or
practices in the foreign  jurisdictions  set forth on Schedule  4.2(a)  attached
hereto  preclude or prevent  the  completion  of  documentation  evidencing  the
security  interest  referenced in subsection  (c)(i) or the filing and recording
referenced in subsection  (c)(ii) on or prior to the Closing Date,  the Borrower
shall not be required to have  completed  and obtained  the security  interests,
filings and  recordings  set forth on  Schedule  4.2(a)  attached  hereto on the
Closing Date;  provided that the Borrower shall complete and obtain the security
interests,  filings and recordings set forth on Schedule  4.2(a) attached hereto
as soon as possible after the Closing Date and, in any event, within ninety (90)
days of the Closing Date.

             (iv) Insurance.  The  Administrative  Agent shall have received the
schedule of insurance as set forth on Schedule 4.2(c) in the form required under
Section  7.3  and   otherwise  in  form  and  substance   satisfactory   to  the
Administrative Agent.

         (d)      Consents; Defaults.

                  (i)  Governmental  and Third Party  Approvals.  All  necessary
approvals,  authorizations and consents,  if any are required, of any Person and
of all Governmental  Authorities and courts having  jurisdiction with respect to
the  transactions  contemplated  by this  Agreement and the other Loan Documents
shall have been obtained.

             (ii)          Permits and Licenses.  All permits and licenses,
including permits and licenses required under Applicable Laws, the
absence of which would have a Material Adverse Effect on the


<PAGE>



current conduct of business by the Borrowers and their Subsidiaries,  shall have
been obtained.

            (iii) No  Injunction,  Etc.  No action,  proceeding,  investigation,
regulation or  legislation  shall have been institut ed,  threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial  damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the  consummation  of the  transactions
contemplated  hereby  or  thereby,  or  which,  in  the  Administrative  Agent's
discretion,   would  make  it  inadvisable   to  consummate   the   transactions
contemplated by this Agreement and such other Loan Documents.

             (iv) No Material Adverse Change.  There shall not have occurred any
material adverse change in the condition  (financial or otherwise),  operations,
properties,  business or prospects of the Borrowers and their Subsidiaries taken
as a whole,  or any  event  or  condition  that  has had or could be  reasonably
expected to have a Material Adverse Effect.

              (v)          No Event of Default.  No Default or Event of Default
shall have occurred and be continuing.

         (e)      Financial Matters.

                  (i) Financial Statements.  The Administrative Agent shall have
received the most recent audited Consolidated  financial statements of BREED and
its Subsidiaries,  all in form and substance  satisfactory to the Administrative
Agent and prepared in accordance with GAAP.

             (ii) Financial Condition Certificate. BREED shall have delivered to
the Administrative  Agent a certificate,  in form and substance  satisfactory to
the  Administrative  Agent,  and  certified  as accurate by the chief  executive
officer  or chief  financial  officer  of BREED,  that (A) BREED and each of its
Subsidiaries  are  each  Solvent,  (B) the  payables  of  BREED  and each of its
Subsidiaries  are current and not past due, (C) attached  thereto is a pro forma
balance sheet of BREED and its  Subsidiaries  setting forth on a pro forma basis
the financial condition of BREED and its Subsidiaries on a Consolidated basis as
of  March  31,  1997,  reflecting  on a  pro  forma  basis  the  effect  of  the
transactions  contemplated herein, including all fees and expenses in connection
therewith; evidencing compliance on a pro forma basis with the


<PAGE>



covenants  contained in Articles  VIII and IX hereof;  and setting forth the pro
forma  calculation of the Applicable  Margin  pursuant to Section 3.1(c) and (D)
attached  thereto are the  financial  projections  previously  delivered  to the
Administrative  Agent  representing  the good faith opinions of BREED and senior
management thereof as to the projected results contained therein.

            (iii)  Payment  at  Closing.  There  shall  have  been  paid  by the
Borrowers  to the  Administrative  Agent and the  Lenders  the fees set forth or
referenced in Section 3.3 and any other  accrued and unpaid fees or  commissions
due hereunder (including,  without limitation,  legal fees and expenses), and to
any other  Person  such  amount as may be due  thereto  in  connection  with the
transactions contemplated hereby, including all taxes, fees and other charges in
connection with the execution,  delivery,  recording, filing and registration of
any of the Loan Documents.

         (f)      Miscellaneous.

              (i)  Notice of  Borrowing.  The  Administrative  Agent  shall have
received a Notice of Borrowing  from the  Borrowers in  accordance  with Section
2.4(a), and a written notice in the form attached hereto as Exhibit G (a "Notice
of  Account  Designation")  specifying  the  account  or  accounts  to which the
proceeds of any Loans made after the Closing Date are to be disbursed.

             (ii)  Proceedings  and  Documents.  Subject  to the  provisions  of
Section  4.2(a) and (c) relating to the effects of Applicable  Laws or practices
in foreign jurisdictions,  all opinions,  certificates and other instruments and
all  proceedings  in  connection  with  the  transactions  contemplated  by this
Agreement shall be  satisfactory in all material  respects in form and substance
to the Lenders.  The Lenders shall have received copies of all other instruments
and other evidence as any Lender may reasonably  request,  in form and substance
satisfactory to the Lenders,  with respect to the  transactions  contemplated by
this Agreement and the taking of all actions in connection therewith.

            (iii)          Due Diligence and Other Documents.  The Loan Parties
shall have delivered to the Administrative Agent such other
documents, certificates and opinions as the Administrative Agent
reasonably requests.

         (g)      Termination of the Existing Credit Agreement.  On the
Closing Date hereunder, all loans under the Existing Credit


<PAGE>



Agreement shall be repaid in full and the commitments and other  obligations and
rights of the lenders thereunder shall be terminated.

         SECTION 4.3  Conditions to All Loans.  The  obligation of any Lender to
make  any  Loan  (subject  to  Section  2.3(b)  with  respect  to  refunding  or
participating  in Swingline  Loans)  hereunder is subject to the satisfaction of
the following conditions precedent on the relevant borrowing or issue date:

         (a) Continuation of Representations and Warranties. The representations
and warranties  contained in the Loan Documents (other than the  representations
and  warranties  made only as of a specific date) shall be true and correct with
the same effect as though such  representations  and warranties had been made on
and as of such borrowing  date,  except to the extent that such  representations
and  warranties  are no longer  true or correct as a result of events,  actions,
transactions or occurrences after the Closing Date which are permitted under the
terms of this Agreement.

         (b) No  Existing  Default.  No Default  or Event of Default  shall have
occurred and be continuing  hereunder on the borrowing date with respect to such
Loan or after giving effect to the Loans to be made on such date.

         (c)  Officer's  Compliance  Certificate;   Additional  Documents.   The
Administrative  Agent  shall have  received  the  current  Officer's  Compliance
Certificate and each  additional  document,  instrument,  legal opinion or other
item of information reasonably requested by it.


                                    ARTICLE V

                 REPRESENTATIONS AND WARRANTIES OF THE BORROWERS

         SECTION   5.1   Representations   and   Warranties.   To   induce   the
Administrative  Agent to enter into this  Agreement  and the Lenders to make the
Loans, the Borrowers hereby  represent and warrant to the  Administrative  Agent
and Lenders that:

         (a)      Organization; Power; Qualification.  Each of BREED and
its Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
formation, has the power and authority to own its properties and to


<PAGE>



carry on its business as now being and hereafter proposed to be conducted and is
duly qualified and authorized to do business in each  jurisdiction  in which the
character  of  its  properties  or the  nature  of its  business  requires  such
qualification and authorization, except where the failure to be so qualified and
authorized would not have a Material Adverse Effect.  The jurisdictions in which
BREED and its  Subsidiaries  are  organized  and  qualified  to do business  are
described on Schedule 5.1(a).

         (b) Ownership.  The  capitalization of BREED and its Subsidiaries as of
the Closing Date consists of the number of shares or other ownership  interests,
authorized,  issued and outstanding, of such classes and series, with or without
par value,  described on Schedule 5.1(b).  All outstanding shares have been duly
authorized  and  validly  issued  and are  fully  paid  and  nonassessable.  The
shareholders or owners of the  Subsidiaries of BREED and the number of shares or
other ownership  interests owned by each as of the Closing Date are described on
Schedule 5.1(b). As of the Closing Date, there are no outstanding stock purchase
warrants, subscriptions, options, securities, instruments or other rights of any
type or nature  whatsoever,  which are  convertible  into,  exchangeable  for or
otherwise provide for or permit the issuance of capital stock or other ownership
interests of BREED or its Subsidiaries, except as described on Schedule 5.1(b).

         (c) Authorization of Agreement,  Loan Documents and Borrowing.  Each of
BREED and its Subsidiaries has the right,  power and authority and has taken all
necessary  corporate and other action to authorize the  execution,  delivery and
performance  of this  Agreement and each of the other Loan Documents to which it
is a party in accordance with their respective terms. This Agreement and each of
the other Loan  Documents  have been duly  executed  and  delivered  by the duly
authorized  officers of BREED and each of its  Subsidiaries  party thereto,  and
each such document  constitutes the legal, valid and binding obligation of BREED
or such  Subsidiary  party thereto,  enforceable  in accordance  with its terms,
except  as  such   enforcement   may  be  limited  by  bankruptcy,   insolvency,
reorganization, moratorium or similar state, provincial or federal debtor relief
laws from time to time in effect  which  affect the  enforcement  of  creditors'
rights in general and the availability of equitable remedies.

         (d)      Compliance of Agreement, Loan Documents and Borrowing
with Laws, Etc.  The execution, delivery and performance by BREED
and its Subsidiaries of the Loan Documents to which each such


<PAGE>



Person is a party, in accordance  with their  respective  terms,  the borrowings
hereunder and the transactions  contemplated  hereby do not and will not, by the
passage  of time,  the  giving of notice  or  otherwise,  (i) to the best of the
Borrowers'   knowledge,   require  any  Governmental  Approval  or  violate  any
Applicable Law relating to BREED or any of its Subsidiaries, (ii) conflict with,
result  in  a  breach  of  or   constitute  a  default  under  the  articles  of
incorporation,  bylaws or other organizational  documents of BREED or any of its
Subsidiaries  or any  indenture,  agreement  or other  instrument  to which such
Person  is a  party  or by  which  any of its  properties  may be  bound  or any
Governmental Approval relating to such Person, or (iii) result in or require the
creation or  imposition  of any Lien upon or with  respect to any  property  now
owned or hereafter  acquired by such Person other than Liens  arising  under the
Loan Documents.

         (e) Compliance with Law; Governmental Approvals.  Each of BREED and its
Subsidiaries (i) has or is actively pursuing all Governmental Approvals required
by any Applicable  Law for it to conduct its business,  each of which is in full
force and  effect,  is final and not  subject to review on appeal and is not the
subject of any pending or, to the best of its  knowledge,  threatened  attack by
direct  or  collateral   proceeding,   and  (ii)  is  in  compliance  with  each
Governmental  Approval  applicable  to it  and  in  compliance  with  all  other
Applicable Laws relating to it or any of its respective properties, except where
the failure to so comply would not have,  individually  or in the  aggregate,  a
Material Adverse Effect.

         (f) Tax Returns and Payments.  Each of BREED and its  Subsidiaries  has
duly filed or caused to be filed all federal, state, provincial, local and other
tax  returns  required  by  Applicable  Law to be filed,  and has paid,  or made
adequate provision for the payment of, all federal, state, provincial, local and
other  taxes,  assessments  and  governmental  charges or levies upon it and its
property, income, profits and assets which are due and payable, except where the
failure to so file or pay would not have,  individually  or in the aggregate,  a
Material  Adverse  Effect.  No  Governmental  Authority has asserted any Lien or
other claim against BREED or any Subsidiary thereof with respect to unpaid taxes
which has not been discharged or resolved. The charges, accruals and reserves on
the  books  of  BREED  and  its  Subsidiaries  in  respect  of  federal,  state,
provincial,  local and other  taxes for all Fiscal  Years and  portions  thereof
since the  organization  of BREED and its  Subsidiaries  are in the  judgment of
BREED adequate,


<PAGE>



and BREED does not anticipate any additional taxes or assessments
for any of such years.

         (g) Intellectual  Property Matters.  Each of BREED and its Subsidiaries
owns or possesses rights to use all franchises,  licenses, copyrights, copyright
applications,   patents,   patent  rights  or  licenses,   patent  applications,
trademarks,  trademark rights,  trade names,  trade name rights,  copyrights and
rights with respect to the foregoing which are required to conduct its business.
No event has occurred  which  permits,  or after notice or lapse of time or both
would permit,  the  revocation or  termination  of any such rights,  and neither
BREED nor any Subsidiary  thereof is liable to any Person for infringement under
Applicable  Law with  respect  to any such  rights as a result  of its  business
operations,  except where any such liability would not have,  individually or in
the aggregate, a Material Adverse Effect.

         (h)      Environmental Matters.  Subject to certain instances of
non-compliance which would not have, individually or in the
aggregate, a Material Adverse Effect on BREED and its Subsidiaries
taken as a whole:

                  (i)  The  properties  of  BREED  and its  Subsidiaries  do not
contain,  and to their  knowledge have not previously  contained,  any Hazardous
Materials in amounts or  concentrations  which (A)  constitute or  constituted a
violation   of,  or  (B)  could  give  rise  to  liability   under,   applicable
Environmental Laws;

             (ii) Such  properties  and all  operations  conducted in connection
therewith are in compliance,  and have been in  compliance,  with all applicable
Environmental  Laws,  and  there is no  contamination  at,  under or about  such
properties or such operations which could interfere with the continued operation
of such properties or impair the fair saleable value thereof;

            (iii)  Neither  BREED nor any  Subsidiary  thereof has  received any
notice of violation,  alleged violation,  noncompliance,  liability or potential
liability regarding  environmental matters or compliance with Environmental Laws
with regard to any of their properties or the operations conducted in connection
therewith,  nor does BREED or any Subsidiary thereof have knowledge or reason to
believe that any such notice will be received or is being threatened;



<PAGE>



             (iv) Hazardous  Materials have not been  transported or disposed of
from the  properties  of BREED and its  Subsidiaries  in  violation  of, or in a
manner or to a location which could give rise to liability under,  Environmental
Laws,  nor have any  Hazardous  Materials  been  generated,  treated,  stored or
disposed  of at, on or under any of such  properties  in  violation  of, or in a
manner that could give rise to liability  under,  any  applicable  Environmental
Laws;

              (v) No judicial  proceedings  or  governmental  or  administrative
action is pending, or, to the knowledge of the Borrowers,  threatened, under any
Environmental  Law to which BREED or any Subsidiary  thereof is or will be named
as a party with respect to such properties or operations conducted in connection
therewith,  nor are there any consent decrees or other decrees,  consent orders,
administrative  orders or other  orders,  or other  administrative  or  judicial
requirements  outstanding  under  any  Environmental  Law with  respect  to such
properties or such operations; and

             (vi) There has been no  release,  or to the best  knowledge  of the
Borrowers,  the  threat  of  release,  of  Hazardous  Materials  at or from such
properties, in violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws.

         (i) ERISA.  Subject to certain instances of non-compliance  which would
not have,  individually or in the aggregate,  a Material Adverse Effect on BREED
and its Subsidiaries taken as a whole:

                  (i)      Neither BREED nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit
Plans other than those identified on Schedule 5.1(i);

             (ii)  BREED and each ERISA  Affiliate  are in  compliance  with all
applicable provisions of ERISA 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  by the
Internal Revenue Service to be so qualified, and each trust related to such plan
has been  determined to be exempt under Section 501(a) of the Code. No liability
has been incurred by BREED or any ERISA Affiliate which remains  unsatisfied for
any


<PAGE>



taxes or penalties with respect to any Employee Benefit Plan or any
Multiemployer Plan;

            (iii) No Pension Plan has been  terminated,  nor has any accumulated
funding  deficiency  (as  defined  in  Section  412 of the Code)  been  incurred
(without  regard to any waiver  granted under Section 412 of the Code),  nor has
any funding waiver from the Internal  Revenue Service been received or requested
with respect to any Pension Plan, nor has BREED or any ERISA Affiliate failed to
make any  contributions  or to pay any  amounts  due and  owing as  required  by
Section 412 of the Code,  Section 302 of ERISA or the terms of any Pension  Plan
prior to the due dates of such  contributions  under  Section 412 of the Code or
Section  302 of ERISA,  nor has there been any event  requiring  any  disclosure
under  Section  4041(c)(3)(C)  or 4063(a) of ERISA with  respect to any  Pension
Plan;

             (iv)          Neither BREED nor any ERISA Affiliate has: (A)
engaged in a nonexempt prohibited transaction described in Section
406 of the ERISA or Section 4975 of the Code,  (B) incurred any liability to the
PBGC which remains  outstanding other than the payment of premiums and there are
no  premium  payments  which are due and  unpaid,  (C) failed to make a required
contribution  or  payment  to a  Multiemployer  Plan,  or (D)  failed  to make a
required installment or other required payment under Section 412 of the Code;

                  (v)      No Termination Event has occurred or is reasonably
expected to occur; and

             (vi) No proceeding, claim, lawsuit and/or investigation is existing
or, to the best knowledge of BREED,  threatened  concerning or involving any (A)
employee  welfare  benefit plan (as defined in Section 3(1) of ERISA)  currently
maintained or contributed to by BREED or any ERISA  Affiliate,  (B) Pension Plan
or (C) Multiemployer Plan.

         (j) Margin Stock.  Neither BREED nor any Subsidiary  thereof is engaged
principally or as one of its activities in the business of extending  credit for
the purpose of  "purchasing" or "carrying" any "margin stock" (as each such term
is  defined  or used in  Regulations  G and U of the Board of  Governors  of the
Federal  Reserve  System).  No part of the  proceeds of any of the Loans will be
used for purchasing or carrying margin stock or for any purpose


<PAGE>



which  violates,  or  which  would  be  inconsistent  with,  the  provisions  of
Regulation G, T, U or X of such Board of Governors.

         (k) Government Regulation.  Neither BREED nor any Subsidiary thereof is
an "investment company" or a company "controlled" by an "investment company" (as
each such term is  defined or used in the  Investment  Company  Act of 1940,  as
amended) and neither BREED nor any Subsidiary thereof is, or after giving effect
to any Loan will be,  subject to  regulation  under the Public  Utility  Holding
Company Act of 1935 or the  Interstate  Commerce  Act,  each as amended,  or any
other  Applicable  Law which  limits  its  ability  to incur or  consummate  the
transactions contemplated hereby.

         (l)      Material Contracts.  Each Material Contract is, and after
giving effect to the consummation of the transactions contemplated
by the Loan Documents will be, in full force and effect in
accordance with the terms thereof.

         (m) Employee Relations. Each of BREED and its Subsidiaries has a stable
work force in place and, as of the Closing Date, is not,  except as set forth on
Schedule 5.1(m), party to any collective  bargaining agreement nor has any labor
union been recognized as the representative of its employees.  BREED knows of no
pending,  threatened or contemplated  strikes, work stoppage or other collective
labor  disputes  involving  its employees or those of its  Subsidiaries,  except
those which would not have, individually or in the aggregate, a Material Adverse
Effect.

         (n) Burdensome Provisions.  Neither BREED nor any Subsidiary thereof is
a party to any indenture,  agreement,  lease or other instrument,  or subject to
any corporate or partnership  restriction,  Governmental  Approval or Applicable
Law which is so unusual or  burdensome  as in the  foreseeable  future  could be
reasonably   expected  to  have  a  Material  Adverse  Effect.   BREED  and  its
Subsidiaries do not presently anticipate that future expenditures needed to meet
the provisions of any statutes,  orders,  rules or regulations of a Governmental
Authority will be so burdensome as to have a Material Adverse Effect.

         (o) Financial  Statements.  The (i) audited Consolidated balance sheets
of BREED  and its  Subsidiaries  as of June 30,  1996  and the  related  audited
statements of income,  retained earnings and cash flows for the Fiscal Year then
ended  and  (ii)  unaudited   Consolidated   balance  sheet  of  BREED  and  its
Subsidiaries as of December 31, 1996 and related unaudited statements of income,


<PAGE>



retained  earnings  and cash flows,  copies of which have been  furnished to the
Administrative  Agent and each  Lender,  are  complete  and  correct  and fairly
present  the  assets,  liabilities  and  financial  position  of  BREED  and its
Subsidiaries as at such dates,  and the results of the operations and changes of
financial  position for the periods then ended.  All such financial  statements,
including  the  related  schedules  and notes  thereto,  have been  prepared  in
accordance with GAAP.  BREED and its  Subsidiaries  have no Debt,  obligation or
other unusual forward or long-term  commitment  which is not fairly reflected in
the foregoing financial statements or in the notes thereto.

         (p) No Material Adverse Change.  Since June 30, 1996, there has been no
material adverse change in the properties,  business, operations,  prospects, or
condition  (financial or otherwise) of BREED and its  Subsidiaries  and no event
has occurred or  condition  arisen that could  reasonably  be expected to have a
Material Adverse Effect.

         (q)  Solvency.  As of the Closing Date and after giving  effect to each
Loan  made  hereunder,  BREED  and its  Subsidiaries  taken  as a whole  will be
Solvent.

         (r) Titles to Properties.  Each of BREED and its  Subsidiaries has such
title to the real property owned or leased by it as is necessary or desirable to
the conduct of its  business  and valid and legal  title to all of its  personal
property  and assets,  including,  but not limited to,  those  reflected  on the
balance  sheets of BREED and its  Subsidiaries  delivered  pursuant  to  Section
5.1(o),  except those which have been  disposed of by BREED or its  Subsidiaries
subsequent to such date which  dispositions  have been in the ordinary course of
business or as otherwise expressly permitted hereunder.

         (s) Liens. None of the properties and assets of BREED or any Subsidiary
thereof is subject to any Lien, except Liens permitted  pursuant to Section 9.3.
No  financing  statement  or  application  for  registration  under the  Uniform
Commercial  Code of any state or personal  property  security  legislation as to
registration  of security on movable  property of any other  jurisdiction  which
names BREED or any Subsidiary  thereof or any of their respective trade names or
divisions as debtor or grantor and which has not been terminated, has been filed
in any state or other  jurisdiction and neither BREED nor any Subsidiary thereof
has signed any such financing  statement or application for  registration or any
security


<PAGE>



agreement  authorizing  any secured party  thereunder to file any such financing
statement  or  application  for  registration,  except to  perfect  those  Liens
permitted by Section 9.3 hereof.

         (t) Debt and Contingent Obligations.  Schedule 5.1(t) is a complete and
correct  listing  of all  Debt  and  Contingent  Obligations  of  BREED  and its
Subsidiaries  as of the  Closing  Date in  excess of  $2,500,000.  BREED and its
Subsidiaries  have performed and are in compliance with all of the terms of such
Debt and Contingent  Obligations  and all  instruments  and agreements  relating
thereto,  and no default or event of default,  or event or condition  which with
notice or lapse of time or both  would  constitute  such a  default  or event of
default on the part of BREED or its Subsidiaries exists with respect to any such
Debt or Contingent Obligation.

         (u) Litigation.  Except as set forth on Schedule  5.1(u),  there are no
actions, suits or proceedings pending nor, to the knowledge of BREED, threatened
against or in any other way  relating  adversely  to or  affecting  BREED or any
Subsidiary thereof or any of their respective  properties in any court or before
any arbitrator of any kind or before or by any Governmental  Authority which, if
adversely determined,  would have,  individually or in the aggregate, a Material
Adverse Effect.

         (v)      Absence of Defaults.  No event has occurred or is
continuing which constitutes a Default or an Event of Default.

         (w) Accuracy and Completeness of Information.  All written information,
reports  and  other  papers  and data  produced  by or on behalf of BREED or any
Subsidiary  thereof and furnished to the Lenders were, at the time the same were
so furnished,  to the best knowledge of the  Borrowers,  complete and correct in
all respects to the extent  necessary to give the  recipient a true and accurate
knowledge of the subject matter. No document furnished or written statement made
to the Administrative Agent or the Lenders by BREED or any Subsidiary thereof in
connection with the  negotiation,  preparation or execution of this Agreement or
any of the  Loan  Documents  contains  or  will  contain  any  knowingly  untrue
statement  of  a  fact  material  to  the   creditworthiness  of  BREED  or  its
Subsidiaries  or knowingly omits or will omit to state a fact necessary in order
to make the statements  contained therein not misleading.  BREED is not aware of
any facts  which it has not  disclosed  in writing to the  Administrative  Agent
having a Material


<PAGE>



Adverse  Effect,  or insofar  as the  Borrowers  can now  foresee,  which  could
reasonably be expected to have a Material Adverse Effect.

         SECTION 5.2  Survival  of  Representations  and  Warranties,  Etc.  All
representations   and   warranties   set  forth  in  this   Article  V  and  all
representations and warranties contained in any certifi cate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this  Agreement.  All  representations  and warranties
made  under this  Agreement  shall be made or deemed to be made at and as of the
Closing  Date,  shall  survive the  Closing  Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing hereunder.


                                   ARTICLE VI

                        FINANCIAL INFORMATION AND NOTICES

         Until all the Obligations have been finally and  indefeasibly  paid and
satisfied  in full  and the  Commitments  terminated,  unless  consent  has been
obtained in the manner set forth in Section  13.11 hereof,  the  Borrowers  will
furnish  or  cause  to  be  furnished  to  the   Administrative   Agent  at  the
Administrative  Agent's  Office at the address set forth in Section  13.1 hereof
and to the  Lenders  at their  respective  addresses  as set  forth on  Schedule
1.1(b),  or such other office as may be designated by the  Administrative  Agent
and Lenders from time to time:

         SECTION 6.1                Financial Statements and Projections.

         (a) Quarterly Financial  Statements.  As soon as practicable and in any
event  within  forty-five  (45) days after the end of each  fiscal  quarter,  an
unaudited  Consolidated  and  consolidating  balance  sheet  of  BREED  and  its
Subsidiaries  as of the close of such fiscal quarter and unaudited  Consolidated
and consolidating statements of income, retained earnings and cash flows for the
fiscal  quarter  then  ended and that  portion of the  Fiscal  Year then  ended,
including  the  notes  thereto,  all  in  reasonable  detail  setting  forth  in
comparative  form the  corresponding  figures for the preceding  Fiscal Year and
prepared  by BREED in  accordance  with  GAAP  and,  if  applicable,  containing
disclosure of the effect on the  financial  position or results of operations of
any change in the application


<PAGE>



of accounting  principles and practices during the period,  and certified by the
chief financial  officer of BREED to present fairly in all material respects the
financial  condition of BREED and its  Subsidiaries as of their respective dates
and the results of operations of BREED and its  Subsidiaries  for the respective
periods then ended, subject to normal year end adjustments.

         (b) Annual  Financial  Statements.  As soon as  practicable  and in any
event  within  ninety  (90) days after the end of each Fiscal  Year,  an audited
Consolidated balance sheet of BREED and its Subsidiaries as of the close of such
Fiscal  Year,  an  unaudited  consolidating  balance  sheet  of  BREED  and  its
Subsidiaries  as of the close of such  Fiscal  Year,  and  audited  Consolidated
statements of income,  retained earnings and cash flows for the Fiscal Year then
ended and unaudited  consolidating  statements of income,  retained earnings and
cash flows for the Fiscal Year then ended,  including the notes thereto,  all in
reasonable  detail setting forth in comparative form the  corresponding  figures
for the preceding  Fiscal Year and prepared by an independent  certified  public
accounting firm acceptable to the  Administrative  Agent in accordance with GAAP
(except  with  regard  to  the  unaudited  consolidating  financial  statements,
retained  earnings  and  cash  flows  which  shall  only  be  reviewed  by  such
independent  certified public  accounting  firm) and, if applicable,  containing
disclosure  of the effect on the  financial  position or results of operation of
any change in the application of accounting  principles and practices during the
year, and accompanied by a report thereon by such certified  public  accountants
that is not qualified with respect to scope limitations  imposed by BREED or any
of its Subsidiaries or with respect to accounting  principles  followed by BREED
or any of its Subsidiaries not in accordance with GAAP.

         (c)  Annual  Business  Plan  and  Financial  Projections.  As  soon  as
practicable and in any event within  forty-five (45) days prior to the beginning
of each  Fiscal  Year,  a business  plan of BREED and its  Subsidiaries  for the
ensuing  four  (4)  fiscal  quarters,  such  plan  to be  prepared  in a  manner
consistent  with GAAP and to include,  on a quarterly  basis,  the following:  a
quarterly operating and capital budget, a projected income statement,  statement
of cash flows and balance sheet and a report containing  management's discussion
and analysis of such  projections,  accompanied by a certificate  from the chief
financial  officer of BREED to the effect  that,  to the best of such  officer's
knowledge,  such projections are good faith estimates of the financial condition
and operations of BREED and its Subsidiaries for such four (4) quarter period.


<PAGE>



         SECTION 6.2 Officer's  Compliance  Certificate.  At each time financial
statements  are delivered  pursuant to Sections  6.1(a) or (b) and at such other
times as the Administrative Agent shall reasonably request, a certificate of the
chief  financial  officer  or the  treasurer  of BREED in the form of  Exhibit E
attached hereto (an "Officer's Compliance Certificate"):

         (a) stating that such officer has reviewed  such  financial  statements
and such  statements  fairly  present the  financial  condition of BREED and its
Subsidiaries as of the dates  indicated and the results of their  operations and
cash flows for the periods indicated;

         (b) stating  that to such  officer's  knowledge,  based on a reasonable
examination, no Default or Event of Default exists, or, if such is not the case,
specifying  such  Default or Event of Default and its nature,  when it occurred,
whether it is continuing and the steps being taken by the Borrowers with respect
to such Default or Event of Default; and

         (c) setting forth as at the end of such fiscal  quarter or Fiscal Year,
as the case may be, the calculations  required to establish whether or not BREED
and its Subsidiaries  were in compliance with the financial  covenants set forth
in Article VIII hereof as at the end of each respective  period, the calculation
of the  Applicable  Margin  pursuant  to  Section  3.1(c)  as at the end of each
respective period, and the calculation of the total assets of each Subsidiary of
BREED  for  the  purpose  of  determining   which   Subsidiaries   are  Material
Subsidiaries.

         SECTION 6.3 Accountants' Certificate. At each time financial statements
are  delivered  pursuant to Section  6.1(b),  a certificate  of the  independent
public  accountants  certifying  such  financial  statements  addressed  to  the
Administrative Agent for the benefit of the Lenders:

         (a)  stating  that  in  making  the   examination   necessary  for  the
certification  of such financial  statements,  they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature and period of existence; and

         (b)      including the calculations prepared by such accountants
required to establish whether or not BREED and its Subsidiaries are


<PAGE>



in compliance  with the financial  covenants set forth in Article VIII hereof as
at the end of each respective period.

         SECTION 6.4                Other Reports.

         (a) Promptly but in any event within ten (10)  Business  Days after the
filing  thereof,  a copy of (i) each report or other filing made by BREED or any
of its Subsidiaries with the Securities and Exchange  Commission and required by
the SEC to be delivered to the shareholders of BREED or any of its Subsidiaries,
(ii) each report made by BREED or any of its Subsidiaries to the SEC on Form 8-K
and (iii) each final registration  statement of BREED or any of its Subsidiaries
filed with the SEC; and

         (b) Such other information  regarding the operations,  business affairs
and  financial   condition  of  BREED  or  any  of  its   Subsidiaries   as  the
Administrative Agent or any Lender may reasonably request.

         SECTION 6.5 Notice of Litigation and Other  Matters.  Prompt (but in no
event later than ten (10) Business Days after an officer of any Borrower obtains
knowledge thereof) telephonic and written notice of:

         (a) the commencement of all proceedings and investigations by or before
any  Governmental  Authority  and all actions  and proceed  ings in any court or
before any arbitrator  against or involving  BREED or any Subsidiary  thereof or
any of their respective properties, assets or businesses, which could reasonably
be  expected  to result in  liabilities  to BREED or any  Subsidiary  thereof in
excess of $25,000,000 or could reasonably be expected to have a Material Adverse
Effect;

         (b) any notice of any  violation  received  by BREED or any  Subsidiary
thereof from any Governmental  Authority,  including,  without  limitation,  any
notice of violation of  Environmental  Laws,  except such violations which would
not have a Material Adverse Effect;

         (c) any labor  controversy that has resulted in, or threatens to result
in, a strike or other  work  action  against  BREED or any  Subsidiary  thereof,
except such controversies which would not have a Material Adverse Effect;



<PAGE>



         (d)      any attachment, judgment, lien, levy or order exceeding
$250,000 that may be assessed against or threatened against BREED
or any Subsidiary thereof;

         (e)      any Default or Event of Default;

         (f) 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) (i) any unfavorable  determination letter from the Internal Revenue
Service  regarding the  qualification  of an Employee Benefit Plan under Section
401(a) of the Code (along  with a copy  thereof),  (ii) all notices  received by
BREED or any ERISA  Affiliate of the PBGC's intent to terminate any Pension Plan
or to have a trustee appointed to administer any Pension Plan, (iii) 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 and (iv) any Borrower  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; and

         (h)      any event which makes any of the representations set
forth in Section 5.1 inaccurate in any respect.

         SECTION 6.6 Accuracy of Information. All written information,  reports,
statements  and other papers and data  furnished by or on behalf of any Borrower
to the  Administrative  Agent or any Lender  (other  than  financial  forecasts)
whether pursuant to this Article VI or any other provision of this Agreement, or
any of the Security  Documents,  shall be, at the time the same is so furnished,
to the best of the  Borrowers'  knowledge,  complete and correct in all material
respects to the extent necessary to give the Administrative  Agent or any Lender
complete,  true  and  accurate  knowledge  of the  subject  matter  based on the
applicable Borrower's knowledge thereof.


                                   ARTICLE VII

                              AFFIRMATIVE COVENANTS


<PAGE>



         Until all of the Obligations  have been finally and  indefeasibly  paid
and satisfied in full and the  Commitments  terminated,  unless consent has been
obtained in the manner  provided for in Section  13.11,  each  Borrower will and
will cause each of its Subsidiaries to:

         SECTION 7.1  Preservation of Corporate  Existence and Related  Matters.
Except as permitted by Section 9.5, preserve and maintain its separate corporate
or legal existence and all rights, franchises, licenses and privileges necessary
to the conduct of its  business,  and qualify and remain  qualified as a foreign
corporation  and  authorized  to do business in each  jurisdiction  in which the
failure to so qualify could  reasonably  be expected to have a Material  Adverse
Effect.

         SECTION 7.2 Maintenance of Property.  Except where the failure to do so
would not have,  individually  or in the aggregate,  a Material  Adverse Effect,
protect and preserve  all  properties  useful in and  material to its  business,
including  copyrights,  patents,  trade names and  trademarks;  maintain in good
working order and condition all buildings, equipment and other tangible real and
personal property;  and from time to time make or cause to be made all renewals,
replacements  and  additions to such  property  necessary for the conduct of its
business,  so that  the  business  carried  on in  connection  therewith  may be
properly and advantageously conducted at all times.

         SECTION 7.3 Insurance.  Maintain  insurance with financially  sound and
reputable  insurance  companies  against  such risks and in such  amounts as are
customarily  maintained  by  similar  businesses  and  as  may  be  required  by
Applicable Law, and on the Closing Date and from time to time thereafter deliver
to the  Administrative  Agent upon its request a detailed  list of the insurance
then in effect, stating the names of the insurance companies, the amounts of the
insurance,  the dates of the  expiration  thereof and the  properties  and risks
covered thereby.

         SECTION  7.4  Accounting  Methods  and  Financial  Records . Maintain a
system of accounting,  and keep such books, records and accounts (which shall be
true and  complete  in all  material  respects)  as may be required or as may be
necessary to permit the  preparation of financial  statements in accordance with
GAAP.

         SECTION 7.5                Payment and Performance of Obligations.  Pay
and perform all Obligations under this Agreement and the other Loan


<PAGE>



Documents,  and pay or perform (a) all taxes, assessments and other governmental
charges  that may be levied or  assessed  upon it or any of its  property to the
extent such taxes,  assessments  or other charges are then due and payable,  and
(b) all other  indebtedness,  obligations  and  liabilities  in accordance  with
customary trade practices;  provided,  that such Borrower or such Subsidiary may
contest any item  described  in clauses (a) and (b) of this  Section 7.5 in good
faith so long as  adequate  reserves  are  maintained  with  respect  thereto in
accordance with GAAP.

         SECTION 7.6 Compliance  With Laws and Approvals.  Observe and remain in
compliance  with all  Applicable  Laws and maintain in full force and effect all
Governmental  Approvals, in each case applicable to the conduct of its business,
except  where  the  failure  to do so would  not  have,  individually  or in the
aggregate, a Material Adverse Effect.

         SECTION 7.7 Environmental Laws. In addition to and without limiting the
generality  of Section  7.6,  except  where the failure to do so would not have,
individually or in the aggregate,  a Material  Adverse Effect,  (a) comply with,
and ensure such  compliance by all tenants and  subtenants,  if any,  with,  all
applicable  Environmental  Laws and  obtain and comply  with and  maintain,  and
ensure that all tenants and subtenants obtain and comply with and maintain,  any
and all licenses, approvals, notifications, registrations or permits required by
applicable  Environmental  Laws,  (b) conduct and complete  all  investigations,
studies,  sampling  and testing,  and all  remedial,  removal and other  actions
required under  Environmental  Laws, and promptly  comply with all lawful orders
and directives of any Governmental  Authority regarding  Environmental Laws, and
(c)  defend,  indemnify  and hold  harmless  the  Administrative  Agent  and the
Lenders,  and their respective  parents,  Subsidiaries,  Affiliates,  employees,
agents, officers and directors, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise,  arising out of, or in any way
relating  to the  violation  of,  noncompliance  with  or  liability  under  any
Environmental  Laws  applicable  to the  operations  of  such  Borrower  or such
Subsidiary,  or any orders,  requirements or demands of Governmental Authorities
related  thereto,  including,  without  limitation,  reasonable  attorney's  and
consultant's  fees,  investigation  and laboratory fees,  response costs,  court
costs and  litigation  expenses,  except to the extent that any of the foregoing
directly  result from the gross  negligence  or willful  misconduct of the party
seeking indemnification therefor.


<PAGE>



         SECTION 7.8 Compliance with ERISA. In addition to and without  limiting
the generality of Section 7.6, except where the failure to do so would not have,
individually or in the aggregate, a Material Adverse Effect, (a) comply with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Employee  Benefit Plans,  (b) not take any action
or fail to take action the result of which  could be a liability  to the PBGC or
to a Multiemployer Plan, (c) not participate in any prohibited  transaction that
could result in any civil penalty under ERISA or tax under the Code, (d) operate
each  Employee  Benefit  Plan in such a  manner  that  will  not  incur  any tax
liability  under  Section  4980B of the Code or any  liability to any  qualified
beneficiary  as  defined  in  Section  4980B of the Code and (e)  furnish to the
Administrative  Agent upon the  Administrative  Agent's  request such additional
information  about any Employee  Benefit Plan as may be reasonably  requested by
the Administrative Agent.

         SECTION 7.9  Compliance  With  Agreements.  Comply in all respects with
each  term,  condition  and  provision  of  all  leases,  agreements  and  other
instruments  entered  into in the  conduct of its  business  including,  without
limitation,  any Material Contract,  except where the failure to so comply would
not have, individually or in the aggregate, a Material Adverse Effect; provided,
that such Borrower or such  Subsidiary may contest any such lease,  agreement or
other  instrument  in  good  faith  through  applicable  proceedings  so long as
adequate reserves are maintained in accordance with GAAP.

         SECTION  7.10  Conduct  of  Business.  Engage  only  in  businesses  in
substantially  the same fields as the  businesses  conducted on the Closing Date
(including,  without  limitation,  automotive  safety  products) and in lines of
business reasonably related thereto.

         SECTION  7.11 Visits and  Inspections.  Permit  representatives  of the
Administrative  Agent or any Lender, from time to time, to visit and inspect its
properties;  inspect, audit and make extracts from its books, records and files,
including,  but not  limited to,  management  letters  prepared  by  independent
accountants;  and  discuss  with its  principal  officers,  and its  independent
accountants, its business, assets, liabilities,  financial condition, results of
operations and business prospects.



<PAGE>



         SECTION 7.12.     Additional Subsidiary Guarantors and Subsidiary
Pledgors.

         (a)  Upon  the  creation  or  acquisition  of  any  Material   Domestic
Subsidiary of BREED permitted by this Agreement and upon any Domestic Subsidiary
of BREED  becoming a Material  Domestic  Subsidiary of BREED as evidenced by the
information set forth in the Officer's Compliance Certificate delivered pursuant
to Section 6.2, cause to be executed and delivered to the  Administrative  Agent
upon the creation or acquisition of such new Material Domestic Subsidiary or the
determination pursuant to Section 6.2 that any existing Domestic Subsidiary is a
Material  Domestic  Subsidiary  (i) a  supplement  to  the  Subsidiary  Guaranty
Agreement  executed  by such new  Material  Domestic  Subsidiary,  (ii) a Pledge
Agreement or a supplement to Pledge Agreement, as applicable,  executed by BREED
or the  applicable  Subsidiary  pledging the capital  stock of such new Material
Domestic Subsidiary and a consent thereto executed by such new Material Domestic
Subsidiary   (including,   without   limitation,   original  stock  certificates
evidencing the capital stock of such new Material Domestic Subsidiary,  together
with an appropriate  undated stock power for each  certificate  duly executed in
blank  by the  registered  owner  thereof),  (iii)  the  closing  documents  and
certificates  reasonably  required  by the  Required  Lenders  to be  delivered,
including,  without limitation,  officers'  certificates,  financial statements,
opinions of counsel,  board  resolutions,  charter  documents,  certificates  of
existence and authority to do business and any other  closing  certificates  and
documents  described in Section 4.2,  and (iv) such other  documents  reasonably
requested  by the  Required  Lenders  in order that such new  Material  Domestic
Subsidiary  shall become  bound by all of the terms,  covenants  and  agreements
contained in the  Subsidiary  Guaranty  Agreement  and the capital stock thereof
shall be pledged pursuant to the applicable Pledge Agreement.

         (b) Upon the creation or acquisition of any Material Foreign Subsidiary
of BREED  permitted by this  Agreement and upon any Foreign  Subsidiary of BREED
becoming a Material Foreign  Subsidiary of BREED as evidenced by the information
set forth in the Officer's Compliance  Certificate delivered pursuant to Section
6.2,  cause to be executed and  delivered to the  Administrative  Agent upon the
creation  or  acquisition  of  such  new  Material  Foreign  Subsidiary  or  the
determination  pursuant to Section 6.2 that any existing Foreign Subsidiary is a
Material  Foreign  Subsidiary  (i) a Pledge  Agreement or a supplement to Pledge
Agreement,  as  applicable,  executed  by  BREED  or the  applicable  Subsidiary
pledging the entire ownership


<PAGE>



interest of BREED or the  applicable  Subsidiary  (up to sixty-six  (66%) of the
total  outstanding  ownership  interest or capital  stock) of such new  Material
Foreign  Subsidiary and a consent thereto  executed by such new Material Foreign
Subsidiary  (including,  without  limitation,  if  applicable,   original  stock
certificates   evidencing  the  capital  stock  of  such  new  Material  Foreign
Subsidiary,   together  with  an  appropriate   undated  stock  power  for  each
certificate  duly executed in blank by the registered  owner thereof),  (ii) the
closing documents and certificates  reasonably  required by the Required Lenders
to  be  delivered,   including,  without  limitation,   officers'  certificates,
financial statements, opinions of counsel, board resolutions, charter documents,
certificates  of existence  and  authority to do business and any other  closing
certificates  and  documents  described  in  Section  4.2,  and (iii) such other
documents reasonably requested by the Required Lenders in order that the capital
stock of such new Material  Foreign  Subsidiary shall be pledged pursuant to the
applicable Pledge Agreement.  Notwithstanding  the provisions of subsections (i)
and (ii) above, with regard to any Material Foreign Subsidiary whose stock is to
be pledged  hereunder,  the provisions  regarding the delivery of original stock
certificates  and undated  stock  powers set forth in  subsections  (i) and (ii)
shall be satisfied upon evidence of (A) a perfected  security  interested in the
relevant indicia of ownership (or the equivalent thereof as determined  pursuant
to the Applicable Laws or practices of the relevant  foreign  jurisdiction)  and
(B)  an  opinion  of  counsel  in  form  and  substance   satisfactory   to  the
Administrative  Agent as to the  validity  and binding  nature of such  security
interest in the applicable  jurisdiction.  Furthermore,  in the event Applicable
Laws or practices of the relevant foreign jurisdiction shall preclude or prevent
the delivery of the Pledge Agreement and the necessary filings and recordings in
connection  therewith  as set  forth in  subsections  (i) and (ii)  above,  such
conditions  shall be  satisfied by the  Borrowers'  good faith effort to satisfy
such  conditions as soon as possible upon the creation of such Material  Foreign
Subsidiary  but, in any event,  within  ninety (90) days of the creation of such
Material Foreign Subsidiary.

         (c)  Notwithstanding  the  foregoing,  a  Subsidiary  formed  to  issue
Convertible  Preferred Stock (and whose sole asset is Intercompany Trust Debt or
amounts received thereon) shall not be required to become a Subsidiary Guarantor
nor shall any securities thereof be required to be pledged.



<PAGE>



         SECTION 7.13  Intercompany  Notes.  As soon as  practicable  and in any
event within ninety (90) days after the Closing Date cause all intercompany Debt
existing on or arising  after such date to be evidenced by a written  promissory
note or notes.

         SECTION 7.14  Further  Assurances.  Make,  execute and deliver all such
additional and further acts, things, deeds and instruments as the Administrative
Agent or any Lender  may  reasonably  require to  document  and  consummate  the
transactions  contemplated  hereby  and to vest  completely  in and  insure  the
Administrative  Agent  and  the  Lenders  their  respective  rights  under  this
Agreement, the Notes and the other Loan Documents.


                                  ARTICLE VIII

                               FINANCIAL COVENANTS

         Until all of the Obligations  have been finally and  indefeasibly  paid
and satisfied in full and the  Commitments  terminated,  unless consent has been
obtained  in the  manner  set  forth in  Section  13.11  hereof,  BREED  and its
Subsidiaries on a Consolidated basis will not:

         SECTION  8.1.  Leverage  Ratio.  As of the end of any  fiscal  quarter,
permit the ratio of (a) the  Consolidated  Debt of BREED and its Subsidiaries as
of such date to (b) EBITDA of BREED and its  Subsidiaries for the period of four
(4) consecutive fiscal quarters ending on such date, to exceed 3.50 to 1.00.

         SECTION  8.2 Minimum  Net Worth.  As of the end of any fiscal  quarter,
permit  Net Worth to be less than (a)  $250,000,000  plus (b) 50% of  cumulative
Consolidated Net Income of BREED and its Subsidiaries commencing with the fiscal
quarter  ending  March 31, 1997  (without  deduction  for any  losses)  plus (c)
seventy-five  (75%)  of  the  net  proceeds  received  by  BREED  or  any of its
Subsidiaries  of any  Equity  Issuance  by  BREED  or  any  of its  Subsidiaries
subsequent  to the Closing  Date,  plus (d) 75% of the net proceeds  received by
BREED or any of its Subsidiaries upon the issuance of any Convertible  Preferred
Stock.

         SECTION 8.3.  Interest Coverage Ratio.  As of the end of any
fiscal quarter, permit the ratio of (a) EBIT of BREED and its
Subsidiaries for the period of four (4) consecutive fiscal quarters
ending on such date to (b) Interest Expense of BREED and its


<PAGE>



Subsidiaries for such period, to be less than 3.00 to 1.00; provided that during
the period from and including March 31, 1997 through and including  December 31,
1997, the ratio set forth in this Section 8.3 shall be permitted to be less than
3.00 to 1.00 as of the end of up to two (2) fiscal  quarters;  provided  further
that (i) the ratio set forth in this  Section  8.3 shall at no time  during such
period noted in the preceding  proviso be less than 2.75 to 1.00 and (ii) in the
event the ratio set  forth in this  Section  8.3 is less than 3.00 to 1.00,  the
Applicable  Margin  shall be adjusted in the manner set forth in Section 3.1 and
the Facility Fee Rate shall be adjusted in the manner set forth in Section 3.3.


                                   ARTICLE IX

                               NEGATIVE COVENANTS

         Until all of the Obligations  have been finally and  indefeasibly  paid
and satisfied in full and the  Commitments  terminated,  unless consent has been
obtained in the manner set forth in Section 13.11 hereof, each Borrower will not
and will not permit any of its Subsidiaries to:

         SECTION 9.1  Limitations on Debt.  Create,  incur,  assume or suffer to
exist any Debt except:

         (a)      the Obligations;

         (b)  Debt  incurred  in  connection  with a  Hedging  Agreement  with a
counterparty  and upon  terms  and  conditions  reasonably  satisfactory  to the
Administrative  Agent (unless the  counterparty  to such Hedging  Agreement is a
Lender, in which such case the approval of the Administrative Agent shall not be
required);

         (c) Debt existing on the Closing Date and not otherwise permitted under
this  Section  9.1,  as set  forth  on  Schedule  5.1(t)  and  the  renewal  and
refinancing (but not the increase) thereof;

         (d)  Debt of  BREED  under a  Capitalized  Lease  with  respect  to the
construction  and  equipping of the VTI FAB2 Facility in Finland in an aggregate
amount not to exceed $25,000,000 on any date of determination;

         (e)      Debt of BREED and its Subsidiaries incurred in connection
with Capitalized Leases other than the Capitalized Lease described


<PAGE>



in clause (d) above in an aggregate amount not to exceed
$10,000,000 on any date of determination;

         (f)      purchase money Debt of BREED and its Subsidiaries in an
aggregate amount not to exceed $25,000,000 on any date of
determination;

         (g)      Debt consisting of Contingent Obligations permitted by
Section 9.2;

         (h)      Debt of any Borrower or any Subsidiary Guarantor owing to
any other Borrower or any other Subsidiary Guarantor and
Intercompany Trust Debt;

         (i)      Subordinated Debt in an aggregate amount not to exceed
$100,000,000;

         (j) Senior Debt of any Borrower;  provided that (i) the Borrowers shall
have demonstrated pro forma compliance with each covenant  contained in Articles
VII, VIII and IX hereof prior to and following the incurrence of any such Senior
Debt and (ii) in  conjunction  with any Debt  permitted  by this  clause (j) the
Borrowers  shall  reduce  the  Aggregate  Commitment  in the manner set forth in
Section 2.7(b); and

         (k) unsecured Debt of the Borrower and its Subsidiaries  other than the
Debt  described in clauses (a) through (j) above in an  aggregate  amount not to
exceed $25,000,000 on any date of determination;

provided,  that  (i)  notwithstanding  any  of  the  foregoing  provisions,  BTI
Investments, FLDB Investments, Ltd. and BREED Technologies Finland, Oy shall not
be  permitted  to  incur  any Debt and  (ii)  none of the Debt  permitted  to be
incurred by this Section 9.1 shall  restrict,  limit or  otherwise  encumber (by
covenant or otherwise) the ability of any Subsidiary of any Borrower to make any
payment to any Borrower or any of its  Subsidiaries  (in the form of  dividends,
intercompany advances or otherwise) for the purpose of enabling the Borrowers to
pay the Obligations.

         SECTION 9.2  Limitations  on  Contingent  Obligations.  Create,  incur,
assume or suffer to exist any Contingent Obligations except:

         (a)      Contingent Obligations in favor of the Administrative
Agent for the benefit of the Administrative Agent and the Lenders;


<PAGE>



         (b)      Contingent Obligations with respect to Debt permitted
pursuant to Section 9.1 (including any Trust Preferred Guarantee);

         (c)      Contingent Obligations existing on the Closing Date and
not otherwise permitted under this Section 9.2, as set forth on
Schedule 9.2; and

         (d)      Contingent Obligations other than the Contingent
Obligations described in clauses (a) through (c) above in an
aggregate amount not to exceed $15,000,000.

         SECTION 9.3 Limitations on Liens.  Create,  incur,  assume or suffer to
exist,  any  Lien  on or  with  respect  to  any  of its  assets  or  properties
(including,  without  limitation,  shares of  capital  stock or other  ownership
interests), real or personal, whether now owned or hereafter acquired, except:

         (a) Liens for  taxes,  assessments  and other  governmental  charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental  Laws)  not yet due or as to which the  period  of grace,  if any,
related  thereto has not expired or which are being  contested in good faith and
by  appropriate  proceedings  if adequate  reserves are maintained to the extent
required by GAAP;

         (b) the  claims  of  materialmen,  mechanics,  carriers,  warehousemen,
processors or landlords for labor,  materials,  supplies or rentals  incurred in
the ordinary course of business,  (i) which are not overdue for a period of more
than  thirty  (30) days or (ii) which are being  contested  in good faith and by
appropriate proceedings;

         (c) Liens consisting of deposits or pledges made in the ordinary course
of business in  connection  with,  or to secure  payment of,  obligations  under
workers' compensation, unemployment insurance or similar legislation;

         (d)  Liens   constituting   encumbrances   in  the   nature  of  zoning
restrictions,  easements and rights or restrictions of record on the use of real
property, which in the aggregate are not substantial in amount and which do not,
in any case,  detract from the value of such  property or impair the use thereof
in the ordinary conduct of business;



<PAGE>



         (e)      Liens of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;

         (f)      Liens in existence on the Closing Date and not otherwise
permitted by this Section 9.3, as described on Schedule 9.3;

         (g) Liens  securing  Debt  permitted  under  Sections  9.1(e)  and (f);
provided, that (i) such Liens shall be created substantially simultaneously with
the  acquisition  or lease of the related  asset,  (ii) such Liens do not at any
time encumber any property other than the property  financed by such Debt, (iii)
the amount of Debt  secured  thereby  is not  increased  and (iv) the  principal
amount of Debt  secured  by any such Lien shall at no time  exceed  one  hundred
percent  (100%) of the original  purchase  price or lease payment stream of such
property at the time it was acquired or leased; and

         (h) Liens on the fixed  assets of  entities  permitted  to be  acquired
pursuant  to  Section  9.4;  provided  that any  Debt  permitted  in  connection
therewith  (i)  was  not  incurred  as a  part  of or in  anticipation  of  such
acquisition  and  (ii)  contains  terms,   conditions  and  provisions  no  more
restrictive than those provided under this Agreement.

         SECTION  9.4   Limitations   on  Loans,   Advances,   Investments   and
Acquisitions.  Purchase,  own,  invest  in or  otherwise  acquire,  directly  or
indirectly,  any capital  stock,  interests in any  partnership or joint venture
(including,   without   limitation,   the  creation  or  capitalization  of  any
Subsidiary), evidence of Debt or other obligation or security, substantially all
or a  portion  of the  business  or  assets  of any  other  Person  or any other
investment  or interest  whatsoever  in any other  Person,  or make or permit to
exist,  directly or indirectly,  any loans, advances or extensions of credit to,
or any  investment  in cash or by delivery of property in, any Person,  or enter
into,  directly  or  indirectly,  any  commitment  or option in  respect  of the
foregoing except:

         (a)      investments in Subsidiaries existing on the Closing Date
and the other existing loans, advances and investments described on
Schedule 9.4;

         (b)  investments  in  (i)  marketable  direct   obligations  issued  or
unconditionally guaranteed by the United States of America or any agency thereof
maturing  within three hundred and sixty (360) days from the date of acquisition
thereof,  (ii)  commercial  paper  maturing  no more than one hundred and twenty
(120) days from the


<PAGE>



date of creation thereof and currently having the highest rating obtainable from
either  Standard  & Poor's  Ratings  Services,  a  division  of The  McGraw-Hill
Companies,  Inc. or Moody's  Investors  Service,  Inc.,  (iii)  certificates  of
deposit maturing no more than one hundred and twenty (120) days from the date of
creation thereof issued by commercial  banks  incorporated or licensed under the
laws of the United States of America, each having combined capital,  surplus and
undivided  profits of not less than  $500,000,000  and having a rating of "A" or
better by a nationally  recognized rating agency;  provided,  that the aggregate
amount  invested in such  certificates  of deposit  shall not at any time exceed
$5,000,000 for any one such  certificate of deposit and  $10,000,000 for any one
such bank, or (iv) time deposits maturing no more than thirty (30) days from the
date of creation  thereof with commercial  banks or savings banks or savings and
loan  associations  each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding  the maximum  amounts
of insurance thereunder;

         (c)  investments  by  BREED or any of its  Subsidiaries  in the form of
acquisitions of all or  substantially  all of the business or a line of business
(whether by the acquisition of capital stock, assets or any combination thereof)
of any other Person if such acquisition meets all of the following requirements:
(i) the Person whose equity  interest is to be acquired shall be or, as a result
of such  acquisition  shall become,  a  Wholly-Owned  Subsidiary of BREED and no
Change in Control shall have been effected thereby, (ii) the Person whose equity
interest  is to be  acquired  shall  engage in a business  or the  assets  being
acquired are to be used in a business  described in Section 7.10, (iii) evidence
of approval of the acquisition of the board of directors or equivalent governing
body of the acquired Person,  including,  without  limitation,  resolutions duly
adopted by the board or directors or equivalent  governing  body of the acquired
Person  authorizing the acquisition and the execution,  delivery and performance
of any  transactions  contemplated  thereby,  shall have been  delivered  to the
Administrative   Agent,  (iv)  such  documents   reasonably   requested  by  the
Administrative  Agent  pursuant to Section 7.12 hereof shall have been delivered
to the Administrative Agent, (v) the Borrowers shall have demonstrated pro forma
compliance  with each  covenant  contained in Articles  VII,  VIII and IX hereof
prior to  consummating  the acquisition and no Default or Event of Default shall
have  occurred  and be  continuing  both before and after  giving  effect to the
acquisition,   (vi)  a  description  of  the   acquisition   and  the  governing
documentation shall have been delivered to the


<PAGE>



Administrative  Agent at least five (5) Business Days prior to the  consummation
of the  acquisition  and a copy of the final  governing  documentation  shall be
delivered  within a  reasonable  time after the  acquisition,  and (vii) if such
acquisition or investment,  if completed,  would cause the aggregate fair market
value  of all  consideration  paid  in  respect  of  all  such  acquisitions  or
investments to exceed  $25,000,000  during any Fiscal Year, the Required Lenders
shall have consented in writing to such  acquisition or investment  prior to the
proposed acquisition or investment;

         (d)      intercompany loans and advances permitted pursuant to
Section 9.1(h);

         (e)      investments in Subsidiaries formed for the purpose of
issuing Convertible Preferred Stock of BREED or any of its
Subsidiaries;

         (f)      loans and advances to employees in the ordinary course of
business in an aggregate amount not to exceed $2,500,000 at any one
time; and

         (g)      investments in joint ventures and minority interest
investments in an aggregate amount not to exceed $25,000,000.

         SECTION 9.5 Limitations on Mergers and Liquidation.  Merge, consolidate
or enter  into any  similar  combination  with any other  Person  or  liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution) except:

         (a) any  Wholly-Owned  Subsidiary  of BREED  may  merge  with any other
Wholly-Owned  Subsidiary of BREED;  provided,  that if any such  Subsidiary is a
Borrower or a Subsidiary Guarantor,  such Borrower or Subsidiary Guarantor shall
be the surviving entity;

         (b)      any Wholly-Owned Subsidiary may merge into the Person
such Wholly-Owned Subsidiary was formed to acquire in connection
with an acquisition permitted by Section 9.4(c);

         (c)      any Subsidiary of BREED may wind-up into any Borrower or
Subsidiary Guarantor; and

         (d) any  Subsidiary  formed to issue  Convertible  Preferred  Stock and
whose  sole  asset is  Intercompany  Trust  Debt may be  dissolved,  wound up or
liquidated.


<PAGE>



         SECTION 9.6 Limitations on Sale of Assets. Convey, sell, lease, assign,
transfer  or  otherwise  dispose  of any of its  property,  business  or  assets
(including,  without  limitation,  the  sale of any  receivables  and  leasehold
interests and any sale-leaseback or similar  transaction),  whether now owned or
hereafter acquired except:

         (a)      the sale of inventory in the ordinary course of business;

         (b)      the sale of obsolete assets no longer used or usable in
the business of BREED or any of its Subsidiaries;

         (c)      the transfer of assets to any Borrower or Subsidiary
Guarantor pursuant to Section 9.5(c);

         (d)      the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection
with the compromise or collection thereof;

         (e) the sale of  Non-Core  Assets  for cash or cash  equivalents  in an
aggregate  amount not to exceed  $100,000,000;  provided  that the Borrowers (i)
shall repay any  outstanding  Revolving  Credit  Loans in an amount equal to one
hundred percent (100%) of the Net Proceeds received from such sale in the manner
set forth in Section  2.5(c) and shall  reduce the  Aggregate  Commitment  by an
amount equal to fifty percent (50%) of the Net Proceeds  received from such sale
in the manner set forth in Section 2.7(b) and (ii) prior to the  consummation of
the sale of any such Non-Core Assets,  shall deliver to the Administrative Agent
and the Lenders written  evidence of pro forma compliance with the provisions of
Articles VII, VIII and IX after giving effect to such sale;

         (f) during any Fiscal Year,  the sale of  property,  business or assets
other than described in clauses (a) through (e) above in an aggregate amount not
to exceed $10,000,000; and

         (g) any  Subsidiary  formed to issue  Convertible  Preferred  Stock and
whose sole asset is Intercompany  Trust Debt may distribute such  obligations to
the holders of the Convertible Preferred Stock; provided that, such distribution
shall be deemed an incurrence of Debt and such incurrence is otherwise permitted
hereunder.

         SECTION 9.7                Limitations on Dividends and Distributions.
Declare or pay any dividends upon any of its capital stock;


<PAGE>



purchase,  redeem,  retire or otherwise  acquire,  directly or  indirectly,  any
shares of its  capital  stock,  or make any  distribution  of cash,  property or
assets among the holders of shares of its capital  stock,  or make any change in
its  capital  structure  that could  reasonably  be  expected to have a Material
Adverse Effect; provided, that:

         (a) BREED or any  Subsidiary  may declare and pay  dividends in cash or
shares of its own capital  stock;  provided  that (i) the  Borrowers  shall have
demonstrated  pro forma  compliance  with the covenant  contained in Section 8.2
prior to and following the declaration of any such dividends;

         (b)      any Subsidiary of a Borrower may pay cash dividends or
make contributions to such Borrower; and

         (c) any Subsidiary of BREED formed pursuant to Section 9.4(f) may issue
and  pay  dividends  on the  Convertible  Preferred  Stock;  provided  that  the
Convertible  Preferred  Stock shall not be redeemed  until at least one (1) year
after the Credit Facility Termination Date.

         SECTION 9.8 Transactions with Affiliates.  Except as permitted pursuant
to Section  9.4,  directly  or  indirectly:  (a) make any loan or advance to, or
purchase or assume any note or other obligation to or from, any of its officers,
directors,  shareholders  or other  Affiliates,  or to or from any member of the
immediate  family  of any of its  officers,  directors,  shareholders  or  other
Affiliates, or subcontract any operations to any of its Affiliates, or (b) enter
into,  or be a party to,  any  transaction  with any of its  Affiliates,  except
pursuant  to the  reasonable  requirements  of its  business  and upon  fair and
reasonable  terms that are fully  disclosed  to and  approved  in writing by the
Required  Lenders  and are no less  favorable  to it than it would  obtain  in a
comparable arm's length transaction with a Person not its Affiliate.

     SECTION 9.9 Certain Accounting Changes. Change its Fiscal Year end, or make
any  change  in its  accounting  treatment  and  reporting  practices  except as
required by GAAP.



<PAGE>



         SECTION 9.10               Restrictive Agreements.

         (a) On and after the Closing Date,  enter into any Debt which  contains
any  negative  pledge on  assets  or any  covenants  more  restrictive  than the
provisions of Articles VII, VIII and IX hereof,  or which  restricts,  limits or
otherwise  encumbers its ability to incur Liens on or with respect to any of its
assets or properties other than the assets or properties securing such Debt; or

         (b)      Enter into or permit to exist any agreement which impairs
or limits the ability of any Subsidiary of a Borrower to pay
dividends to such Borrower.

         SECTION  9.11  Payments  under  Convertible  Preferred  Stock.  Pay any
interest or principal due under the  Convertible  Preferred Stock so long as any
Default or Event of Default has occurred and is then continuing.


                                    ARTICLE X

                             UNCONDITIONAL GUARANTY

         SECTION   10.1   Guaranty  of   Obligations.   The   Guarantor   hereby
unconditionally  guarantees to the Administrative  Agent for the ratable benefit
of the Administrative  Agent and the Lenders,  and their respective  successors,
endorsees,  transferees  and assigns,  the prompt payment and performance of all
Obligations of the Borrowers,  whether  primary or secondary  (whether by way of
endorsement or otherwise), whether now existing or hereafter arising, whether or
not from time to time  reduced or  extinguished  (except by payment  thereof) or
hereafter  increased  or  incurred,  whether or not recovery may be or hereafter
become  barred  by  the  statute  of   limitations,   whether   enforceable   or
unenforceable as against any such Borrower, whether or not discharged, stayed or
otherwise  affected  by any  bankruptcy,  insolvency  or  other  similar  law or
proceeding, whether created directly with any Agent or Lender or acquired by any
Agent or Lender through assignment, endorsement or otherwise, whether matured or
unmatured, whether joint or several, as and when the same become due and payable
(whether at maturity or earlier, by reason of acceleration,  mandatory repayment
or otherwise),  in accordance with the terms of any such instruments  evidencing
any such  obligations,  including  all  renewals,  extensions  or  modifications
thereof (all Obligations of


<PAGE>



each such Borrower to any Agent or Lender, including all of the foregoing, being
hereinafter collectively referred to as the "Guaranteed Obligations").

         SECTION  10.2  Nature  of  Guaranty.  The  Guarantor  agrees  that this
Guaranty is a continuing,  unconditional guaranty of payment and performance and
not of  collection,  and that  its  obligations  under  this  Guaranty  shall be
primary, absolute and unconditional,  irrespective of, and unaffected by (a) the
genuineness, validity, regularity, enforceability or any future amendment of, or
change in, this  Agreement  or any other Loan  Document or any other  agreement,
document or instrument to which any such Borrower is or may become a party,  (b)
the absence of any action to enforce this Guaranty,  this Agreement or any other
Loan Document or the waiver or consent by the Administrative Agent or any Lender
with respect to any of the  provisions of this  Guaranty,  this Agreement or any
other Loan  Document,  (c) the  existence,  value or condition of, or failure to
perfect its Lien against,  any security for or other  guaranty of the Guaranteed
Obligations or any action, or the ab sence of any action, by the  Administrative
Agent or any Lender in respect of such security or guaranty (including,  without
limitation,  the  release of any such  security  or  guaranty)  or (d) any other
action or  circumstances  which might otherwise  constitute a legal or equitable
discharge or defense of a surety or guarantor;  it being agreed by the Guarantor
that its obligations under this Guaranty shall not be discharged until the final
and indefeasible payment and performance, in full, of the Guaranteed Obligations
and the  termination  of the  Commitments.  The Guarantor  expressly  waives all
rights it may now or in the future  have under any statute  (including,  without
limitation,  North Carolina  General  Statutes  Section 26-7, et seq. or similar
law), or at law or in equity, or otherwise,  to compel the Administrative  Agent
or any Lender to proceed in respect of the  Guaranteed  Obligations  against any
Borrower or any other party or against any security for or other guaranty of the
payment and performance of the Guaranteed Obligations before proceeding against,
or as a condition to proceeding  against,  the Guarantor.  The Guarantor further
expressly waives and agrees not to assert or take advantage of any defense based
upon the failure of the Administrative Agent or any Lender to commence an action
in respect of the Guaranteed  Obligations against any such Borrower or any other
party  or any  security  for  the  payment  and  performance  of the  Guaranteed
Obligations. The Guarantor agrees that any notice or directive given at any time
to the Administrative Agent or any Lender which is inconsistent with the waivers
in the preceding two sentences shall be null and void


<PAGE>



and may be ignored by the Administrative Agent or Lender, and, in addition,  may
not be pleaded or  introduced  as  evidence in any  litigation  relating to this
Guaranty for the reason that such pleading or introduction  would be at variance
with the written terms of this Guaranty, unless the Administrative Agent and the
Required Lenders have  specifically  agreed otherwise in writing.  The foregoing
waivers are of the essence of the transaction contemplated by the Loan Documents
and,  but for this  Guaranty  and such  waivers,  the  Administrative  Agent and
Lenders would decline to enter into this Agreement.

     SECTION 10.3 Demand by the  Administrative  Agent. In addition to the terms
set forth in Section  10.2,  and in no manner  imposing any  limitation  on such
terms,  if all or any  portion of the then  outstanding  Guaranteed  Obligations
under this  Agreement are declared to be immediately  due and payable,  then the
Guarantor shall, upon demand in writing therefor by the Administrative  Agent to
the Guarantor, pay all or such portion of the outstanding Guaranteed Obligations
then  declared due and payable.  Payment by the  Guarantor  shall be made to the
Administrative   Agent,   to  be  credited  and  applied  upon  the   Guaranteed
Obligations,  in immedi ately available funds in the Permitted Currency in which
the relevant Guaranteed  Obligations are denominated to an account designated by
the Administrative Agent or at the Administrative Agent's office or at any other
address that may be specified in writing from time to time by the Administrative
Agent.

         SECTION 10.4 Waivers.  In addition to the waivers  contained in Section
10.2,  the  Guarantor  waives,  and agrees  that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage of,
any appraisal,  valuation, stay, extension,  marshalling of assets or redemption
laws, or  exemption,  whether now or at any time  hereafter in force,  which may
delay,  prevent or  otherwise  affect the  performance  by the  Guarantor of its
obligations under, or the enforcement by the Administrative Agent or the Lenders
of, this Guaranty.  The Guarantor further hereby waives diligence,  presentment,
demand, protest and notice of whatever kind or nature with respect to any of the
Guaranteed Obligations and waives the benefit of all provisions of law which are
or  might  be in  conflict  with  the  terms  of this  Guaranty.  The  Guarantor
represents, warrants and agrees that its obligations under this Guaranty are not
and shall not be subject to any  counterclaims,  offsets or defenses of any kind
against the  Administrative  Agent, the Lenders or any such Borrower whether now
existing or which may arise in the future.


<PAGE>



     SECTION 10.5  Modification  of Loan  Documents  etc. If the  Administrative
Agent or the Lenders shall at any time or from time to time, with or without the
consent of, or notice to, the Guarant or (a) change or extend the manner,  place
or terms of payment of, or renew or alter all or any portion of, the  Guaranteed
Obliga tions,  (b) take any action under or in respect of the Loan Docu ments in
the exercise of any remedy, power or privilege contained therein or available to
it at law, in equity or otherwise,  or waive or refrain from exercising any such
remedies,  powers or privileges,  (c) amend or modify, in any manner whatsoever,
the Loan  Documents,  (d)  extend  or waive  the  time  for  performance  by the
Guarantor,  any such  Borrower or any other Person of, or compliance  with,  any
term, covenant or agreement on its part to be performed or observed under a Loan
Document (other than this Guaranty),  or waive such performance or compliance or
consent to a failure of, or departure from, such performance or compliance,  (e)
take  and  hold  security  or  collateral  for  the  payment  of the  Guaranteed
Obligations or sell, exchange,  release, dispose of, or otherwise deal with, any
property pledged, mortgaged or conveyed, or in which the Administrative Agent or
the Lenders have been granted a Lien, to secure any Debt of the Guarantor or any
such Borrower to any Agent or the Lenders,  (f) release anyone who may be liable
in any manner for the payment of any amounts  owed by the  Guarantor or any such
Borrower  to any  Agent or  Lender,  (g)  modify or  terminate  the terms of any
intercreditor  or  subordination  agreement  pursuant  to which  claims of other
creditors of the Guarantor or any such Borrower are  subordinated  to the claims
of any  Agent or  Lender  or (h)  apply  any sums by  whomever  paid or  however
realized to any amounts owing by the Guarantor or any such Borrower to any Agent
or Lender on account of the  Obligations  in such  manner as the  Administrative
Agent or any Lender shall determine in its reasonable  discretion;  then neither
the  Administrative  Agent  nor any  Lender  shall  incur any  liability  to the
Guarantor  as a result  thereof,  and no such action shall impair or release the
obligations of the Guarantor under this Guaranty.

         SECTION 10.6  Reinstatement.  The Guarantor agrees that, if any payment
made by any such Borrower or any other Person  applied to the  Obligations is at
any time annulled, set aside, rescinded,  invalidated, declared to be fraudulent
or preferential or otherwise  required to be refunded or repaid, or the proceeds
of  Collateral  are required to be returned by the  Administrative  Agent or any
Lender to any such Borrower, its estate,  trustee,  receiver or any other party,
including,  without  limitation,  the  Guarantor,  under any  Applicable  Law or
equitable cause, then, to the extent of such


<PAGE>



payment or  repayment,  the  Guarantor's  liability  hereunder  (and any Lien or
Collateral  securing  such  liability)  shall be and  remain  in full  force and
effect,  as fully as if such payment had never been made, and, if prior thereto,
this  Guaranty  shall  have been  canceled  or  surrendered  (and if any Lien or
Collateral securing the Guarantor's liability hereunder shall have been released
or terminated by virtue of such  cancellation or surrender),  this Guaranty (and
such Lien or Collateral) shall be reinstated in full force and effect,  and such
prior cancellation or surrender shall not diminish,  release,  discharge, impair
or otherwise affect the obligations of the Guarantor in respect of the amount of
such payment (or any Lien or Collateral securing such obligation).

         SECTION  10.7  No   Subrogation.   Until  all  amounts   owing  to  the
Administrative  Agent and the Lenders on account of the  Obligations are paid in
full and the Commitments are terminated,  the Guarantor hereby waives any claims
or other rights which it may now or hereafter  acquire against any such Borrower
that arise from the  existence or  performance  of the  Guarantor's  obligations
under this Guaranty,  including,  without limitation,  any right of subrogation,
reimbursement,  exoneration,  indemnification,  any right to  participate in any
claim or remedy of the  Administrative  Agent or the  Lenders  against  any such
Borrower or any  Collateral  which the  Administrative  Agent or the Lenders now
have or may hereafter acquire, whether or not such claim, remedy or right arises
in  equity or under  contract,  statute  or  common  law,  by any  payment  made
hereunder  or  otherwise,  including  without  limitation,  the right to take or
receive  from  any  such  Borrower,  directly  or  indirectly,  in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other  rights.  If any amount  shall be paid to the  Guarantor  on
account of such  rights at any time when all of the  Obligations  shall not have
been paid in full,  such amount shall be held by the  Guarantor in trust for the
Administrative Agent,  segregated from other funds of the Guarantor,  and shall,
forthwith  upon receipt by the Guarantor,  be turned over to the  Administrative
Agent  in the  exact  form  received  by the  Guarantor  (duly  indorsed  by the
Guarantor to the  Administrative  Agent,  if required) to be applied against the
Obligations, whether matured or unmatured, in such order as set forth herein.



<PAGE>




                                   ARTICLE XI

                              DEFAULT AND REMEDIES

         SECTION 11.1 Events of Default.  Each of the following shall constitute
an Event of Default,  whatever the reason for such event and whether it shall be
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment  or  order  of any  court  or any  order,  rule  or  regulation  of any
Governmental Authority or otherwise:

         (a)  Default in Payment  of  Principal  of Loans.  Any  Borrower  shall
default in any payment of principal of any Loan or Note when and as due (whether
at maturity, by reason of acceleration or otherwise).

         (b) Other Payment  Default.  Any Borrower  shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise) of
interest  on any Loan or Note or the payment of any other  Obligation,  and such
default shall continue unremedied for three (3) Business Days.

         (c) Misrepresentation. Any representation or warranty made or deemed to
be made by any Borrower or any of its  Subsidiaries  under this  Agreement,  any
Loan  Document or any  amendment  hereto or thereto,  shall at any time prove to
have been  incorrect or misleading  in any material  respect when made or deemed
made.

         (d)      Default in Performance of Certain Covenants.  Any
Borrower shall default in the performance or observance of any
covenant or agreement contained in Sections 6.2, 6.5(e) or 7.12 or
Articles VIII or IX of this Agreement.

         (e) Default in  Performance  of Other  Covenants  and  Conditions.  Any
Borrower  or  any  Subsidiary  thereof  shall  default  in  the  performance  or
observance  of any term,  covenant,  condition  or  agreement  contained in this
Agreement  (other than as  specifically  provided for  otherwise in this Section
11.1) or any other Loan Document and such default shall continue for a period of
thirty (30) days after written notice thereof has been given to such Borrower by
the Administrative Agent.



<PAGE>



         (f)      Hedging Agreement.  Any termination payment shall be due
by a Borrower under any Hedging Agreement and such amount is not
paid within ten (10) Business Days of the due date thereof.

         (g) Debt  Cross-Default.  Any Borrower or any of its Subsidiaries shall
(i)  default in the  payment of any Debt  (other  than the Notes) the  aggregate
outstanding amount of which Debt is in excess of $2,500,000 beyond the period of
grace if any,  provided in the instrument or agreement under which such Debt was
created, or (ii) default in the observance or performance of any other agreement
or  condition  relating  to any  Debt  (other  than  the  Notes)  the  aggregate
outstanding  amount of which Debt is in excess of $2,500,000 or contained in any
instrument or agreement  evidencing,  securing or relating  thereto or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause,  or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause,  with the giving
of notice if required,  any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).

         (h) Other Cross-Defaults. Any Borrower or any of its Subsidiaries shall
default in the payment when due, or in the  performance  or  observance,  of any
obligation or condition of any Material  Contract  unless,  but only as long as,
the  existence of any such default is being  contested by such  Borrower or such
Subsidiary in good faith by  appropriate  proceedings  and adequate  reserves in
respect  thereof  have been  established  on the books of such  Borrower or such
Subsidiary to the extent required by GAAP.

         (i)  Change in  Control.  Any person or group of  persons  (within  the
meaning of Section  13(d) of the  Securities  Exchange Act of 1934, as amended),
shall obtain  ownership or control in one or more series of transactions of more
than thirty  percent  (30%) of the common stock or thirty  percent  (30%) of the
voting  power of BREED  entitled to vote in the election of members of the board
of directors of BREED or there shall have occurred  under any indenture or other
instrument evidencing any Debt in excess of $500,000 any "change in control" (as
defined in such indenture or other evidence of Debt)  obligating any Borrower to
repurchase,  redeem  or  repay  all or any  part of the  Debt or  capital  stock
provided for therein (any such event, a "Change in Control").

         (j)      Voluntary Bankruptcy Proceeding.  Any Borrower or any
Material Subsidiary thereof shall (i) commence a voluntary case


<PAGE>



under the federal  bankruptcy laws (as now or hereafter in effect),  (ii) file a
petition,  proposal  or  notice of intent  to file a  proposal  seeking  to take
advantage  of any other  laws,  domestic or  foreign,  relating  to  bankruptcy,
insolvency,  reorganization,  winding up or composition for adjustment of debts,
(iii)  consent  to or fail to contest  in a timely  and  appropriate  manner any
petition or other  proceeding filed against it in an involuntary case under such
bankruptcy  laws or other laws, (iv) apply for or consent to, or fail to contest
in a timely  and  appropriate  manner,  the  appointment  of,  or the  taking of
possession by, a receiver, custodian, trustee,  administrator,  or liquidator of
itself or of a substantial part of its property,  domestic or foreign, (v) admit
in  writing  its  inability  to pay its debts as they  become  due,  (vi) make a
general  assignment  for the benefit of  creditors,  or (vii) take any corporate
action for the purpose of authorizing any of the foregoing.

         (k) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be  commenced  against any Borrower or any  Material  Subsidiary  thereof in any
court of competent  jurisdiction seeking (i) relief under the federal bankruptcy
laws (as now or  hereafter  in  effect)  or under any other  laws,  domestic  or
foreign,  relating  to  bankruptcy,  insolvency,  reorganization,  winding up or
adjustment of debts, or (ii) the appointment of a trustee, receiver,  custodian,
liquidator  or the like for any Borrower or any Material  Subsidiary  thereof or
for all or any substantial part of their respective assets, domestic or foreign,
and such case or  proceeding  shall  continue  without  dismissal  or stay for a
period of sixty (60) consecutive days, or an order granting the relief requested
in such case or proceeding  (including,  but not limited to, an order for relief
under such federal bankruptcy laws) shall be entered.

         (l) Failure of Agreements. Any provision of Article X of this Agreement
or any  provision  of any other Loan  Document  shall for any reason cease to be
valid and binding on any Borrower or Subsidiary party thereto or any such Person
shall so state in writing,  or any Loan  Document  shall for any reason cease to
create a valid and perfected  first  priority Lien on, or security  interest in,
any of the collateral  purported to be covered thereby,  in each case other than
in accordance with the express terms hereof or thereof.

     (m) Termination  Event. The occurrence of any of the following events:  (i)
BREED or any ERISA  Affiliate fails to make full payment when due of all amounts
which, under the provisions of


<PAGE>



any Pension  Plan or Section 412 of the Code,  BREED or any ERISA  Affiliate  is
required to pay as contributions thereto, (ii) an accumulated funding deficiency
in excess of $1,000,000 occurs or exists, whether or not waived, with respect to
any Pension Plan, (iii) a Termination Event or (iv) BREED or any ERISA Affiliate
as employers  under one or more  Multiemployer  Plan makes a complete or partial
withdrawal  from  any such  Multiemployer  Plan  and the  plan  sponsor  of such
Multiemployer  Plans notifies such  withdrawing  employer that such employer has
incurred  a  withdrawal  liability  requiring  payments  in an amount  exceeding
$2,500,000.

         (n) Judgment.  An uninsured  judgment or order for the payment of money
which  causes the  aggregate  amount of all such  uninsured  judgments to exceed
$1,000,000  in any Fiscal Year shall be entered  against any  Borrower or any of
its  Subsidiaries by any court and such judgment or order shall continue without
discharge or stay for a period of thirty (30) days.

         (o)      364-Day Credit Agreement.  An Event of Default shall have
occurred and be continuing under the 364-Day Credit Agreement.

         SECTION 11.2 Remedies.  Upon the occurrence and during the  continuance
of an  Event  of  Default,  with  the  consent  of  the  Required  Lenders,  the
Administrative  Agent may,  or upon the  request of the  Required  Lenders,  the
Administrative Agent shall, by notice to the Borrowers:

         (a) Acceleration;  Termination of Facilities.  Declare the principal of
and interest on the Loans and the Notes at the time  outstanding,  and all other
amounts owed to the Lenders and to the Administrative Agent under this Agreement
or any of the other Loan  Documents and all other  Obligations,  to be forthwith
due and payable,  whereupon  the same shall  immediately  become due and payable
without presentment,  demand,  protest or other notice of any kind, all of which
are expressly waived,  anything in this Agreement or the other Loan Documents to
the contrary notwithstanding, and terminate the Credit Facility and any right of
the  Borrowers  to  request  borrowings  thereunder;  provided,  that  upon  the
occurrence  of an Event of  Default  specified  in Section  11.1(j) or (k),  the
Credit  Facility shall be  automatically  terminated and all  Obligations  shall
automatically become due and payable.

         (b) Rights of Collection.  Exercise on behalf of the Lenders
all of its other rights and remedies under this Agreement, the


<PAGE>



other Loan Documents and Applicable Law, in order to satisfy all of
the Borrowers' Obligations.

         SECTION  11.3 Rights and  Remedies  Cumulative;  Non-Waiver;  etc.  The
enumeration  of the  rights and  remedies  of the  Administrative  Agent and the
Lenders set forth in this  Agreement  is not intended to be  exhaustive  and the
exercise  by the  Administrative  Agent and the  Lenders  of any right or remedy
shall not preclude  the  exercise of any other rights or remedies,  all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter  exist in law
or in equity or by suit or otherwise.  No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise  of any  such  right,  power or  privilege  preclude  other or  further
exercise thereof or the exercise of any other right, power or privilege or shall
be  construed  to be a waiver of any  Event of  Default.  No  course of  dealing
between  any  Borrower,  the  Administrative  Agent  and the  Lenders  or  their
respective agents or employees shall be effective to change, modify or discharge
any  provision  of this  Agreement  or any of the  other  Loan  Documents  or to
constitute a waiver of any Event of Default.

         SECTION 11.4 Judgment Currency. The obligation of the Borrowers to make
payments of the principal of and interest on the Notes and the obligation of the
Guarantor to make payments on the Guaranteed  Obligations  and the obligation of
any such  Person to make  payments of any other  amounts  payable  hereunder  or
pursuant to any other Loan  Document in the currency  specified for such payment
shall not be discharged or satisfied by any tender,  or any recovery pursuant to
any judgment, which is expressed in or converted into any other currency, except
to the extent that such tender or recovery shall result in the actual receipt by
each  of the  Administrative  Agent  and  Lenders  of  the  full  amount  of the
particular Permitted Currency expressed to be payable pursuant to the applicable
Loan Document.  The  Administrative  Agent shall,  using all amounts obtained or
received from the  Borrowers  pursuant to any such tender or recovery in payment
of  principal  of  and  interest  on  the  Obligations,  promptly  purchase  the
applicable   Permitted  Currency  at  the  most  favorable  spot  exchange  rate
determined by the Administrative  Agent to be available to it. The obligation of
the Borrowers to make payments in the  applicable  Permitted  Currency  shall be
enforceable  as an  alternative  or  additional  cause of action  solely for the
purpose of recovering in


<PAGE>



the  applicable  Permitted  Currency  the  amount,  if any, by which such actual
receipt shall fall short of the full amount of the Permitted  Currency expressed
to be payable pursuant to the applicable Loan Document.


                                   ARTICLE XII

                            THE ADMINISTRATIVE AGENT

         SECTION  12.1  Appointment.  Each  of the  Lenders  hereby  irrevocably
designates and appoints First Union as Administrative Agent of such Lender under
this  Agreement and the other Loan  Documents  and each such Lender  irrevocably
authorizes  First Union as  Administrative  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 and perform such duties as are expressly
delegated to the  Administrative  Agent by the terms of this  Agreement and such
other  Loan  Documents,  together  with  such  other  powers  as are  reasonably
incidental  thereto.  Notwithstanding any provision to the contrary elsewhere in
this Agreement or such other Loan Documents,  the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary  relationship with any Lender (nor shall any Lender be
deemed to have any fiduciary  relationship  with any  Borrower),  and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this  Agreement  or the other Loan  Documents  or  otherwise  exist
against the Administrative  Agent. To the extent any provision of this Agreement
permits action by the  Administrative  Agent, such  Administrative  Agent shall,
subject to the  provisions of Section 13.11 hereof and of this Article XII, take
such action if directed in writing to do so by the Required Lenders.

         SECTION 12.2 Delegation of Duties. The Administrative Agent may execute
any of its  respective  duties under this Agreement and the other Loan Documents
by or through  agents or  attorneys-in-fact  and shall be  entitled to advice of
counsel  concerning all matters  pertaining to such duties.  The  Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by the Administrative Agent with reasonable care.

         SECTION 12.3               Exculpatory Provisions.  Neither the
Administrative Agent nor any of its officers, directors, employees,


<PAGE>



agents,  attorneys-in-fact,  Subsidiaries or Affiliates  shall be (a) liable for
any action  lawfully  taken or omitted to be taken by it or such Person under or
in  connection  with this  Agreement  or the other Loan  Documents  (except  for
actions  occasioned  directly by its or such  Person's own gross  negligence  or
willful misconduct),  or (b) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrowers or
any of their  Subsidiaries or any officer thereof contained in this Agreement or
the other Loan  Documents  or in any  certificate,  report,  statement  or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection  with,  this Agreement or the other Loan Documents or for
the value, validity, effectiveness,  genuineness,  enforceability or sufficiency
of  this  Agreement  or the  other  Loan  Documents  or for any  failure  of the
Borrowers or any of their  Subsidiaries to perform its obligations  hereunder or
thereunder.  The  Administrative  Agent shall not be under any obligation to any
Lender to ascertain or to inquire as to the  observance or performance of any of
the agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Borrowers or any of their Subsidiaries.

     SECTION 12.4 Reliance by the Administrative Agent. The Administrative Agent
shall be entitled to rely,  and shall be fully  protected  in relying,  upon any
note, writing,  resolution,  notice, consent,  certificate,  affidavit,  letter,
cablegram,  telegram,  telecopy, telex or teletype message,  statement, order or
other document or  conversation  believed by it to be genuine and correct and to
have been signed,  sent or made by the proper  Person or Persons and upon advice
and statements of legal counsel (including,  without limitation,  counsel to the
Borrowers),   independent   accountants  and  other  experts   selected  by  the
Administrative  Agent. The Administrative  Agent may deem and treat the payee of
any Note as the owner thereof for all purposes  unless such Note shall have been
transferred in accordance with Section 13.10 hereof.  The  Administrative  Agent
shall be fully  justified  in failing or refusing to take any action  under this
Agreement and the other Loan Documents unless it shall first receive such advice
or concurrence of the Required Lenders (or, when expressly required hereby or by
the relevant other Loan Document, all the Lenders) as it deems appropriate or 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 or
continuing  to take any such  action  except  for its own  gross  negligence  or
willful  misconduct.  The  Administrative  Agent  shall  in all  cases  be fully
protected in


<PAGE>



acting,  or in  refraining  from acting,  under this  Agreement and the Notes in
accordance with a request of the Required  Lenders (or, when expressly  required
hereby,  all the  Lenders),  and such request and any action taken or failure to
act  pursuant  thereto  shall be  binding  upon all the  Lenders  and all future
holders of the Notes.

         SECTION 12.5 Notice of Default.  The Administrative  Agent shall not be
deemed to have  knowledge or notice of the occurrence of any Default or Event of
Default  hereunder  unless it has  received  notice  from a Lender or a Borrower
referring  to this  Agreement,  describing  such Default or Event of Default and
stating  that such  notice  is a  "notice  of  default".  In the event  that the
Administrative  Agent  receives  such a notice,  it shall  promptly  give notice
thereof to the  Lenders.  The  Administrative  Agent shall take such action with
respect to such Default or Event of Default as shall be  reasonably  directed by
the Required Lenders;  provided,  that unless and until the Administrative Agent
shall have received such directions, the Administrative 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 interests of the Lenders.

         SECTION  12.6  Non-Reliance  on  the  Administrative  Agent  and  Other
Lenders.  Each Lender  expressly  acknowledges  that neither the  Administrative
Agent  nor  any  of  its  respective  officers,  directors,  employees,  agents,
attorneys-in-fact,  Subsidiaries or Affiliates has made any  representations  or
warranties to it and that no act by the Administrative  Agent hereinafter taken,
including  any  review  of  the  affairs  of  the  Borrowers  or  any  of  their
Subsidiaries,  shall be deemed to constitute any  representation  or warranty by
the  Administrative   Agent  to  any  Lender.  Each  Lender  represents  to  the
Administrative  Agent that it has,  independently  and without reliance upon the
Administrative  Agent or any  other  Lender,  and  based on such  documents  and
information  as it  has  deemed  appropriate,  made  its  own  appraisal  of and
investigation  into the  business,  operations,  property,  financial  and other
condition and  creditworthiness of the Borrowers and their Subsidiaries and made
its own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Administrative  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
credit  analysis,  appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents,  and to make such  investigation as
it deems necessary to inform itself as to the


<PAGE>



business,   operations,    property,   financial   and   other   condition   and
creditworthiness  of the Borrowers and their  Subsidiaries.  Except for notices,
reports and other documents expressly required to be furnished to the Lenders by
the  Administrative  Agent  hereunder  or  by  the  other  Loan  Documents,  the
Administrative  Agent shall not have any duty or  responsibility  to provide any
Lender with any credit or other information concerning the business, operations,
property,  financial and other condition or creditworthiness of the Borrowers or
any  of  their   Subsidiaries   which  may  come  into  the  possession  of  the
Administrative  Agent or any of its respective officers,  directors,  employees,
agents, attorneys-in-fact, Subsidiaries or Affiliates.

         SECTION  12.7  Indemnification.  The  Lenders  agree to  indemnify  the
Administrative  Agent in its capacity as such and (to the extent not  reimbursed
by the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably  according to the respective  amounts of their  Commitment  Percentages,
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind whatsoever which may at any time  (including,  without  limitation,  at any
time following the payment of the Notes) be imposed on,  incurred by or asserted
against the  Administrative  Agent in any way relating to or arising out of this
Agreement  or the other Loan  Documents,  or any  documents  contemplated  by or
referred to herein or therein or the transactions contemplated hereby or thereby
or  any  action  taken  or  omitted  by the  Administrative  Agent  under  or in
connection with any of the foregoing;  provided,  that no Lender shall be liable
for the  payment  of any  portion  of  such  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting directly from the  Administrative  Agent's bad faith, gross negligence
or willful  misconduct.  The  agreements  in this Section 12.7 shall survive the
payment of the Notes and all other amounts payable hereunder and the termination
of this Agreement.

         SECTION 12.8 The Administrative Agent in Its Individual  Capacity.  The
Administrative  Agent and its  respective  Subsidiaries  and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
any Borrower as though the Administrative Agent were not an Administrative Agent
hereunder.  With  respect to any Loans made or renewed by it and any Note issued
to it, the Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents


<PAGE>



as any Lender and may exercise the same as though it were not an  Administrative
Agent,  and the terms  "Lender" and "Lenders"  shall include the  Administrative
Agent in its individual capacity.

         SECTION 12.9               Resignation of the Administrative Agent;
Successor Administrative Agent.

         (a)  Subject  to the  appointment  and  acceptance  of a  successor  as
provided below, the Administrative 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  Administrative
Agent,  which  successor  shall have  minimum  capital  and  surplus of at least
$500,000,000.  If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such  appointment  within thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the  Administrative  Agent may,  on behalf of the  Lenders,  appoint a successor
Administrative  Agent, which successor shall have minimum capital and surplus of
at least $500,000,000.  Upon the acceptance of any appointment as Administrative
Agent   hereunder  by  a  successor   Administrative   Agent,   such   successor
Administrative  Agent  shall  thereupon  succeed to and become  vested  with all
rights, powers,  privileges and duties of the retiring Administrative Agent, and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations  hereunder.  After any retiring  Administrative  Agent's resignation
hereunder as  Administrative  Agent,  the  provisions of this Section 12.9 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 Administrative Agent.

         (b) Each reference in subsection (a) above to the Administrative  Agent
shall also be deemed a reference to the Swingline  Lender.  Therefore,  upon the
acceptance of any  appointment as  Administrative  Agent (and Swingline  Lender)
hereunder  by a successor  Administrative  Agent (and  Swingline  Lender),  such
successor Administrative Agent (and Swingline Lender) shall thereupon succeed to
and become vested with all rights, powers, privileges and duties of the retiring
Swingline Lender, and the retiring Swingline Lender shall be discharged from its
duties and obligations hereunder.

         SECTION 12.10  Documentation  Agent.  The  Documentation  Agent, in its
capacity  as a  documentation  agent,  shall have no duties or  responsibilities
under this Agreement or any other Loan Document.


<PAGE>




                                  ARTICLE XIII

                                  MISCELLANEOUS

         SECTION 13.1               Notices.

         (a)  Method of  Communication.  Except as  otherwise  provided  in this
Agreement,  all notices and communications  hereunder shall be in writing, or by
telephone  subsequently  confirmed in writing.  Any notice shall be effective if
delivered by hand delivery or sent via telecopy,  recognized  overnight  courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party  hereto (i) on the date of delivery if  delivered by hand or
sent by telecopy,  (ii) on the next Business Day if sent by recognized overnight
courier  service and (iii) on the third  Business Day following the date sent by
certified  mail,   return  receipt   requested.   A  telephonic  notice  to  the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the  controlling  and  proper  notice in the event of a  discrepancy  with or
failure to receive a confirming written notice.

         (b)      Addresses for Notices.  Notices to any party shall be
sent to it at the following addresses, or any other address as to
which all the other parties are notified in writing.

If to BREED:                 BREED Technologies, Inc.
                             5300 Old Tampa Highway
                             Lakeland, Florida 33811
                             Attention:  Chief Financial Officer
                             Telephone No.: (941) 668-6000
                             Telecopy No.:  (941) 668-6036

With copies to:              BREED Technologies, Inc.
                             5300 Old Tampa Highway
                             Lakeland, Florida 33811
                             Attention:  Treasurer
                             General Counsel
                             Telephone No.: (941) 668-6389
                             Telecopy No.: (941) 668-6039




<PAGE>



If to First Union as
Administrative Agent:        First Union National Bank of Florida
                             100 South Ashley Drive, Suite 940
                             Tampa, Florida 33602
                             Attention:  Gilbert Reese
                             Telephone No.: (813) 276-6434
                             Telecopy No.: (813) 276-6454

                                       and

                             First Union National Bank of North Carolina
                             One First Union Center, TW-10
                             301 South College Street
                             Charlotte, North Carolina  28288-0608
                             Attention: Syndication Agency Services
                             Telephone No.: (704) 383-0281
                             Telecopy No.: (704) 383-0288

If to any Lender:            To the Address set forth on Schedule 1.1(b) hereto

         (c)  Administrative  Agent's Office.  The  Administrative  Agent hereby
designates its office located at the address set forth above,  or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrowers and the Lenders,  as the  Administrative  Agent's  Office  referred to
herein, to which payments due are to be made and at which Revolving Credit Loans
and Finnish Mark Loans will be disbursed.

         SECTION  13.2  Expenses;  Indemnity.  The  Borrowers  will  (a) pay all
reasonable  out-of-pocket  expenses of the  Administrative  Agent in  connection
with:  (i) the  preparation,  execution and delivery of this  Agreement and each
other  Loan  Document,  whenever  the same  shall  be  executed  and  delivered,
including,  without limitation,  all out-of-pocket syndication and due diligence
expenses and reasonable fees and disbursements of counsel for the Administrative
Agent and (ii) the preparation,  execution and delivery of any waiver, amendment
or consent by the Administrative Agent or the Lenders relating to this Agreement
or any other Loan Document,  including, without limitation,  reasonable fees and
disbursements of counsel for the Administrative Agent, (b) pay all


<PAGE>



reasonable out-of-pocket expenses of the Administrative Agent and the Lenders in
connection with the administration and enforcement of any rights and remedies of
the  Administrative  Agent and  Lenders  under the  Credit  Facility,  including
consulting with appraisers,  accountants, engineers, attorneys and other Persons
concerning  the  nature,   scope  or  value  of  any  right  or  remedy  of  the
Administrative Agent or any Lender hereunder or under any other Loan Document or
any factual  matters in connection  therewith,  which  expenses  shall  include,
without  limitation,  the reasonable fees and  disbursements of such Persons and
(c)  defend,  indemnify  and hold  harmless  the  Administrative  Agent  and the
Lenders,  and their respective  parents,  Subsidiaries,  Affiliates,  employees,
agents, officers and directors, from and against any losses,  penalties,  fines,
liabilities,  settlements,  damages,  costs and  expenses,  suffered by any such
Person  in  connection  with  any  claim,  investigation,  litigation  or  other
proceeding  (whether  or not the  Administrative  Agent or any Lender is a party
thereto) and the prosecution and defense  thereof,  arising out of or in any way
connected with the Agreement,  any other Loan Document or the Loans,  including,
without limitation,  reasonable  attorney's and consultant's fees, except to the
extent that any of the foregoing  directly  result from the gross  negligence or
willful misconduct of the party seeking indemnification therefor.

         SECTION  13.3  Set-off.  In  addition  to any rights  now or  hereafter
granted  under  Applicable  Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the continuance
thereof,  the Lenders and any assignee or  participant of a Lender in accordance
with Section  13.10 are hereby  authorized  by the Borrowers at any time or from
time to time,  without notice to the Borrowers or to any other Person,  any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits  (general or special,  time or demand,  including,  but not
limited to, indebtedness  evidenced by certificates of deposit,  whether matured
or  unmatured)  and any  other  indebtedness  at any  time  held or owing by the
Lenders, or any such assignee or participant to or for the credit or the account
of a Borrower against and on account of the Obligations  irrespective of whether
or not (a) the Lenders shall have made any demand under this Agreement or any of
the other Loan Documents or (b) the Administrative Agent shall have declared any
or all of the Obligations to be due and payable as permitted by Section 11.2 and
although such Obligations shall be contingent or unmatured.



<PAGE>



         SECTION 13.4  Governing  Law. This  Agreement,  the Notes and the other
Loan Documents,  unless otherwise expressly set forth therein, shall be governed
by,  construed  and enforced in  accordance  with the laws of the State of North
Carolina,  without  reference  to the  conflicts  or  choice  of law  principles
thereof.

         SECTION 13.5 Consent to Jurisdiction.  The Borrowers hereby irrevocably
consent to the personal  jurisdiction of the state and federal courts located in
Mecklenburg  County,  North Carolina,  in any action,  claim or other proceeding
arising out of any dispute in connection with this Agreement,  the Notes and the
other Loan Documents, any rights or obligations hereunder or thereunder,  or the
performance of such rights and  obligations.  The Borrowers  hereby  irrevocably
consent  to the  service of a summons  and  complaint  and other  process in any
action, claim or proceeding brought by the Administrative Agent or any Lender in
connection  with this  Agreement,  the Notes or the other  Loan  Documents,  any
rights or obligations hereunder or thereunder, or the performance of such rights
and obligations, on behalf of itself or its property, in the manner specified in
Section  13.1.  Nothing  in this  Section  13.5  shall  affect  the right of the
Administrative  Agent or any Lender to serve legal  process in any other  manner
permitted by Applicable Law or affect the right of the  Administrative  Agent or
any  Lender to bring any  action  or  proceeding  against  any  Borrower  or its
properties in the courts of any other jurisdictions.

     SECTION  13.6  Binding  Arbitration;  Waiver  of Jury  Trial.  (a)  Binding
Arbitration.  Upon demand of the  Borrower,  any Agent or the Required  Lenders,
whether made before or within one hundred twenty days (120) after institution of
any judicial  proceeding,  any  dispute,  claim or  controversy  arising out of,
connected   with  or  relating  to  the  Notes  or  any  other  Loan   Documents
("Disputes"),  between or among  parties to the Notes or any other Loan Document
shall be resolved by binding  arbitration as provided  herein.  Institution of a
judicial  proceeding by a party does not waive the right of that party to demand
arbitration hereunder.  Disputes may include,  without limitation,  tort claims,
counterclaims,  claims  brought  as class  actions,  claims  arising  from  Loan
Documents  executed in the future,  or claims concerning any aspect of the past,
present  or  future  relationships  arising  out of or  connected  with the Loan
Documents.  Arbitration  shall be conducted under and governed by the Commercial
Financial Disputes  Arbitration Rules (the "Arbitration  Rules") of the American
Arbitration Association and Title 9 of the U.S. Code. All


<PAGE>



arbitration  hearings  shall be  conducted in  Charlotte,  North  Carolina.  The
expedited  procedures  set forth in Rule 51, et seq.  of the  Arbitration  Rules
shall be applicable to claims of less than $1,000,000.  All applicable  statutes
of  limitation  shall  apply to any  Dispute.  A judgment  upon the award may be
entered in any court having  jurisdiction.  The panel from which all arbitrators
are selected  shall be comprised of licensed  attorneys.  The single  arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general  jurisdiction,  state or federal, of the state where the hearing will
be conducted.  Notwithstanding the foregoing,  this paragraph shall not apply to
any Hedging Agreement that is a Loan Document.

         (b)  Jury  Trial.  TO THE  EXTENT  PERMITTED  BY  APPLICABLE  LAW,  THE
ADMINISTRATIVE  AGENT,  EACH LENDER AND EACH BORROWER HEREBY  IRREVOCABLY  WAIVE
THEIR  RESPECTIVE  RIGHTS TO A JURY TRIAL WITH  RESPECT TO ANY ACTION,  CLAIM OR
OTHER  PROCEEDING  ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
THE NOTES OR THE OTHER LOAN  DOCUMENTS,  ANY RIGHTS OR OBLIGATIONS  HEREUNDER OR
THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

         (c)  Preservation of Certain  Remedies.  Notwithstanding  the preceding
binding arbitration provisions, the parties hereto preserve, without diminution,
certain remedies that such Persons may employ or exercise freely,  either alone,
in conjunction with or during a Dispute.  Each such Person shall have and hereby
reserves  the right to  proceed in any court of proper  jurisdiction  or by self
help to  exercise  or  prosecute  the  following  remedies:  (i) all  rights  to
foreclose  against  or  otherwise  become  owner or sell  any  real or  personal
property or other  security by  exercising  a power of sale  granted in the Loan
Documents or under applicable law or by judicial  foreclosure and sale, (ii) all
rights of self help including peaceful  occupation of property and collection of
rents, set off, and peaceful possession of property, (iii) obtaining provisional
or ancillary remedies including injunctive relief,  sequestration,  garnishment,
attachment,  appointment  of receiver  and in filing an  involuntary  bankruptcy
proceeding,  and (iv) when  applicable,  a judgment by  confession  of judgment.
Preservation  of these  remedies  does not limit the power of an  arbitrator  to
grant similar remedies that may be requested by a party in a Dispute.

         SECTION 13.7 Reversal of Payments.  To the extent any Borrower  makes a
payment or payments to the  Administrative  Agent for the ratable benefit of the
Lenders or the  Administrative  Agent  receives  any  payment or proceeds of the
collateral which payments


<PAGE>



or proceeds or any part  thereof are  subsequently  invalidated,  declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other  party under any  bankruptcy  law,  state or federal  law,
common law or equitable  cause,  then, to the extent of such payment or proceeds
repaid,  the  Obligations  or part  thereof  intended to be  satisfied  shall be
revived and  continued  in full force and effect as if such  payment or proceeds
had not been received by the Administrative Agent.

         SECTION 13.8               Injunctive Relief; Punitive Damages.

         (a) The Borrowers  recognize  that, in the event the Borrowers  fail to
perform, observe or discharge any of their obligations or liabilities under this
Agreement,  any remedy of law may prove to be inadequate  relief to the Lenders.
Therefore,  the Borrowers agree that the Lenders, at the Lenders' option,  shall
be  entitled  to  temporary  and  permanent  injunctive  relief in any such case
without the necessity of proving actual damages.

         (b) The Administrative  Agent, the Lenders and the Borrowers (on behalf
of  themselves  and their  Subsidiaries)  hereby agree that no such Person shall
have a remedy of punitive or exemplary damages against any other party to a Loan
Document  and each such Person  hereby  waives any right or claim to punitive or
exemplary  damages  that  they  may  now  have or may  arise  in the  future  in
connection  with  any  Dispute,   whether  such  Dispute  is  resolved   through
arbitration or judicially.

         SECTION  13.9   Accounting   Matters.   All  financial  and  accounting
calculations,  measurements  and  computations  made for any purpose relating to
this Agreement,  including,  without  limitation,  all computations  utilized by
BREED or any  Subsidiary  thereof  to  determine  compliance  with any  covenant
contained herein,  shall, except as otherwise  expressly  contemplated hereby or
unless there is an express written direction by the Administrative  Agent to the
contrary agreed to by the Borrowers,  be performed in accordance with GAAP as in
effect on the Closing  Date. In the event that changes in GAAP shall be mandated
by the Financial  Accounting  Standards Board, or any similar accounting body of
comparable  standing,  or shall  be  recommended  by  BREED's  certified  public
accountants,  to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof,  such changes shall be followed in
defining  such  accounting  terms only from and after the date the Borrowers and
the Lenders shall have


<PAGE>



amended this  Agreement  to the extent  necessary to reflect any such changes in
the financial covenants and other terms and conditions of this Agreement.

         SECTION 13.10              Successors and Assigns; Participations.

         (a) Benefit of  Agreement.  This  Agreement  shall be binding  upon and
inure to the benefit of the Borrowers, the Administrative Agent and the Lenders,
all future holders of the Notes,  and their  respective  successors and assigns,
except  that  no  Borrower  shall  assign  or  transfer  any  of its  rights  or
obligations  under this  Agreement  without  the prior  written  consent of each
Lender.

         (b)  Assignment  by Lenders.  Each Lender may,  with the consent of the
Administrative  Agent  and  (unless  an Event of  Default  has  occurred  and is
continuing) the Borrowers,  which consents shall not be unreasonably withheld or
delayed,  assign  to one or more  Eligible  Assignees  all or a  portion  of its
interests,  rights and  obligations  under this  Agreement  (including,  without
limitation,  all or a portion of the Loans at the time owing to it and the Notes
held by it); provided, that:

                        (i) each such assignment shall be of a constant, and not
         a  varying,  percentage  of  all  the  assigning  Lender's  rights  and
         obligations  under this Agreement and its rights and obligations  under
         the 364-Day Credit Agreement;

                       (ii)  if  less  than  all  of  the   assigning   Lender's
         Commitment is to be assigned,  the Commitment  under this Agreement and
         the commitment under the 364-Day Credit Agreement so assigned shall not
         be less than $10,000,000 in the aggregate;

                      (iii) the parties to each such  assignment  shall  execute
         and  deliver  to the  Administrative  Agent,  for  its  acceptance  and
         recording in the Register,  an Assignment and Acceptance in the form of
         Exhibit F attached hereto (an "Assignment  and  Acceptance"),  together
         with any Note or Notes subject to such assignment;

                       (iv) such  assignment  shall not,  without the consent of
         any applicable  Borrower,  require such Borrower to file a registration
         statement with the  Securities  and Exchange  Commission or apply to or
         qualify the Loans or the Notes under the blue sky laws of any state;


<PAGE>



                        (v) the assigning Lender shall pay to the Administrative
         Agent an assignment  fee of $3,000 upon the execution by such Lender of
         the Assignment and Acceptance;  provided, that (A) no such fee shall be
         payable upon any assignment by a Lender to an Affiliate thereof and (B)
         if such  Assignment  is executed in connection  with an Assignment  and
         Acceptance under the 364-Day Credit Agreement the aggregate  assignment
         fee for both such assignments shall be $3,000; and

               (vi) the  assignee  of each such  assignment  shall  execute  and
         deliver  to  the  Administrative  Agent  any  such  supplements  to the
         Security  Documents and/or  additional  Security  Documents that may be
         reasonably  required  by the  Administrative  Agent in  order  that the
         assignee may become a secured party thereunder.

Upon such  execution,  delivery,  acceptance and  recording,  from and after the
effective date specified in each  Assignment  and Accep tance,  which  effective
date shall be at least five (5) Business Days after the execution  thereof,  (A)
the assignee  thereunder  shall be a party hereto and, to the extent provided in
such  Assignment  and  Acceptance,  have the rights and  obligations of a Lender
hereby and (B) the Lender  thereunder  shall,  to the  extent  provided  in such
assignment, be released from its obligations under this Agreement.

         (c) Rights and Duties Upon  Assignment.  By executing and delivering an
Assignment  and  Acceptance,  the assigning  Lender  thereunder and the assignee
thereunder  confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.

         (d) Register.  The  Administrative  Agent shall maintain a copy of each
Assignment and Acceptance  delivered to it and a register for the recordation of
the names and  addresses of the Lenders and the amount of the Loans with respect
to each Lender from time to time (the  "Register").  The entries in the Register
shall be conclusive,  in the absence of manifest error,  and the Borrowers,  the
Administrative  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.

         (e)      Issuance of New Notes.  Upon its receipt of an Assignment
and Acceptance executed by an assigning Lender and an Eligible


<PAGE>



Assignee  together  with any Note or Notes  subject to such  assignment  and the
written  consent to such  assignment,  the  Administrative  Agent shall, if such
Assignment and Acceptance has been completed and is substantially in the form of
Exhibit F:

                        (i)  accept such Assignment and Acceptance;

                       (ii)  record the information contained therein in the
         Register;

                      (iii)  give prompt notice thereof to the Lenders and
         the Borrowers; and

                       (iv)  promptly deliver a copy of such Assignment and
         Acceptance to the Borrowers.

Within five (5) Business Days after receipt of notice,  the applicable  Borrower
or Borrowers shall execute and deliver to the Administrative  Agent, in exchange
for the  surrendered  Note or  Notes,  a new Note or Notes to the  order of such
Eligible  Assignee in amounts equal to the Commitment  assumed by it pursuant to
such  Assignment  and  Acceptance  and a new Note or  Notes to the  order of the
assigning Lender in an amount equal to the Commitment  retained by it hereunder.
Such new Note or Notes shall be in an  aggregate  principal  amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated the
effective  date of such  Assignment  and  Acceptance  and shall  otherwise be in
substantially  the form of the assigned Notes delivered to the assigning Lender.
Each surrendered Note or Notes shall be canceled and returned to the Borrowers.

         (f) Participations.  Each Lender may sell participations to one or more
banks or other entities in all or a portion of its rights and obligations  under
this Agreement (including, without limitation, all or a portion of its Loans and
the Notes held by it); provided, that:

                        (i) each such participation shall be of a constant,  and
         not varying  percentage  of all the  Assigning  Lender's  Commitment or
         Loans under this  Agreement  and the  commitment or the loans under the
         364-Day Credit Agreement;

                       (ii)         each such participation of the Commitment or
         the Loans under this Agreement and the commitment or the loans


<PAGE>



         under the 364-Day Credit Agreement shall be in an amount not
         less than $5,000,000 in the aggregate;

                      (iii)  such Lender's obligations under this Agreement
         (including, without limitation, its Commitment) shall remain
         unchanged;

                       (iv)  such Lender shall remain solely responsible to
         the other parties hereto for the performance of such
         obligations;

                        (v)  such Lender shall remain the holder of the
         Notes held by it for all purposes of this Agreement;

                       (vi) the  Borrowers,  the  Administrative  Agent  and the
         other  Lenders  shall  continue to deal solely and  directly  with such
         Lender in connection with such Lender's  rights and  obligations  under
         this Agreement;

                      (vii) such Lender  shall not permit such  participant  the
         right to approve any waivers, amendments or other modifications to this
         Agreement or any other Loan Document other than waivers,  amendments or
         modifications  which would reduce the principal of or the interest rate
         on any Loan,  extend the term or increase the amount of the Commitment,
         reduce the amount of any fees to which such  participant  is  entitled,
         extend any scheduled  payment date for principal of any Loan or, except
         as  expressly  contemplated  hereby or thereby,  release  any  material
         portion of the Collateral or release the Guaranty; and

                     (viii) any such disposition  shall not, without the consent
         of  the   applicable   Borrower,   require  such  Borrower  to  file  a
         registration  statement with the Securities and Exchange  Commission to
         apply to qualify  the Loans or the Notes  under the blue sky law of any
         state.

         (g)  Disclosure of  Information;  Confidentiality.  The  Administrative
Agent and the Lenders shall hold all non-public  information with respect to the
Borrowers  obtained  pursuant to the Loan  Documents  in  accordance  with their
customary procedures for handling confidential  information.  Any Lender may, in
connection with any assignment,  proposed assignment,  participation or proposed
participation  pursuant  to  this  Section  13.10,  disclose  to  the  assignee,
participant, proposed assignee or proposed participant,


<PAGE>



any  information  relating to the  Borrowers  furnished  to such Lender by or on
behalf of the Borrowers;  provided, that prior to any such disclosure, each such
assignee,  proposed  assignee,  participant or proposed  participant shall agree
with the  Borrowers  or such  Lender  to  preserve  the  confidentiality  of any
confidential information relating to the Borrowers received from such Lender.

         (h)      Certain Pledges or Assignments.  Nothing herein shall
prohibit any Lender from pledging or assigning any Note to any
Federal Reserve Bank in accordance with Applicable Law.

     SECTION 13.11 Amendments,  Waivers and Consents. Except as set forth below,
any term, covenant, agreement or condition of this Agreement or any of the other
Loan Documents may be amended or waived by the Lenders, and any consent given by
the Lenders,  if, but only if, such  amendment,  waiver or consent is in writing
signed by the Required Lenders (or by the Administrative  Agent with the consent
of the Required Lenders) and delivered to the  Administrative  Agent and, in the
case of an  amendment,  signed by the  Borrowers;  provided,  that no amendment,
waiver or consent shall,  without the prior written consent of each Lender,  (a)
release any Borrower from its Obligations hereunder,  (b) increase the amount or
extend the time of the  obligation  of the  Lenders  to make  Loans  (including,
without  limitation,  pursuant  to  Section  2.8),  (c)  extend  the  originally
scheduled  time or times of payment of the  principal of any Loan or the time or
times of payment of  interest on any Loan or the time or times of any payment of
any fees hereunder,  (d) reduce the rate of interest  payable on any Loan or the
amount of any fees hereunder,  (e) permit any  subordination of the principal or
interest on any Loan,  (f) release any  material  portion of the  Collateral  or
release any  Security  Document  (other than as  specifically  permitted in this
Agreement  or the  applicable  Security  Document),  (g) reduce the  "Guaranteed
Obligations"  as defined  in Section  10.1 or  release  the  Guarantor  from its
Obligations  under Article X, (h) release or discharge any Subsidiary  Guarantor
from its obligations  under any Subsidiary  Guaranty  Agreement or amend Section
7.12 or (i) amend the  provisions of Sections  13.10(a) or this Section 13.11 or
the definition of Required Lenders. In addition, no amendment, waiver or consent
to the  provisions  of Article XII shall be made without the written  consent of
the Administrative Agent.

         SECTION 13.12              Performance of Duties.  The Borrowers'
obligations under this Agreement and each of the Loan Documents


<PAGE>



shall be performed by the applicable Borrower at its sole cost and
expense.

     SECTION 13.13 All Powers Coupled with Interest.  All powers of attorney and
other  authorizations  granted to the Lenders,  the Administrative Agent and any
Persons  designated by the  Administrative  Agent or any Lender  pursuant to any
provisions of this Agreement or any of the other Loan Documents  shall be deemed
coupled  with  an  interest  and  shall  be  irrevocable  so  long as any of the
Obligations  remain unpaid or  unsatisfied  or the Credit  Facility has not been
terminated.

         SECTION 13.14 Survival of Indemnities.  Notwithstanding any termination
of this  Agreement,  the indemnities to which the  Administrative  Agent and the
Lenders are  entitled  under the  provisions  of this Article XIII and any other
provision of this Agreement and the Loan Documents  shall continue in full force
and effect and shall protect the  Administrative  Agent and the Lenders  against
events arising after such termination as well as before.

         SECTION 13.15 Releases. Any security interest arising under or pursuant
to this  Agreement in the assets of the  Borrowers or any of their  Subsidiaries
shall be released  upon a sale of the subject  assets as permitted  hereunder in
accordance with the terms hereof.

         SECTION  13.16  Titles and  Captions.  Titles and captions of Articles,
Sections and  subsections  in this  Agreement  are for conve  nience  only,  and
neither limit nor amplify the provisions of this Agreement.

         SECTION  13.17  Severability  of  Provisions.  Any  provision  of  this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction  shall, as to such jurisdiction,  be ineffective only to the extent
of such prohibition or unen forceability  without  invalidating the remainder of
such  provision or the remaining  provisions  hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdic tion.

         SECTION  13.18  Counterparts.  This  Agreement  may be  executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed  shall be deemed to be an  original  and shall be
binding upon all parties,  their successors and assigns,  and all of which taken
together shall constitute one and the same agreement.


<PAGE>



         SECTION 13.19 Term of Agreement.  This Agreement shall remain in effect
from the Closing Date through and including the date upon which all  Obligations
shall have been  indefeasibly  and  irrevocably  paid and  satisfied in full. No
termination  of this  Agreement  shall affect the rights and  obligations of the
parties hereto arising prior to such termination.



                            [SIGNATURE PAGES FOLLOW]



<PAGE>



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


                                            BORROWERS:


[CORPORATE SEAL]                            BREED TECHNOLOGIES, INC.


                                            By:/s/Arthur R. Schauffert, Jr.    
                                            Name: Arthur R. Schauffert, Jr.
                                            Title:   Treasurer

[CORPORATE SEAL]                            UNITED STEERING SYSTEMS, INC.

                                            By:/s/Arthur R. Schauffert, Jr.    
                                            Name: Arthur R. Schauffert, Jr.
                                            Title:   Treasurer


[CORPORATE SEAL]                            AUTO TRIM, INC.

                                            By:/s/Stuart D. Boyd    
                                            Name: Stuart D. Boyd
                                            Title:   Secretary


[CORPORATE SEAL]                            CUSTOM TRIM, LTD.

                                            By:/s/Stuart D. Boyd    
                                            Name: Stuart D. Boyd
                                            Title:   Secretary 


<PAGE>




[CORPORATE SEAL]                            BREED ITALIA, S.r.l.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: President

[CORPORATE SEAL]                            BREED ITALIAN HOLDINGS, S.r.l.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: Director


[CORPORATE SEAL]                            MOMO, S.p.A.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: President


[CORPORATE SEAL]                            GALLINO PLASTURGIA, S.r.l.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: President


[CORPORATE SEAL]                            ITALTEST, S.r.l.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: President


[CORPORATE SEAL]                            BREED EUROPEAN HOLDINGS LIMITED

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: President





<PAGE>





[CORPORATE SEAL]                            HAMLIN ELECTRONICS EUROPE LIMITED


                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: Director


[CORPORATE SEAL]                            UNITED STEERING SYSTEMS CLIFFORD
                                                     LIMITED


                                             By:/s/Charles J. Speranzella, Jr.
                                             Name: Charles J. Speranzella, Jr.
                                             Title: Director/Secretary



[CORPORATE SEAL]                            HAMLIN ELECTRONICS, GmbH


                                             By:/s/Falk-I. Krommes
                                             Name: Falk-I. Krommes
                                             Title: Managing Director


[CORPORATE SEAL]                            VTI HAMLIN Oy


                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: Director/President





<PAGE>



                                            ADMINISTRATIVE AGENT:

[CORPORATE SEAL]                            FIRST UNION NATIONAL BANK OF
                                            FLORIDA, as Administrative Agent


                                            By:/s/Michael J. Carlin
                                            Name: Michael J. Carlin
                                            Title: Senior Vice President






<PAGE>



                                            LENDERS:

[CORPORATE SEAL]                            FIRST UNION NATIONAL BANK OF
                                            FLORIDA, as Lender


                                            By:/s/Michael J. Carlin
                                            Name: Michael J. Carlin
                                            Title: Senior Vice President







<PAGE>



                                            THE CHASE MANHATTAN BANK, as
                                            Documentation Agent and Lender


                                            By:/s/J. McNamara
                                            Name: J. McNamara
                                            Title: Vice President




<PAGE>



                                            THE FIRST NATIONAL BANK OF CHICAGO


                                            By:/s/Robert H. Wolohan
                                            Name: Robert H. Wolohan
                                            Title: AVP-Authorized Agent




<PAGE>



                                            BANK OF AMERICA ILLINOIS


                                            By:/s/Deidre B. Doyle
                                            Name: Deirdre B. Doyle
                                            Title: Vice President




<PAGE>



                                            BHF-BANK AKTIENGESELLSCHAFT


                                            By:/s/John Sykes
                                            Name: John Sykes
                                            Title: AVP


                                            By:/s/Tom Scifo
                                            Name: Tom Scifo
                                            Title: AVP





<PAGE>



                                            COMERICA BANK


                                            By:/s/Mark B. Grover
                                            Name: Mark B. Grover
                                            Title: Vice President




<PAGE>



                                            FLEET BANK, NATIONAL ASSOCIATION


                                            By:/s/Craig W. Trautwein
                                            Name: Craig W. Trautwein
                                            Title: Vice President




<PAGE>



                                            NATIONSBANK, N.A.


                                            By:/s/Andrew M. Airheart 
                                            Name:  Andrew M. Airheart
                                            Title: Senior Vice President




<PAGE>



                                            ABN AMRO BANK N.V.


                                            By:/s/nick T. Weaver
                                            Name: Nick T. Weaver
                                            Title: Vice President


                                            By:/s/Linda K. Davis
                                            Name: Linda K. Davis
                                            Title: Vice President






<PAGE>



                                            THE BANK OF NOVA SCOTIA


                                            By:/s/F.C.H. Ashby
                                            Name: F.C.H. Ashby
                                            Title: Senior Mgr Loan Operations




<PAGE>



                                            THE FUJI BANK AND TRUST COMPANY


                                            By:/s/Toshiaki Yakura
                                            Name: Toshiaki Yakura
                                            Title: Senior Vice President




<PAGE>



                                            PNC BANK, KENTUCKY, INC.


                                            By:/s/James D. Neil
                                            Name:  James D. Neil
                                            Title: Vice President




<PAGE>



                                            TORONTO DOMINION (TEXAS), INC.


                                            By:/s/Lisa Allison
                                            Name: Lisa Allison
                                            Title: Vice President






<PAGE>



                                            BANCA COMMERCIALE ITALIANA - NEW
                                                     YORK BRANCH


                                            By:/s/C. Dougherty
                                            Name: C. Dougherty
                                            Title: Vice President



                                            By:/s/Karen Purelis
                                            Name: Karen Purelis
                                            Title: Vice President






<PAGE>



                                            THE BANK OF NEW YORK


                                            By:/s/David C. Siegel
                                            Name: David C. Siegel
                                            Title: Assistant Vice President




<PAGE>



                                            COMMERZBANK AG, ATLANTA AGENCY


                                            By:/s/Andreas K. Bremer
                                            Name: Andreas K. Bremer
                                            Title: SVP & Manager

                                            By:/s/Mary B. Smith
                                            Name: Mary B. Smith
                                            Title: AVP




<PAGE>



                                            CREDITO ITALIANO SpA


                                            By:/s/Harmon P. Butler
                                            Name: Harmon P. Butler
                                            Title:First Vice President & Deputy
                                                               Manager

                                            By:/s/Pierluigi Mainardi
                                            Name: Pierluigi Mainardi
                                            Title: Assistant Vice President




<PAGE>



                                            CREDIT LYONNAIS ATLANTA AGENCY

                                            By:/s/David Cawrse
                                            Name: David Cawrse
                                            Title:First Vice President & Manager




<PAGE>



                                            DRESDNER BANK AG NEW YORK AND GRAND
                                                     CAYMAN BRANCHES

                                            By:/s/John W. Sweeney
                                            Name: John W. Sweeney
                                            Title: Assistant Vice President


                                            By:/s/Christopher E. Sarisky
                                            Name: Christopher E. Sarisky
                                            Title: Assistant Treasurer




<PAGE>



                                            HARRIS TRUST AND SAVINGS BANK


                                            By:/s/Peter Krawchuk
                                            Name: Peter Krawchuk
                                            Title: Vice President






<PAGE>



                                            THE MITSUI TRUST AND BANKING COMPANY
                                                     LIMITED, NEW YORK BRANCH


                                            By:/s/Margaret Holloway
                                            Name: Margaret Holloway
                                            Title: Vice President & Manager




<PAGE>



                                            THE SANWA BANK, LIMITED, ATLANTA
                                                     AGENCY


                                            By:/s/P.J. Pawiak
                                            Name:P.J. Pawiak
                                            Title: V.P. & Senior Manager




<PAGE>



                                            THE SUMITOMO BANK, LIMITED


                                            By:/s/James Drum
                                            Name: James Drum
                                            Title: Vice President

                                            By:/s/Brian M. Smith
                                            Name: Brian M. Smith
                                            Title:Senior VP & Regional Manager
                                                               (East)



<PAGE>



                                            MERITA BANK LTD. NEW YORK BRANCH


                                            By:/s/Anu Seppala & John Kehnle
                                            Name: Anu Seppala & John Kehnle
                                            Title:Vice President/Vice President





<PAGE>



                                            ISTITUTO BANCARIO SAN PAOLO DI
                                                     TORINO SPA


                                            By:/s/Robert Wurster
                                            Name: Robert Wurster
                                            Title:First Vice President


                                            By:/s/William De Angelo
                                            Name: William De Angelo
                                            Title: First Vice President




<PAGE>



                                            BANQUE FRANCAISE DU COMMERCE
                                            EXTERIEUR

                                            By:/s/Timothy L. Polvado
                                            Name: Timothy L. Polvado
                                            Title:Assistant Vice President


                                            By:/s/Mark A. Harrington
                                            Name: Mark A. Harrington
                                            Title:VP & Regional Manager




<PAGE>



                                 SCHEDULE 1.1(a)

                                  A/C BORROWERS

         Name of A/C Borrower                    Place of Incorporation

1.       BREED Technologies, Inc.                United States (DE)

2.       United Steering Systems, Inc.           United States (DE)

3.       Auto Trim, Inc.                         United States (TX)

4.       Custom Trim, Ltd.                       Canada (ONT)

5.       BREED Italia, S.r.l.                    Italy

6.       BREED Italian Holdings, S.r.l.          Italy

7.       Momo, S.p.A.                            Italy

8.       Gallino Plasturgia, S.r.l.              Italy

9.       Italtest, S.r.l.                        Italy

10.      BREED European Holdings Limited         United Kingdom

11.      Hamlin Electronics Europe Limited       United Kingdom

12.      United Steering Systems Clifford        United Kingdom
           Limited

13.      Hamlin [Electronics], GmbH              Germany

14.      VTI Hamlin Oy                           Finland




<PAGE>



                                  SCHEDULE 9.2

                             CONTINGENT OBLIGATIONS


                                      None.



<PAGE>



                                 SCHEDULE 1.1(b)

                             LENDERS AND COMMITMENTS


                                   COMMITMENT
LENDER                              PERCENTAGE                COMMITMENT

First Union National Bank          7.1111111111%             14,222,222.26
  of Florida
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina
  28288-0608
Attention: Syndication Agency
  Services
Telephone No.: (704) 383-0281
Telecopy No.:  (704) 382-0288

The Chase Manhattan Bank           6.6666666667%            $13,333,333.33
1 CMP 8th Floor
New York, New York  10081
Attention:  Thomas M. Brennan
         Associate
Telephone No.:  (212) 552-7406
Telecopy No.:   (212) 552-5662

The First National Bank            5.5555555556%            $11,111,111.11
  of Chicago
One First National Plaza
Suite 0634, 1-10
Chicago, Illinois  60670
Attention:  Gloria Steinbrenner
         Client Services Associate
Telephone No.:  (312) 732-5714
Telecopy No.:   (312) 732-4840

Bank of America Illinois           5.5555555556%            $11,111,111.11
231 South LaSalle Street
Chicago, Illinois  60697
         Account Administrator
Attention:  Shelia Johnson
Telephone No.:  (312) 828-6568
Telecopy No.:   (312) 974-9626



<PAGE>



BHF-Bank Aktiengesellschaft        4.8888888889%            $ 9,777,777.78
590 Madison Avenue
New York, New York  10022
Attention:  Renate Boston
Telephone No.:  (212) 756-5543
Telecopy No.:   (212) 756-5536



<PAGE>



Comerica Bank                      4.8888888889%            $ 9,777,777.78
500 Woodward Avenue
Mail Code 3265, 9th Floor
Detroit, Michigan  48226-3265
Attention:  Susan M. Boyd
         Customer Assistant,
         Automotive Group
Telephone No.:  (313) 222-5548
Telecopy No.:   (313) 222-3776

Fleet Bank, National Association   4.8888888889%            $ 9,777,777.78
208 Harristown Road
Glen Rock, New Jersey  07452
Attention:  Ceil Christie
         Assistant Vice President
Telephone No.:  (201) 251-5323
Telecopy No.:   (201) 251-5739

NationsBank, N.A.                  4.8888888889%            $ 9,777,777.78
101 N. Tryon Street
NC1-001-15-06
Charlotte, North Carolina  28255
Attention:  Barbara Pollock
         Credit Services Rep.
Telephone No.:  (704) 388-1112
Telecopy No.:   (704) 386-8694

ABN AMRO Bank N.V.                 4.4444444444%            $ 8,888,888.89
One Ravinia Drive, Suite 1200
Atlanta, Georgia  30346
Attention:  Reenie Williamson
Telephone No.:  (770) 395-7990
Telecopy No.:   (770) 395-9188

The Bank of Nova Scotia            4.4444444444%            $ 8,888,888.89
600 Peachtree Street, NE
Suite 2700
Atlanta, Georgia  30308
Attention:  Dorothy Legista
Telephone No.:  (404) 877-1535
Telecopy No.:   (404) 888-8998

The Fuji Bank and Trust Company    4.4444444444%            $ 8,888,888.89
Two World Trade Center
79th Floor


<PAGE>



New York, New York  10048
Attention:  Kathleen Barsotti
         Vice President
Telephone No.:  (212) 898-2065
Telecopy No.:   (212) 488-8216



<PAGE>



PNC Bank, Kentucky, Inc.           4.4444444444%            $ 8,888,888.89
500 W. Jefferson Street
Louisville, Kentucky  40202
Attention:  Jamie Argenbright
         Lending Assistant
Telephone No.:  (502) 581-2086
Telecopy No.:   (502) 581-2302

Toronto Dominion (Texas), Inc.     4.4444444444%            $ 8,888,888.89
909 Fannin, Suite 1700
Houston, Texas  77010
Attention:  Lisa Allison
Telephone No.:  (713) 653-8244
Telecopy No.:   (713) 951-9921

Banca Commerciale Italiana -       2.6666666667%            $ 5,333,333.33
  New York Branch
One William Street
New York, New York  10004
Attention:  Jonathan Sahr
         Loan Supervisor
Telephone No.:  (212) 607-3814
Telecopy No.:   (212) 607-3537

The Bank of New York               2.6666666667%            $ 5,333,333.33
One Wall Street - 22N
New York, New York  10286
Attention:  Annette Megargel
         Administrator
Telephone No.:  (212) 635-6780
Telecopy No.:   (212) 635-6877

Commerzbank AG, Atlanta Agency     2.6666666667%            $ 5,333,333.33
2 World Financial Center
New York, New York  10281
Attention:  Gabriela Schmidtchen
Telephone No.:  (212) 266-7345
Telecopy No.:   (212) 266-7593

Credito Italiano SpA               2.6666666667%            $ 5,333,333.33
375 Park Avenue, 2nd Floor
New York, New York  10152
Attention:  Luz David
         Money Desk
Telephone No.:  (212) 546-9615
Telecopy No.:   (212) 546-9675








<PAGE>



Credit Lyonnais Atlanta Agency     2.6666666667%            $ 5,333,333.33
303 Peachtree Street, N.E.
Suite 4400
Atlanta, Georgia  30308
Attention:  Pascal Seris
Telephone No.:  (404) 524-3700
Telecopy No.:   (404) 584-5249

Dresdner Bank AG New York          2.6666666667%            $ 5,333,333.33
  and Grand Cayman Branches
75 Wall Street
New York, New York  10005-2889
Attention:  Gary Jermanski
         Credit Services
Telephone No.:  (212) 429-2674
Telecopy No.:   (212) 429-2130

Harris Trust and Savings Bank     2.6666666667%             $ 5,333,333.33
111 W. Monroe Street
Floor 2W
Chicago, Illinois  60603
Attention:  Arlett Hall
         Sr. Banking Services
         Representative
Telephone No.:  (312) 461-2786
Telecopy No.:   (312) 461-2591

The Mitsui Trust and Banking       2.6666666667%            $ 5,333,333.33
  Company Limited, New York Branch
1251 Avenue of the Americas
39th Floor
New York, New York  10020-1104
Attention:  Ed Simnor
Telephone No.:  (212) 790-5352
Telecopy No.:   (212) 768-9044

The Sanwa Bank, Limited,           2.6666666667%            $ 5,333,333.33
  Atlanta Agency
Park Avenue Plaza
55 E. 52nd Street
New York, New York  10055
Attention:  Renko Hara
Telephone No.:  (212) 339-6390
Telecopy No.:   (212) 754-2368



<PAGE>



The Sumitomo Bank, Limited         2.6666666667%            $ 5,333,333.33
100 S. Ashley Drive, Suite 1780
Tampa, Florida  33602
Attention:  M. Phillip Freeman
Telephone No.:  (813) 229-6002
Telecopy No.:   (813) 229-6372



<PAGE>



Merita Bank Ltd., New York Branch  2.2222222222%            $ 4,444,444.44
437 Madison Avenue
New York, New York  10022
Attention:  Revella Perna
Telephone No.:  (212) 318-9345
Telecopy No.:   (212) 421-4420

Istituto Bancario San Paolo        2.2222222222%            $ 4,444,444.44
  Di Torino SPA
245 Park Avenue
New York, New York  10167
Attention:  Giovanni Lugato
         Account Officer
Telephone No.:  (212) 692-3195
Telecopy No.:   (212) 599-5303

Banque Francaise du Commerce       2.2222222222%            $ 4,444,444.44
  Exterieur
333 Clay Street, Suite 4340
Houston, Texas  77002
Attention:  Tim Polvado
Telephone No.:  (713) 759-9401
Telecopy No.:   (713) 759-9908



<PAGE>



                                 SCHEDULE 1.1(c)

                FINNISH MARK LENDERS AND FINNISH MARK COMMITMENTS


                                   COMMITMENT
LENDER                              PERCENTAGE                COMMITMENT

First Union National Bank              50%                  $5,000,000.00
  of Florida
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina
  28288-0608
Attention: Syndication Agency
  Services
Telephone No.: (704) 383-0281
Telecopy No.:  (704) 382-0288


Merita Bank Ltd., New York Branch      50%                  $5,000,000.00
437 Madison Avenue
New York, New York  10022
Attention:  Revella Perna
Telephone No.:  (212) 318-9345
Telecopy No.:   (212) 421-4420



<PAGE>



                                 SCHEDULE 1.1(d)

                          PLEDGE AGREEMENTS AND ISSUERS

         Pledge Agreement                                     Applicable Issuers

         1. BREED Pledge Agreement

         2. [Subsidiary Pledge
          Agreements]





<PAGE>



                                 SCHEDULE 1.1(e)

                              SUBSIDIARY GUARANTORS

1.       BREED Automotive Florida, Inc.

2.       BREED Automotive West, Inc.

3.       Hamlin, Incorporated

4.       United Steering Systems, Inc.



<PAGE>



                                   EXHIBIT A-1
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                              REVOLVING CREDIT NOTE


$  _________________                                         April ___,1997
(or the equivalent
thereof described
below)

     FOR VALUE RECEIVED,  each of the  undersigned,  BREED  Technologies,  Inc.,
United Steering Systems, Inc., Auto Trim, Inc., Custom Trim, Ltd., BREED Italia,
S.r.l.,  BREED Italian  Holdings,  S.r.l.,  Momo,  S.p.A.,  Gallino  Plasturgia,
S.r.l.,  Italtest,  S.r.l., BREED European Holdings Limited,  Hamlin Electronics
Europe Limited,  United Steering Systems Clifford Limited,  Hamlin, GmbH and VTI
Hamlin Oy (collectively,  the  "Borrowers"),  hereby severally promise to pay to
the order of ____________________________________ (the "Bank"), at the times, at
the place and in the manner provided in the Credit  Agreement  described  below,
the principal sum of up to  ______________________  Dollars  ($_____________) or
the aggregate unpaid principal Dollar Amount of all Loans disbursed to each such
Borrower by the Bank under such Credit Agreement,  together with interest at the
rates as in  effect  from  time to time  with  respect  to each  portion  of the
principal  amount  hereof,  determined and payable as provided in Article III of
such Credit Agreement.

         This Revolving  Credit Note is a Revolving  Credit Note referred to in,
and is entitled to the benefits of, the Five-Year  Credit  Agreement dated as of
April 30, 1997 (as further amended, restated,


<PAGE>



supplemented or otherwise modified from time to time, the "Credit Agreement") by
and among the Borrowers,  Breed  Technologies,  Inc., as Guarantor,  the Lenders
party thereto,  First Union National Bank of Florida,  as Administrative  Agent,
and The Chase  Manhattan  Bank, as  Documentation  Agent.  The Credit  Agreement
contains,  among  other  things,  provisions  for the time,  place and manner of
payment of this Revolving  Credit Note, the  determination  of the interest rate
borne by and fees payable in respect of this Revolving Credit Note, acceleration
of the  payment of this  Revolving  Credit  Note upon the  happening  of certain
stated events and the mandatory  repayment of this  Revolving  Credit Note under
certain  circumstances.  All  capitalized  terms used  herein and not  otherwise
defined herein shall have the meaning assigned thereto in the Credit Agreement.

         The  Borrowers  hereby  severally  agree to pay on demand  all costs of
collection,  including reasonable attorneys' fees, if any part of this Revolving
Credit Note, principal or interest,  is collected after maturity with the aid of
an attorney.

         Diligence,  presentment  for payment,  notice of dishonor,  protest and
notice of any kind (other than as explicitly  required by the Credit  Agreement)
are hereby waived.

         THIS REVOLVING  CREDIT NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH
CAROLINA AND SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NORTH CAROLINA.

         The Debt evidenced by this Revolving  Credit Note is senior in right of
payment to all Subordinated Debt referred to in the Credit Agreement.

                                             [Signature pages follow]



<PAGE>



         IN WITNESS  WHEREOF,  each of the Borrowers  has caused this  Revolving
Credit Note to be executed under seal by a duly authorized officer as of the day
and year first above written.


[CORPORATE SEAL]                            BREED TECHNOLOGIES, INC.

                                            By:/s/Arthur R. Schauffert, Jr.
                                            Name: Arthur R. Schauffert, Jr.
                                            Title: Treasurer


[CORPORATE SEAL]                            UNITED STEERING SYSTEMS, INC.

                                            By:/s/Arthur R. Schauffert, Jr.
                                            Name: Arthur R. Schauffert, Jr.
                                            Title: Treasurer


[CORPORATE SEAL]                            AUTO TRIM, INC.

                                            By:/s/Stuart D. Boyd
                                            Name: Stuart D. Boyd
                                            Title: Secretary


[CORPORATE SEAL]                            CUSTOM TRIM, LTD.

                                            By:/s/Stuart D. Boyd
                                            Name: Stuart D. Boyd
                                            Title: Secretary


[CORPORATE SEAL]                            BREED ITALIA, S.R.L.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: President


[CORPORATE SEAL]                            BREED ITALIAN HOLDINGS, S.R.L.

                                            By:/s/Charles J. Speranzella, Jr.


<PAGE>



                                            Name:  Charles J. Speranzella, Jr.
                                            Title: Director


[CORPORATE SEAL]                            MOMO, S.P.A.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: Director


[CORPORATE SEAL]                            GALLINO PLASTURGIA, S.R.L.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name: Charles J. Speranzella, Jr.
                                            Title: President



[CORPORATE SEAL]                            ITALTEST, S.R.L.

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name:  Charles J. Speranzella, Jr.
                                            Title: President



[CORPORATE SEAL]                            BREED EUROPEAN HOLDINGS LIMITED

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name:  Charles J. Speranzella, Jr.
                                            Title: President



[CORPORATE SEAL]                            HAMLIN ELECTRONICS EUROPE LIMITED

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name:  Charles J. Speranzella, Jr.
                                            Title: Director



[CORPORATE SEAL]                            UNITED STEERING SYSTEMS CLIFFORD
                                            LIMITED


<PAGE>



                                            By:/s/Charles J. Speranzella, Jr.
                                            Name:  Charles J. Speranzella, Jr.
                                            Title: Director/Secretary



[CORPORATE SEAL]                            HAMLIN ELECTRONICS, GMBH

                                            By:/s/Falk-I. Kromees
                                            Name: Falk- I. Krommes
                                            Title: Managing Director



[CORPORATE SEAL]                            VTI HAMLIN OY

                                            By:/s/Charles J. Speranzella, Jr.
                                            Name:  Charles J. Speranzella, Jr.
                                            Title: President





<PAGE>



                                   EXHIBIT A-2
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                                  FINNISH MARK
                              REVOLVING CREDIT NOTE


$___________                                      April __, 1997
(or the equivalent
thereof described
below)

FOR VALUE RECEIVED,  each of the undersigned,  BREED Technologies,  Inc. and VTI
Hamlin Oy (collectively,  the  "Borrowers"),  hereby severally promise to pay to
the order of __________________________ (the "Bank"), at the times, at the place
and in the  manner  provided  in  the  Credit  Agreement  described  below,  the
principal sum of up to  ______________________  Dollars  ($___________),  or the
aggregate  unpaid  principal  Dollar Amount of all Loans  disbursed to each such
Borrower by the Bank under such Credit Agreement,  together with interest at the
rates as in  effect  from  time to time  with  respect  to each  portion  of the
principal  amount  hereof,  determined and payable as provided in Article III of
such Credit Agreement.

         This Finnish  Mark  Revolving  Credit Note is a Finnish Mark  Revolving
Credit Note  referred to in, and is entitled to the benefits  of, the  Five-Year
Credit  Agreement  dated as of April __,  1997 (as  further  amended,  restated,
supplemented or otherwise modified from time to time, the "Credit Agreement") by
and among the Borrowers,  Breed  Technologies,  Inc., as Guarantor,  the Lenders
party thereto and First Union National Bank of Florida, as


<PAGE>



Administrative  Agent, and The Chase Manhattan Bank, as Documentation Agent. The
Credit Agreement  contains,  among other things,  provisions for the time, place
and  manner  of  payment  of  this  Finnish  Mark  Revolving  Credit  Note,  the
determination  of the interest rate borne by and fees payable in respect of this
Finnish Mark Revolving Credit Note,  acceleration of the payment of this Finnish
Mark  Revolving  Credit Note upon the happening of certain stated events and the
mandatory  repayment of this Finnish Mark  Revolving  Credit Note under  certain
circumstances.  All  capitalized  terms used  herein and not  otherwise  defined
herein shall have the meaning assigned thereto in the Credit Agreement.

         The  Borrowers  hereby  severally  agree to pay on demand  all costs of
collection,  including  reasonable  attorneys' fees, if any part of this Finnish
Mark Revolving Credit Note,  principal or interest,  is collected after maturity
with the aid of an attorney.

         Diligence,  presentment  for payment,  notice of dishonor,  protest and
notice of any kind (other than as explicitly  required by the Credit  Agreement)
are hereby waived.

         THIS FINNISH MARK  REVOLVING  CREDIT NOTE IS MADE AND  DELIVERED IN THE
STATE OF NORTH  CAROLINA AND SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NORTH CAROLINA.

         The Debt evidenced by this Finnish Mark Revolving Credit Note is senior
in  right  of  payment  to all  Subordinated  Debt  referred  to in  the  Credit
Agreement.


                                             [Signature pages follow]



<PAGE>



         IN WITNESS WHEREOF,  each of the Borrowers has caused this Finnish Mark
Revolving Credit Note to be executed under seal by a duly authorized  officer as
of the day and year first above written.


[CORPORATE SEAL]                            BREED TECHNOLOGIES, INC.

                                            By:
                                            Name:
                                            Title:


[CORPORATE SEAL]                            VTI HAMLIN OY

                                            By:
                                            Name:
                                            Title:




<PAGE>



                                   EXHIBIT A-3
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                                 SWINGLINE NOTE


$15,000,000.00                                           April __, 1997

         FOR VALUE  RECEIVED,  the  undersigned,  BREED  TECHNOLOGIES,  INC.,  a
corporation  organized under the laws of Delaware ("BREED"),  hereby promises to
pay to the order of FIRST UNION  NATIONAL BANK OF FLORIDA (the  "Bank"),  at the
times, at the place and in the manner provided in the Credit Agreement described
below,   the  principal  sum  of  up  to  Fifteen  Million  and  No/100  Dollars
($15,000,000.00),  or, if less,  the aggregate  unpaid  principal  amount of all
Swingline Loans disbursed by the Bank under such Credit Agreement, together with
interest  at the rates as in  effect  from  time to time  with  respect  to each
portion of the principal  amount  hereof,  determined and payable as provided in
Article III of such Credit Agreement.

         This  Swingline  Note is the  Swingline  Note  referred  to in,  and is
entitled to the benefits of, the Five-Year  Credit  Agreement  dated as of April
__, 1997 (as amended, restated,  supplemented or otherwise modified, the "Credit
Agreement") by and among BREED and certain  Subsidiaries  thereof, as Borrowers,
BREED, as Guarantor,  the Lenders party thereto and First Union National Bank of
Florida, as Administrative Agent, and The Chase Manhattan Bank, as Documentation
Agent. The Credit  Agreement  contains,  among other things,  provisions for the
time,  place and manner of payment of this Swingline Note, the  determination of
the interest rate borne by and fees payable in respect of this  Swingline  Note,
acceleration of the payment of this Swingline Note upon the happening of certain


<PAGE>



stated events and the mandatory  repayment of this  Swingline Note under certain
circumstances.  All  capitalized  terms used  herein and not  otherwise  defined
herein shall have the meaning assigned thereto in the Credit Agreement.

         BREED  agrees  to pay on  demand  all  costs of  collection,  including
reasonable  attorneys'  fees, if any part of this Swingline  Note,  principal or
interest, is collected after maturity with the aid of an attorney.

         Diligence,  presentment  for payment,  notice of dishonor,  protest and
notice of any kind (other than as explicitly  required by the Credit  Agreement)
are hereby waived.

         THIS  SWINGLINE  NOTE IS MADE  AND  DELIVERED  IN THE  STATE  OF  NORTH
CAROLINA AND SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NORTH CAROLINA.

         The Debt evidenced by this Swingline Note is senior in right of payment
to all Subordinated Debt referred to in the Credit Agreement.




<PAGE>



         IN WITNESS WHEREOF, BREED has caused this Swingline Note to be executed
under  seal by a duly  authorized  officer  as of the day and year  first  above
written.

                                                     BREED TECHNOLOGIES, INC.

[CORPORATE SEAL]

                                                     By:
                                                        Name:
                                                        Title:






<PAGE>



                                    EXHIBIT B
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                               NOTICE OF BORROWING


First Union National Bank
 of Florida, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

         This irrevocable  Notice of Borrowing is delivered to you under Section
2.4(a)  of the  Five-Year  Credit  Agreement  dated  as of April  ___,  1997 (as
amended, restated,  supplemented or otherwise modified, the "Credit Agreement"),
by and among BREED  Technologies,  Inc.  and certain of its  Subsidiaries  party
thereto (collectively, the "Borrowers"), BREED Technologies, Inc., as Guarantor,
the lenders party thereto (the "Lenders"), First Union National Bank of Florida,
as Administrative Agent, and The Chase Manhattan Bank, as Documentation Agent.

         1.       The undersigned Borrower(s) hereby request(s) that the
Lenders make a Loan denominated in [Dollars] [Finnish Marks]


<PAGE>



[applicable Alternative Currency] in the aggregate principal amount
of $________________ (the "Loan").1

         2.       The undersigned Borrower(s) hereby request(s) that the
Loan be made on the following Business Day: _______________.2
         3.       This Loan shall be a _______________ Loan.3

         4. The undersigned  Borrower(s)  hereby  request(s) that the [Revolving
Credit]  [Finnish Mark] Loan bear interest at the following  interest rate, plus
the Applicable Margin, as set forth below:

                           Termination Date for Interest

                           [Base Rate           [One, Two, or
                            or LIBOR            Three, Six or, if
                            Rate]4              permitted by Lenders,
                                                Twelve Months]

         5. The principal amount of all Loans  outstanding as of the date hereof
(including the requested  Loan) does not exceed the maximum amount  permitted to
be outstanding pursuant to the terms of the Credit Agreement.

         6.       All of the conditions applicable to the Loan requested
herein as set forth in the Credit Agreement have been satisfied as
--------
1    Complete with a Permitted Currency and an amount in accordance with Section
     2.4 of the Credit Agreement.
2    Complete with a Business Day in accordance with Section 2.4 of the Credit
     Agreement.
3    Complete with either "Revolving  Credit",  "Finnish Mark" or "Swingline" in
     accordance with Section 2.3.
4    Revolving Credit Loans denominated in Dollars may bear interest at the Base
     Rate  or  the  LIBOR  Rate;   Revolving  Credit  Loans  denominated  in  an
     Alternative  Currency  shall bear interest at the LIBOR Rate; and Swingline
     Loans  shall bear  interest at the Base Rate.  In each case the  Applicable
     Margin shall be set forth in accordance with Section 3.1.


<PAGE>



of the date hereof and will remain satisfied to the date of such
Loan.

         7.       No Default or Event of Default exists, and none will
exist upon making the Loan requested herein.

         8.       All capitalized undefined terms used herein have the
meanings assigned thereto in the Credit Agreement.




<PAGE>



         IN WITNESS  WHEREOF,  the  undersigned  have  executed  this  Notice of
Borrowing this ____ day of _______, ____.





                                            By:
                                            Name:
                                            Title:



<PAGE>



                                    EXHIBIT C
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                              NOTICE OF PREPAYMENT


First Union National Bank
 of Florida, as Administrative Agent
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services

Ladies and Gentlemen:

         This   irrevocable   Notice  of  Prepayment  is  delivered  to  you  by
__________________,  a corporation organized under the laws of _________________
(the  "Borrower"),  under Section 2.5(d) of the Five-Year Credit Agreement dated
as of April ___, 1997 (as amended, restated, supplemented or otherwise modified,
the "Credit  Agreement"),  by and among BREED Technologies,  Inc. and certain of
its Subsidiaries,  as Borrowers,  BREED  Technologies,  Inc., as Guarantor,  the
Lenders party thereto,  First Union National Bank of Florida,  as Administrative
Agent, and The Chase Manhattan Bank, as Documentation Agent.

         1.       The undersigned Borrower(s) hereby provides notice to the
Administrative Agent that the undersigned Borrower(s) shall repay


<PAGE>



the following Base Rate Loans and/or LIBOR Rate Loans and/or
Swingline Loans: ____________________.1

         2.       The undersigned Borrower(s) shall repay the above
referenced Loans on the following Business Day: _______________.2

         3.       All capitalized undefined terms used herein have the
meanings assigned thereto in the Credit Agreement.


         IN  WITNESS  WHEREOF,  the  undersigned  has  executed  this  Notice of
Prepayment this ____ day of _______, 19__.


                                                     
[CORPORATE SEAL]

                                            By:______________________________
                                            Name:_________________________
                                            Title:________________________



--------
1        Complete with an amount in accordance with Section 2.5(d) of the Credit
         Agreement.  If the Loan to be  repaid  is a LIBOR  Rate  Loan,  specify
         whether such Loan (i) is a Revolving Credit Loan or a Finnish Mark Loan
         and  (ii)  is  denominated  in  Dollars  or  an  Alternative   Currency
         (including, without limitation, Finnish Marks).

2        Complete with a Business Day in accordance with Section 2.5(d) of the
         Credit Agreement.



<PAGE>



                                    EXHIBIT D
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent

                        NOTICE OF CONVERSION/CONTINUATION


First Union National Bank
 of Florida, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

         This irrevocable  Notice of  Conversion/Continuation  (the "Notice") is
delivered to you under Section 3.2 of the Five-Year Credit Agreement dated as of
April __, 1997 (as amended,  restated,  supplemented or otherwise modified,  the
"Credit  Agreement"),  by  and  among  BREED  Technologies,   Inc.  and  certain
Subsidiaries, as Borrowers, BREED Technologies,  Inc., as Guarantor, the lenders
party  thereto  (the  "Lenders"),  First  Union  National  Bank of  Florida,  as
Administrative Agent, and The Chase Manhattan Bank, as Documentation Agent.

         1.       This Notice of Conversion/Continuation is submitted for
the purpose of:  (Complete applicable information.)

         (a)      [Converting] [continuing] a               Loan [into]
                  [as] a               Loan.1



<PAGE>



         (b)      Such Loan is  denominated in [Insert  Permitted  Currency] and
                  the  Dollar  Amount  of the  aggregate  outstanding  principal
                  balance of such Loan is $__________.

         (c)      The last day of the current Interest Period for such Loan
                  is               .2

         (d)      The principal amount of such Loan to be [converted]
                  [continued] is $_______________.3

         (e)      The requested effective date of the [conversion]
                  [continuation] of such Loan is _______________.4

         (f)      The requested Interest Period applicable to the
                  [converted] [continued] Loan is _______________.5

         2. The principal amount of all Loans  outstanding as of the date hereof
does not exceed the maximum amount  permitted to be outstanding  pursuant to the
terms of the Credit Agreement.

         3. All of the conditions applicable to the Loan requested herein as set
forth in the Credit Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Loan.

         4.       No Default or Event of Default exists, and none will
exist upon the conversion or continuation of the Loan requested
herein.

         5.       All capitalized undefined terms used herein have the
meanings assigned thereto in the Credit Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  have  executed  this  Notice of
Conversion/Continuation this ____ day of __________, 19__.





                                            By:
                                            Name:
                                            Title:





<PAGE>









                                    EXHIBIT E
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                        OFFICER'S COMPLIANCE CERTIFICATE


         The undersigned,  on behalf of BREED Technologies,  Inc., a corporation
organized  under the laws of  Delaware  ("Breed"),  on  behalf of the  Borrowers
described below,  hereby  certifies to First Union National Bank of Florida,  as
Administrative Agent (the "Administrative Agent"), as follows:

         1. This  Certificate is delivered to you pursuant to Section 6.2 of the
Five-Year  Credit  Agreement  dated as of April __, 1997 (as amended,  restated,
supplemented or otherwise modified, the "Credit Agreement"),  by and among BREED
and certain Subsidiaries thereof, as Borrowers, BREED, as Guarantor, the lenders
party thereto (the "Lenders"),  the Administrative Agent and The Chase Manhattan
Bank,  as  Documentation  Agent.  Capitalized  terms used herein and not defined
herein shall have the meanings assigned thereto in the Credit Agreement.

         2.  I  have  reviewed  the  financial   statements  of  Breed  and  its
Subsidiaries dated as of _______________ and for the  _______________  period[s]
then ended and such statements  fairly present the financial  condition of BREED
and its  Subsidiaries  as of the  dates  indicated  and  the  results  of  their
operations and cash flows for the period[s] indicated.

     3. I have  reviewed  the terms of the Credit  Agreement,  the Notes and the
related Loan Documents and have made, or caused to be made under my supervision,
a review in reasonable detail of the

<PAGE>



transactions  and the  condition  of  BREED  and  its  Subsidiaries  during  the
accounting period covered by the financial statements referred to in Paragraph 2
above.  Such review has not disclosed the existence during or at the end of such
accounting  period of any  condition or event that  constitutes  a Default or an
Event of  Default,  nor do I have any  knowledge  of the  existence  of any such
condition  or  event  as at the  date  of this  Certificate  [except,  [if  such
condition  or event  existed  or  exists,  describe  the  nature  and  period of
existence  thereof and what  action the  Borrowers  have  taken,  are taking and
propose to take with respect thereto]].

         4.       The Applicable Margin and calculations determining such
figure are set forth on the attached Schedule 1.

         5. BREED and its  Subsidiaries  are in  compliance  with the  covenants
contained  in Article VIII of the Credit  Agreement as shown on such  Schedule 1
and BREED and its  Subsidiaries  are in compliance  with the other covenants and
restrictions contained in Articles VII and IX of the Credit Agreement.

         6. The calculations of the total assets of each Subsidiary of BREED for
the purpose of determining which Subsidiaries are Material  Subsidiaries are set
forth on the attached Schedule 1.


         WITNESS the following signatures as of the _____ day of______, _____


                                            BREED TECHNOLOGIES, INC.
                                            By:
                                            Name:
                                            Title:




<PAGE>



                                   Schedule 1
                                       to
                        Officer's Compliance Certificate

I.       Applicable Margin.

         [To Be Completed Pursuant to the Credit Agreement]













<PAGE>



                                   Schedule 1
                                       to
                        Officer's Compliance Certificate

II.      Compliance with the Financial Covenants.


A.       Leverage Ratio.

         [To Be Completed Pursuant to the Credit Agreement]


B.       Minimum Net Worth.

         [To Be Completed Pursuant to the Credit Agreement]


C.       Interest Coverage Ratio.

         [To Be Completed Pursuant to the Credit Agreement]




<PAGE>



                                   Schedule 1
                                       to
                        Officer's Compliance Certificate

III.     Total Assets of each Subsidiary.


A.       Material Subsidiaries.

                                                            Percentage of
                  Subsidiary        Total Assets            Total Assets

         1.

         2.

         3.


         Note:             Breed and the  Subsidiaries  of Breed which  comprise
                           "Material  Subsidiaries"  (as  defined  in the Credit
                           Agreement) shall at all times have total assets equal
                           to or  greater  than  ninety  percent  (90%)  of  the
                           Consolidated   total   assets   of   Breed   and  its
                           Subsidiaries.


B.       Non-Material Subsidiaries.

                                                            Percentage of
                  Subsidiary        Total Assets            Total Assets

         1.

         2.

         3.






<PAGE>



                                    EXHIBIT F
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                            ASSIGNMENT AND ACCEPTANCE

                                                    Dated _________

         Reference is made to the Five-Year  Credit  Agreement dated as of April
__, 1997 (as amended, restated,  supplemented or otherwise modified, the "Credit
Agreement"),  by and among BREED  Technologies,  Inc.  and certain  Subsidiaries
thereof, as Borrowers, BREED Technologies, Inc., as Guarantor, the lenders party
thereto (the "Lenders"), First Union National Bank of Florida, as Administrative
Agent  (the   "Administrative   Agent")  and  The  Chase   Manhattan   Bank,  as
Documentation Agent. Capitalized terms which are defined in the Credit Agreement
and which are used herein without definition shall have the same meanings herein
as in the Credit Agreement.

         _____________________________________ (the "Assignor") and
____________________________ (the "Assignee") agree as follows:

         1. The  Assignor  hereby  sells and  assigns to the  Assignee,  and the
Assignee  hereby  purchases and assumes from the  Assignor,  as of the Effective
Date (as defined  below),  a ____% interest (the "Assigned  Interest") in and to
all of the  Assignor's  interests,  rights  and  obligations  under  the  Credit
Agreement  and the other Loan  Documents  and all  Collateral  and the  Assignor
thereby retains ____% of its interest  therein (the "Retained  Interest").  This
Assignment  and  Acceptance is entered  pursuant to, and  authorized by, Section
13.10 of the Credit Agreement.


                                                          6

<PAGE>



         2. The Assignor (a)  represents  that,  as of the date hereof,  (i) its
Commitment  Percentage  (without giving effect to assignments thereof which have
not yet become  effective)  under the  Credit  Agreement,  (ii) the  outstanding
balance of its  Revolving  Credit Loans  (unreduced by any  assignments  thereof
which have not yet become  effective)  under the Credit  Agreement  [, (iii) the
outstanding  balance of its Finnish  Mark Loans  (unreduced  by any  assignments
thereof which have not yet become effective) under the Credit Agreement and (iv)
the  outstanding  balance of its Swingline  Loans  (unreduced by any assignments
thereof which have not yet become effective)] are each set forth in Section 2 of
Schedule  I hereto;  (b) makes no  representation  or  warranty  and  assumes no
responsibility  with respect to any  statements,  warranties or  representations
made in or in connection with the Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of the Credit  Agreement  or any other  instrument  or document  furnished
pursuant thereto, other than that the Assignor 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;  (c) makes no  representation  or warranty  and
assumes  no  responsibility  with  respect  to the  financial  condition  of the
Borrowers or the  performance  or  observance  by the  Borrowers of any of their
obligations  under the  Credit  Agreement  or any other Loan  Document;  and (d)
attaches the  Revolving  Credit Note [, the Finnish Mark Note and the  Swingline
Note,  as  applicable]  delivered to it under the Credit  Agreement and requests
that the Borrowers exchange such [Note] [Notes] for new Notes payable to each of
the Assignor and the Assignee as follows:

         Revolving Credit Note
         Payable to the Order of:                Principal Amount of Note:

                                                 $_________


                                                 $_________


         Finnish Mark Note
         Payable to the Order of:                Principal Amount of Note:

                                                 $_________


                                                 $_________


<PAGE>





         Swingline Note
         Payable to the Order of:                Principal Amount of Note:

                                                 $_________

         3.  The  Assignee  (a)  represents  and  warrants  that  it is  legally
authorized to enter into this  Assignment and  Acceptance;  (b) confirms that it
has received a copy of the Credit  Agreement,  together  with copies of the most
recent financial  statements  delivered pursuant to Section 6.1 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;  (c)
agrees that it will, independently and without reliance upon the Assignor or any
other  Lender  or the  Administrative  Agent  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;  (d)
confirms  that it is an Eligible  Assignee;  (e)  appoints  and  authorizes  the
Administrative  Agent to take such action as agent on its behalf and to exercise
such  powers  under the Credit  Agreement  and the other Loan  Documents  as are
delegated to the agent by the terms  thereof,  together  with such powers as are
reasonably  incidental  thereto;  (f) agrees that it will perform in  accordance
with their terms all the obligations  which by the terms of the Credit Agreement
and the other Loan Documents are required to be performed by it as a Lender; and
(g)  agrees  that it will keep  confidential  all  non-public  information  with
respect to the Borrowers  obtained  pursuant to the Loan Documents in accordance
with Section 13.10(g) of the Credit Agreement.

         4. The effective date for this  Assignment  and Acceptance  shall be as
set forth in Section 1 of Schedule I hereto (the  "Effective  Date").  Following
the execution of this  Assignment  and  Acceptance,  it will be delivered to the
Administrative Agent for consent thereby and by the Borrowers and acceptance and
recording in the Register.

         5. Upon such consents,  acceptance  and  recording,  from and after the
Effective  Date, (i) the Assignee  shall be a party to the Credit  Agreement and
the other  Loan  Documents  to which  Lenders  are  parties  and,  to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender under each such  agreement,  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  and the other Loan
Documents.



<PAGE>



         6. Upon such consents,  acceptance  and  recording,  from and after the
Effective Date, the  Administrative  Agent shall make all payments in respect of
the interest assigned hereby (including  payments of principal,  interest,  fees
and other  amounts) to the  Assignee.  The Assignor and Assignee  shall make all
appropriate  adjustments  in payments for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.

         7.       THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A
CONTRACT UNDER SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE  STATE Of NORTH  CAROLINA,  WITHOUT  REGARD  TO
CONFLICT OF LAW PRINCIPLES.



<PAGE>




                                            ASSIGNOR:


                                            Commitment Percentage ____%

                                            By:
                                            Name:
                                            Title:


                                            ASSIGNEE:


                                            Commitment Percentage ____%

                                            By:
                                            Name:
                                            Title:





<PAGE>



Acknowledged and Consented to by:

BREED TECHNOLOGIES, INC., on behalf of
  itself and the other Borrowers


By:____________________________________
Name:  _____________________________
Title: _____________________________



Consented to and Accepted by:

FIRST UNION NATIONAL BANK OF FLORIDA,
  as Administrative Agent


By:____________________________________
Name:______________________________
Title:______________________________




<PAGE>



                                   Schedule I
                                       to
                            Assignment and Acceptance

1.       Effective Date                          

2.       Assignor's Interest
         Prior to Assignment

         (a)      Commitment Percentage
                  of Assignor                                         %

         (b)      Outstanding balance
                  of Assignor's Revolving
                  Credit Loans                              $

         [(c)     Outstanding balance of
                  Assignor's Finnish Mark Loans             $

         (d)      Outstanding balance of
                  Assignor's Swingline
                  Loans                                     $          ]

3.       Assigned Interest
         (from Section 1)                                             %

4.       Assignee's Extensions of Credit
         After Effective Date

         (a)      Outstanding balance of
                  Assignee's Revolving
                  Credit Loans
                  (line 2(b) times line 3)                  $


         [(b)     Outstanding balance of
                  Assignee's Finnish Mark Loans
                  (line 2(b) times 3)                       $


         (c)      Outstanding balance of
                  Assignee's Swingline Loans
                  (line 2(d))                               $          ]

5.       Retained Interest of Assignor after
         Effective Date

         (a)      Retained Interest (from
                  Section 1)                                             %



<PAGE>



         (b)      Outstanding balance of
                  Assignor's Revolving Credit
                  Loans (line 2(b) times
                  line 5(a))                                $

         [(c)     Outstanding balance of
                  Assignor's Finnish Mark Loans
                  (line 2(c) times line 5(a))               $
         (d)      Outstanding balance of
                  Assignor's Swingline Loans
                  (line 2(d) times line 5(a))               $          ]

6.       Payment Amount                                     $

7.       Payment Instructions

         (a)      If payable to Assignor,
                  to the account of Assignor to:




                  Routing No.:
                  Account No.:
                  Attn:
                  Reference:

         (b)      If payable to Assignee,
                  to the account            of Assignee to:




                  Routing No.:
                  Account No.:
                  Attn:
                  Reference:




<PAGE>



                                    EXHIBIT G
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                          NOTICE OF ACCOUNT DESIGNATION


                                                  Dated _________


First Union National Bank
 of Florida, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

         This  Notice  of  Account  Designation  is  delivered  to you by  BREED
Technologies,   Inc.,  a  corporation  organized  under  the  laws  of  Delaware
("BREED"),  on behalf of the Borrowers  described below, under Section 4.2(f)(i)
of the  Five-Year  Credit  Agreement  dated as of April  __,  1997 (as  amended,
restated,  supplemented or otherwise  modified,  the "Credit  Agreement") by and
among BREED and certain Subsidiaries thereof, as Borrowers, BREED, as Guarantor,
the  Lenders  party  thereto,   First  Union   National  Bank  of  Florida,   as
Administrative Agent (the "Administrative Agent"), and The Chase Manhattan Bank,
as Documentation Agent.

         The  Administrative  Agent is hereby  authorized  to disburse  all Loan
proceeds into the following account(s):

                              [Insert name of bank/
                               ABA Routing Number/
                               and Account Number]

                                                         3

<PAGE>








         IN WITNESS WHEREOF, the undersigned has executed this Notice of Account
Designation this _____ day of _______, 19__.


[CORPORATE SEAL]                            BREED TECHNOLOGIES, INC.


                                            By:
                                            Name:
                                            Title:



<PAGE>



                                    EXHIBIT H
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                            FORM OF PLEDGE AGREEMENT


         THIS PLEDGE AGREEMENT (the "Pledge  Agreement"),  dated as of April __,
1997, is made by  __________________________,  a corporation organized under the
laws of ____________  (the "Pled gor"), in favor of FIRST UNION NATIONAL BANK OF
FLORIDA,  a  national  banking   association,   as  Administrative   Agent  (the
"Administrative  Agent"),  for the ratable  benefit of itself and the  financial
institutions (the "Lenders") that are, or may from time to time become,  parties
to the Credit Agreements (as hereinafter defined).

                              STATEMENT OF PURPOSE

         Pursuant to the terms of the Five-Year Credit Agreement of even date by
and among BREED Technologies, Inc. ("BREED") and certain of its subsidiaries, as
Borrowers,  BREED, as Guarantor,  the Lenders party thereto,  the Administrative
Agent  and The  Chase  Manhattan  Bank,  as  Documentation  Agent  (as  amended,
restated,  supplemented or otherwise  modified from time to time, the "Five-Year
Credit  Agreement")  and the 364-Day Credit  Agreement of even date by and among
BREED and certain of its subsidiaries,  as Borrow ers, BREED, as Guarantor,  the
Lenders party thereto, the Administrative Agent and The Chase Manhattan Bank, as
Documentation  Agent (as amended,  restated,  supplemented or otherwise modified
from  time to time,  the  "364-Day  Credit  Agreement"  and,  together  with the
Five-Year  Credit  Agreement,  the "Credit  Agreements"),  the Lenders  extended
certain  credit  facilities  to the  Borrowers  as more  particularly  described
therein.


<PAGE>



         The  Pledgor  is the legal and  beneficial  owner of (a) the  shares of
Pledged  Stock (as  hereinafter  defined)  issued  by  certain  corporations  as
specified on Schedule I attached  hereto and incor  porated  herein by reference
(collectively,  the "Issuers") and (b) the Partnership Interests (as hereinafter
defined) in the partner ships and limited liability companies listed on Schedule
I hereto (collectively, the "Partnerships").

         In  connection  with  the  transactions   contemplated  by  the  Credit
Agreements and as a condition precedent thereto, the Lenders have requested, and
the Pledgor has agreed to execute and deliver,  this Pledge  Agreement  with the
Pledged Stock to the Administrative Agent, for the ratable benefit of itself and
the Lenders.

         NOW,  THEREFORE,  in  consideration  of the  foregoing  premises and to
induce the Administrative Agent and the Lenders to enter into and make available
Loans  pursuant to the Credit  Agreements,  the Pledgor  hereby  agrees with the
Administrative Agent, for the ratable benefit of itself and the Lenders.

     1. Defined Terms. Unless otherwise defined herein,  terms which are defined
in the Credit  Agreements  and used  herein are so used as so  defined,  and the
following terms shall have the following meanings:

                  "Code" means the Uniform  Commercial Code from time to time in
         effect in the State of North Carolina.

                  "Collateral" means the Stock Collateral and the
         Partnership Collateral.

                  "Obligations" means the collective  reference to the Pledgor's
         obligations under each Credit Agreement and each Loan Document to which
         such Pledgor is a party.

                  "Partnership Collateral" means all of the Partnership Inter-
          ests of the Pledgor in the Partnerships and all Proceeds therefrom.

                  "Partnership   Interests"  means  the  entire  partnership  or
         membership  interest  of the  Pledgor  in each  Partnership  listed  on
         Schedule  I hereto,  including,  without  limita  tion,  the  Pledgor's
         capital account,  its or his interest as a partner or member in the net
         cash flow,  net profit and net loss, and items of income,  gain,  loss,
         deduction


<PAGE>



         and credit of the Partnerships,  its interest in all distributions made
         or to be made by the  Partnerships  to the Pledgor and all of the other
         economic  rights,  titles and  interests of the Pledgor as a partner or
         member  of the  Partnerships,  whether  set  forth  in the  partnership
         agreement  or  membership  agreement of the  Partnerships,  by separate
         agreement or otherwise.

                  "Pledge  Agreement" means this Pledge  Agreement,  as amended,
         restated, supplemented or otherwise modified from time to time.

                  "Pledged  Stock"  means the  shares of  capital  stock of each
         Issuer   listed  on  Schedule  I  hereto,   together   with  all  stock
         certificates,  options or rights of any nature  whatsoever  that may be
         issued or  granted by such  Issuer to the  Pledgor  while  this  Pledge
         Agreement is in effect.

                  "Proceeds"  means all  "proceeds"  as such term is  defined in
         Section  9-306(1)  of the Code on the date  hereof  and,  in any event,
         shall include,  without limi tation, all dividends or other income from
         the  Pledged  Stock and  Partnership  Interests,  collections  thereon,
         proceeds of sale thereof or distributions with respect thereto.

                  "Stock Collateral" means the Pledged Stock and all
         Proceeds therefrom.

         2. Pledge and Grant of Security  Interest.  The Pledgor hereby delivers
to the Administrative  Agent, for the ratable benefit of itself and the Lenders,
all the Pledged Stock and hereby  grants to the  Administrative  Agent,  for the
ratable benefit of itself and the Lenders, a first priority security interest in
the Pledged  Stock and all other  Collateral,  as  collateral  security  for the
prompt and  complete  payment and  performance  when due  (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.



<PAGE>



         3.       Stock Powers; Register of Pledge.

         (a) Concurrently with the delivery to the Administrative  Agent of each
certificate  representing one or more shares of Pledged Stock, the Pledgor shall
deliver an undated stock power covering such certificate, duly executed in blank
by the Pledgor with, if the Administrative  Agent so requests,  signature guaran
teed.

         (b)  Concurrently  with the  execution  of this Pledge  Agreement,  the
Pledgor will send to each Partnership written instructions  substantially in the
form of  Exhibit  A  hereto  and  shall  cause  each  Partnership  to,  and each
Partnership shall, deliver to the Administrative Agent the Transaction Statement
in the form of Exhibit B hereto, confirming that each Partnership has registered
the pledge effected by this Pledge Agreement on its books.

         4.   Pledgor   Remains   Liable.   Anything   herein  to  the  contrary
notwithstanding,  (a) the  Pledgor  shall  remain  liable to perform  all of its
duties and obligations as a partner of the Partnerships to the same extent as if
this  Pledge  Agreement  had  not  been  executed,   (b)  the  exercise  by  the
Administrative  Agent or any  Lender of any of its  rights  hereunder  shall not
release the Pledgor  from any of its duties or  obligations  as a partner of the
Partnerships, and (c) neither the Administrative Agent nor any Lender shall have
any obligation or liability as a partner of the  Partnerships  by reason of this
Pledge Agreement.

     5.  Representations and Warranties.  To induce the Administrative Agent and
the  Lenders to execute the Credit  Agreements  and make any Loans and to accept
the security  contemplated  hereby,  the Pledgor hereby  represents and warrants
that:

                  (a) the Pledgor has the corporate  power,  authority and legal
         right to execute and deliver,  to perform its obligations under, and to
         grant the Lien on the Collateral pursuant to, this Pledge Agreement and
         has taken all necessary  corporate  action to authorize its  execution,
         delivery and  performance  of, and grant of the Lien on the  Collateral
         pursuant to, this Pledge Agreement;

                  (b) this  Pledge  Agreement  constitutes  a legal,  valid  and
         binding  obligation of the Pledgor  enforceable  against the Pledgor in
         accordance with its terms, except as enforceability


<PAGE>



         may be limited by bankruptcy, insolvency, reorganization, moratorium or
         similar laws affecting the enforcement of creditors'  rights  generally
         and by the availability of equitable remedies;

                  (c) the  execution,  delivery and  performance  of this Pledge
         Agreement  will not  violate any  provision  of any  Applicable  Law or
         contractual  obligation  of the  Pledgor  and  will not  result  in the
         creation  or  imposition  of any Lien on any of the  properties  or the
         revenues of the Pledgor  pursuant to any  Applicable Law or contractual
         obligation, except as contemplated hereby and by the Credit Agreements;

                  (d) no consent or authorization  of, filing with, or other act
         by or in respect of, any  arbitrator or  Governmental  Authority and no
         consent  of  any  other  Person  (including,  without  limitation,  any
         stockholder  or creditor of the Pledgor or any Issuer or any general or
         limited partner of any Partnership), is required in connection with the
         execution,  delivery,  performance,  validity or enforceability against
         the Pledgor of this Pledge Agreement,  except (i) as may be required in
         connection   with  the   disposition  of  the  Pledged  Stock  and  the
         Partnership  Interests  by laws  affecting  the  offering  and  sale of
         securities  generally,  and (ii) filings  under the Uniform  Commercial
         Code;

                  (e) no  litigation,  investigation  or proceeding of or before
         any  arbitrator  or  Governmental  Authority  is  pending  or,  to  the
         knowledge  of the  Pledgor,  threatened  by or against  the  Pledgor or
         against any of its  properties  or revenues with respect to this Pledge
         Agreement or any of the transactions contemplated hereby;

                  (f)  the  shares  of  Pledged   Stock  listed  on  Schedule  I
         constitute all of the issued and  outstanding  shares of all classes of
         the  capital  stock of each Issuer  that is a Domestic  Subsidiary  and
         constitute  _____% of all of the issued and  outstanding  shares of all
         classes of capital  stock of each Issuer that is a Foreign  Subsidiary,
         and Schedule I accurately reflects such Pledgor's  Partnership Interest
         in each of the  Partnerships and the Partnership  Interests  pledged by
         the Pledgor  constitute all of the outstanding  ownership  interests in
         which the Pledgor has any right,  title or interest in each Partnership
         which  is  a  Domestic   Subsidiary  and  constitutes   _____%  of  the
         outstanding ownership interests in which the


<PAGE>



         Pledgor has any right, title and interest in each Partnership
         which is a Foreign Subsidiary;

                  (g) all the  shares of the  Pledged  Stock  have been duly and
         validly  issued  and are fully  paid and  nonassessable  and all of the
         Partnership Interests have been duly and validly issued;

                  (h) the Pledgor is the record and beneficial owner of, and has
         good and  marketable  title  to,  the  Pledged  Stock  and  Partnership
         Interests listed on Schedule I, free of any and all Liens or options in
         favor of, or claims of, any other Per son, except the Credit Agreements
         and the Lien created by this Pledge Agreement;

                  (i) upon  delivery  to the  Administrative  Agent of the stock
         certificates evidencing the Pledged Stock, the Lien granted pursuant to
         this Pledge Agreement will constitute a valid, perfected first priority
         Lien on the  Collateral,  enforceable  as such against all creditors of
         the  Pledgor  and  any  Persons  purporting  to  purchase  any  of  the
         Collateral from the Pledgor; and

                  (j) the Pledgor has delivered to the Administrative Agent true
         and  complete  copies  of the  partnership  agreements  for each of the
         Partnerships  which partnership  agreements are currently in full force
         and effect and have not been amended or modified except as disclosed to
         the Administrative Agent in writing.

         6.       Certain Covenants.  The Pledgor covenants and agrees with
the Administrative Agent, for the ratable benefit of itself and the
Lenders, that, from and after the date of this Pledge Agreement
until the Obligations are paid in full and the Commitments are
terminated:

                  (a)  On or  before  the  date  of  execution  of  this  Pledge
         Agreement,  the Pledgor shall cause each of the partners of each of the
         Partnerships   to  execute  a  consent  in  the  form  attached  hereto
         evidencing the consent of the partners to the pledge of the Partnership
         Interests pursuant to this Pledge Agreement.

                  (b)      The Pledgor agrees that as a partner in the Partner
         ships it will abide by, perform and discharge each and every


<PAGE>



         obligation,  covenant  and  agreement  to be abided  by,  performed  or
         discharged by Pledgor under the terms of the partnership  agreements of
         the Partnerships, at no cost or expense to the Administrative Agent and
         the Lenders.

                  (c) If the Pledgor shall,  as a result of its ownership of the
         Collateral,  become  entitled  to  receive or shall  receive  any stock
         certificate   (including,    without   limitation,    any   certificate
         representing a stock dividend or a distribution  in connection with any
         reclassification,  increase or reduction of capital or any  certificate
         issued  in  connection  with any  reorganization),  option  or  rights,
         whether in addition to, in  substitution  of, as a conversion of, or in
         exchange for any of the  Collateral,  or otherwise in respect  thereof,
         the Pledgor  shall  accept the same as the agent of the  Administrative
         Agent, hold the same in trust for the Administrative  Agent and deliver
         the  same  forthwith  to the  Administrative  Agent in the  exact  form
         received,  duly indorsed by the Pledgor to the Administrative Agent, if
         required,   together  with  an  undated   stock  power   covering  such
         certificate  duly  executed in blank by the  Pledgor  and with,  if the
         Administrative Agent so requests,  signature guaranteed,  to be held by
         the  Administrative  Agent,  subject to the terms hereof, as additional
         collateral  security  for the  Obligations;  provided,  that at no time
         shall the  Pledged  Stock or  Partnership  Interests  of any  Issuer or
         Partnership that is a Foreign  Subsidiary  exceed 66.00% of the Pledged
         Stock or Partnership  Interests of such  Subsidiary.  In addition,  any
         sums paid upon or in respect of the Collateral  upon the liquidation or
         disso  lution  of any  Issuer  or  Partnership  shall  be  held  by the
         Administrative   Agent  as  additional   collateral  security  for  the
         Obligations.

                  (d) Without the prior  written  consent of the  Administrative
         Agent,  the  Pledgor  will not (i) vote to  enable,  or take any  other
         action to  permit,  any  Issuer  or  Partnership  to issue  any  stock,
         partnership  interests,  limited  liability  company interests or other
         equity  securities  of any  nature  or to issue  any  other  securities
         convertible  into or granting the right to purchase or exchange for any
         stock,  partnership  interests,  limited liability company interests or
         other equity  securities  of any nature of such Issuer or  Partnership,
         (ii) except as expressly  provided to the contrary  herein,  consent to
         any  modification,   extension  or  alteration  of  the  terms  of  any
         partnership agreement of the Partnerships, (iii) accept a


<PAGE>



         surrender of any  partnership  agreement of any of the Partner ships or
         waive any breach of or default under any  partnership  agreement of any
         of the  Partnerships  by any other party  there to, (iv) sell,  assign,
         transfer,  exchange,  or otherwise dispose of, or grant any option with
         respect to, the Collateral, or (v) create, incur or permit to exist any
         Lien or option in favor of, or any claim of any Person with respect to,
         any of the  Collateral,  or any interest  therein,  except for the Lien
         provided  for by this Pledge  Agreement.  The  Pledgor  will defend the
         right,  title and  interest of the  Administrative  Agent in and to the
         Collateral against the claims and demands of all Persons whomsoever.

                  (e) At any  time  and from  time to  time,  upon  the  written
         request of the  Administrative  Agent,  and at the sole  expense of the
         Pledgor,  the Pledgor  will  promptly and duly execute and deliver such
         further  instruments and documents and take such further actions as the
         Administrative  Agent  may  reasonably  request  for  the  purposes  of
         obtaining or preserving the full benefits of this Pledge  Agreement and
         of the rights and powers herein granted. If any amount payable under or
         in connection with any of the Collateral  shall be or become  evidenced
         by any promissory note,  other instrument or chattel paper,  such note,
         instrument  or chattel  paper  shall be  immediately  delivered  to the
         Administrative  Agent,  duly endorsed in a manner  satisfac tory to the
         Administrative  Agent, to be held as Collateral pursuant to this Pledge
         Agreement.

                  (f) The Pledgor agrees to pay, and to save the  Administrative
         Agent and the  Lenders  harmless  from,  any and all  liabilities  with
         respect to, or resulting  from any delay in paying,  any and all stamp,
         excise, sales or other similar taxes which may be payable or determined
         to be payable with respect to any of the  Collateral  or in  connection
         with any of the transactions contemplated by this Pledge Agreement.

                  (g)  On or  prior  to  the  formation  or  acquisition  of any
         Subsidiary  of  the  Pledgor,   the  Pledgor  agrees  to  execute  such
         amendments and supplements to this Pledge Agreement, including, without
         limitation,  the Pledge Agreement  Supplement attached hereto, and such
         other documents and instruments as required pursuant to Section 7.12 of
         each Credit Agreement.

          7. Cash Dividends and Distributions; Voting Rights. Unless an Event of
     Default shall have occurred and be continuing and the


<PAGE>



Administrative   Agent   shall  have  given   notice  to  the   Pledgor  of  the
Administrative  Agent's  intent to exercise  its rights  pursuant to Paragraph 8
below,  the  Pledgor  shall be  permitted  to  receive  all cash  dividends  and
shareholder and partnership  distributions  paid in accordance with the terms of
each Credit  Agreement in respect of the  Collateral  and to exercise all voting
and  corporate  or  partnership  rights,  as  applicable,  with  respect  to the
Collateral;  provided,  that no vote shall be cast or corporate  or  partnership
right  exercised  or other action taken  which,  in the  Administrative  Agent's
reasonable judgment,  would impair the collateral or which would be inconsistent
with or result in any violation of any provision of either Credit Agreement, the
Notes, any other Loan Documents or this Pledge Agreement.

         8.       Rights of the Administrative Agent.

         (a) If an  Event of  Default  shall  occur  and be  continuing  and the
Administrative  Agent shall give notice of its intent to exercise such rights to
the Pledgor,  (i) the  Administrative  Agent shall have the right to receive any
and all cash  dividends  paid in respect of the  Pledged  Stock and  partnership
distributions  in  respect of the  Partnership  Interests  and make  application
thereof to the  Obligations in the order set forth in Section 3.5 of each Credit
Agreement and (ii) all shares of the Pledged Stock and the Partnership Interests
shall be registered in the name of the Administrative  Agent or its nominee, and
the Administrative  Agent or its nominee may thereafter exercise (A) all voting,
corporate, partnership and other rights pertaining to such shares of the Pledged
Stock or  Partnership  Interests at any meeting of sharehold  ers or partners of
the applicable  Issuer or Partnership or otherwise and (B) any and all rights of
conversion,  exchange,  subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock or Partnership Interests as if it
were the absolute owner thereof  (including,  without  limitation,  the right to
exchange  at its  discretion  any and all of the  Pledged  Stock or  Partnership
Interests upon the merger,  consolidation,  reorganization,  recapitalization or
other fundamental change in the corporate  structure of the applicable Issuer or
Partnership,  or upon the exercise by the Pledgor or the Administrative Agent of
any right, privilege or option pertaining to such shares of the Pledged Stock or
the Partnership Interests, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock or the  Partnership  Interests with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine), all without liability


<PAGE>



except to account for property actually  received by it, but the  Administrative
Agent shall have no duty to the Pledgor to exercise any such right, privilege or
option  and shall not be  responsible  for any  failure  to do so or delay in so
doing.

         (b) The rights of the  Administrative  Agent and the Lenders  hereunder
shall not be  conditioned or contingent  upon the pursuit by the  Administrative
Agent or any Lender of any right or remedy  against  the  Pledgor or against any
other Person which may be or become  liable in respect of all or any part of the
Obligations or against any collateral  security  therefor,  guarantee thereof or
right of offset with respect thereto.  Neither the Administrative  Agent nor any
Lender shall be liable for any failure to demand, collect or realize upon all or
any  part of the  Collateral  or for any  delay  in  doing  so,  nor  shall  the
Administrative Agent be under any obligation to sell or otherwise dispose of any
Collateral  upon the request of the  Pledgor or any other  Person or to take any
other action whatsoever with regard to the Collateral or any part thereof.

         9. Remedies. If an Event of Default shall occur and be continuing, with
the consent of the Required Lenders,  the Administrative Agent may, and upon the
request of the Required Lenders,  the  Administrative  Agent shall,  exercise on
behalf of itself and the Lenders, all rights and remedies granted in this Pledge
Agreement  and in any other  instrument  or agreement  securing,  evidencing  or
relating to the Obligations, and in addition thereto, all rights and remedies of
a secured party under the Code. Without limiting the generality of the foregoing
with  regard  to  the  scope  of  the  Administrative   Agent's  remedies,   the
Administrative   Agent,   without   demand  of   performance  or  other  demand,
presentment,  protest,  advertisement  or notice of any kind  (except any notice
required by law  referred  to below) to or upon the  Pledgor,  any  Issuer,  any
Partnership  or any  other  Person  (all and each of  which  demands,  defenses,
advertisements  and  notices  are  hereby  waived),  may in  such  circumstances
forthwith collect, receive,  appropriate and realize upon the Collateral, or any
part  thereof,  and/or may  forthwith  sell,  assign,  give option or options to
purchase or otherwise  dispose of and deliver the Collateral or any part thereof
(or  contract to do any of the  foregoing),  in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere upon such
terms and  conditions as it may deem advisable and at such prices as it may deem
best,  for cash or on credit or for future  delivery  without  assumption of any
credit


<PAGE>



risk. The Administrative  Agent or any Lender shall have the right upon any such
public sale or sales, and, to the extent permitted by law, upon any such private
sale or sales, to purchase the whole or any part of the Collateral so sold, free
of any right or equity of  redemption  in the Pledgor,  which right or equity is
hereby  waived or released.  The  Administrative  Agent shall apply any Proceeds
from  time to time  held by it and the  net  proceeds  of any  such  collection,
recovery,  receipt,  appropriation,  realization  or sale,  after  deducting all
reasonable  costs and  expenses  of every kind  incurred  in respect  thereof or
incidental  to the care or safekeep ing of any of the  Collateral  or in any way
relating to the  Collateral  or the rights of the  Administrative  Agent and the
Lenders hereunder, including, without limitation, reasonable attorneys' fees and
disbursements  of  counsel  thereto,  to the  payment in whole or in part of the
Obligations, in the order set forth in Section 3.5 of each Credit Agreement, and
only after such application and after the payment by the Administrative Agent of
any  other  amount  required  by  any  provision  of  law,  including,   without
limitation,  Section  9-504(1)(c)  of the Code,  need the  Administrative  Agent
account for the  surplus,  if any, to the  Pledgor.  To the extent  permitted by
applicable  law,  the  Pledgor  waives all  claims,  damages  and demands it may
acquire  against  the  Administrative  Agent or any  Lender  arising  out of the
exercise by them of any rights  hereunder.  If any notice of a proposed  sale or
other  disposition of Collateral  shall be required by law, such notice shall be
deemed reasonable and proper if given at least ten (10) days before such sale or
other  disposition.  The  Pledgor  further  waives  and agrees not to assert any
rights or privileges which it may acquire under Section 9-112 of the Code.

         10.      Registration Rights; Private Sales.

         (a) If the  Administrative  Agent shall determine to exercise its right
to sell any or all of the Pledged Stock  pursuant to Paragraph 9 hereof,  and if
in the opinion of the Administrative  Agent it is necessary or advisable to have
the Pledged  Stock,  or that portion  thereof to be sold,  registered  under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Pledgor will cause the applicable  Issuer to (i) execute and deliver,  and cause
the directors and officers of the applicable Issuer to execute and deliver,  all
such  instruments and documents,  and do or cause to be done all such other acts
as may be, in the reasonable opinion of the Administrative  Agent,  necessary or
advis able to register the Pledged  Stock,  or that portion  thereof to be sold,
under the provisions of the Securities Act, (ii) to use its


<PAGE>



best  efforts to cause the  registration  statement  relating  thereto to become
effective and to remain  effective for a period of one year from the date of the
first public  offering of the Pledged Stock, or that portion thereof to be sold,
and (iii) to make all amendments thereto and/or to the related prospectus which,
in the opinion of the Administrative  Agent, are necessary or advisable,  all in
conformity  with  the  requirements  of the  Securities  Act and the  rules  and
regulations of the Securities and Exchange Commission  applicable  thereto.  The
Pledgor agrees to cause the  applicable  Issuer to comply with the provisions of
the  securities  or  "Blue  Sky"  laws of any and all  jurisdictions  which  the
Administrative  Agent shall  designate  and to make  available  to its  security
holders,  as soon as  practicable,  an  earnings  statement  (which  need not be
audited)  which will satisfy the  provisions of Section 11(a) of the  Securities
Act.

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

         (c) The Pledgor  further  agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the  Collateral  pursuant to this  Paragraph  10 valid and
binding and in compliance  with any and all other  Applicable  Laws. The Pledgor
further agrees that a breach of any of the covenants contained in this Paragraph
10 will cause irreparable injury to the Administrative Agent and the Lenders not
compensable in damages,  that the  Administrative  Agent and the Lenders have no
adequate  remedy at law in respect of such breach and,  as a  consequence,  that
each and every covenant


<PAGE>



contained in this  Paragraph 10 shall be  specifically  enforceable  against the
Pledgor,  and the Pledgor  hereby  waives and agrees not to assert any  defenses
against  an action  for  specific  performance  of such  covenants  except for a
defense that no Event of Default has occurred under either Credit Agreement.

     11.  Amendments,  etc. With Respect to the  Obligations.  The Pledgor shall
remain obligated hereunder,  and the Collateral shall remain subject to the Lien
granted hereby,  notwithstanding that, without any reservation of rights against
the Pledgor,  and without notice to or further assent by the Pledgor, any demand
for payment of any of the Obligations  made by the  Administrative  Agent or any
Lender may be rescinded by the  Administrative  Agent or such Lender, and any of
the Obligations continued, and the Obligations,  or the liability of the Pledgor
or any other Person upon or for any part thereof,  or any collateral security or
guarantee  therefor or right of offset with respect  thereto,  may, from time to
time, in whole or in part, be renewed, extended, amended, modified, accelerated,
compromised, waived, surrendered, or released by the Administrative Agent or any
Lender, and either Credit Agreement, the Notes, any other Loan Documents and any
other documents  executed and delivered in connection  therewith may be amended,
modified,  supplemented or terminated,  in whole or part, as the Lenders (or the
Required Lenders,  as the case may be) may deem advisable from time to time, and
any guarantee,  right of offset or other collateral security at any time held by
the Administrative Agent or any Lender for the payment of the Obligations may be
sold,  exchanged,  waived,  surrendered or released.  Neither the Administrative
Agent nor any Lender shall have any  obligation to protect,  secure,  perfect or
insure any other Lien at any time held by it as security for the  Obligations or
any  property  subject  thereto.  The  Pledgor  waives any and all notice of the
creation,  renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Administrative  Agent or any Lender upon this Pledge
Agreement;  the Obligations,  and any of them,  shall  conclusively be deemed to
have  been  created,  contracted  or  incurred  in  reliance  upon  this  Pledge
Agreement;  and all  dealings  between  the  Pledgor,  on the one hand,  and the
Administrative   Agent  and  the  Lenders,  on  the  other,  shall  likewise  be
conclusively  presumed to have been had or  consummated  in  reliance  upon this
Pledge Agreement.  The Pledgor waives dili gence,  presentment,  protest, demand
for payment  and notice of default or  nonpayment  to or upon the  Pledgor  with
respect to the Obligations.



<PAGE>



         12. No Subrogation. Notwithstanding any payment or payments made by the
Pledgor  hereunder,  or any setoff or application of funds of the Pledgor by the
Administrative  Agent, or the receipt of any amounts by the Administrative Agent
with respect to any of the  Collateral,  the Pledgor shall not be entitled to be
subrogated to any of the rights of the Administrative Agent against any Borrower
or  the  Guarantor  or  against  any  other  collateral  security  held  by  the
Administrative  Agent for the payment of the Obligations,  nor shall the Pledgor
seek any reimbursement from any Borrower or the Guarantor in respect of payments
made by the Pledgor in connection  with the Collateral,  or amounts  realized by
the  Administrative  Agent in connection with the Collateral,  until all amounts
owing to the Administrative  Agent and Lenders on account of the Obligations are
paid in full and each Credit  Agreement  is  terminated.  If any amount shall be
paid to the Pledgor on account of such  subrogation  rights at any time when all
of the  Obligations  shall not have been paid in full, such amount shall be held
by the  Pledgor in trust for the  Administrative  Agent,  segregated  from other
funds of the Pledgor,  and shall,  forthwith  upon  receipt by the  Pledgor,  be
turned  over to the  Administrative  Agent in the  exact  form  received  by the
Pledgor (duly indorsed by the  Administrative  Agent, if required) to be applied
against the  Obligations,  whether  matured or  unmatured,  in such order as set
forth in each Credit Agreement.

         13.  Limitation  on Duties  Regarding  Collateral.  The  Administrative
Agent's  sole duty with  respect  to the  custody,  safe  keeping  and  physical
preservation  of the  Collateral in its posses sion,  under Section 9-207 of the
Code  or  otherwise,  shall  be to  deal  with  it in  the  same  manner  as the
Administrative  Agent deals with  similar  securities  and  property for its own
account.  Neither  the  Administrative  Agent,  any  Lender  nor  any  of  their
respective directors,  officers, employees or agents shall be liable for failure
to demand,  collect or realize  upon any of the  Collateral  or for any delay in
doing so or shall be under any  obligation  to sell or otherwise  dispose of any
Collateral upon the request of the Pledgor or otherwise.

         14.      Powers Coupled with an Interest.  All authorizations and
agencies herein contained with respect to the Collateral constitute
irrevocable powers coupled with an interest.

         15.      Severability.  Any provision of this Pledge Agreement
which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining


<PAGE>



provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other jurisdiction.

     16.  Paragraph  Headings.  The  paragraph  headings  used  in  this  Pledge
Agreement  are for  convenience  of  reference  only and are not to  affect  the
construction hereof or be taken into consideration in the interpretation hereof.

         17. No Waiver;  Cumulative  Remedies.  Neither the Administrative Agent
nor any Lender  shall by any act  (except by a written  instrument  pursuant  to
Paragraph  18 hereof) be deemed to have waived any right or remedy  hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and  conditions  hereof.  No  failure  to  exercise,  nor any delay in
exercising,  on the part of the  Administrative  Agent or any Lender, any right,
power or privilege  hereunder  shall operate as a waiver  thereof.  No single or
partial exercise of any right,  power or privilege  hereunder shall preclude any
other or further exercise  thereof or the exercise of any other right,  power or
privilege.  A waiver by the  Administrative  Agent or any Lender of any right or
remedy  hereunder  on any one  occasion  shall not be  construed as a bar to any
right or remedy which the  Administrative  Agent or such Lender would  otherwise
have on any future  occasion.  The  rights  and  remedies  herein  provided  are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.

         18. Waivers and Amendments; Successors and Assigns; Governing Law. None
of the terms or provisions of this Pledge Agreement may be amended, supplemented
or otherwise modified except by a written instrument executed by the Pledgor and
the Administrative  Agent; provided that any consent by the Administrative Agent
to any waiver, amendment,  supplement or modification hereto shall be subject to
approval  thereof  by  the  Lenders  or  Required  Lenders,  as  applicable,  in
accordance with Section 13.11 of each Credit  Agreement.  This Pledge  Agreement
shall be binding upon the succes sors and assigns of the Pledgor and shall inure
to the benefit of the  Administrative  Agent,  the Lenders and their  respective
succes  sors and  assigns.  This  Pledge  Agreement  shall be  governed  by, and
construed and  interpreted  in accordance  with,  the laws of the State of North
Carolina.



<PAGE>



         19.      Notices.  All notices and communications hereunder shall
be given to the addresses and otherwise in accordance with Section
13.1 of each Credit Agreement.

         20. Irrevocable  Authorization and Instruction to Issuers.  The Pledgor
hereby  authorizes and instructs each Issuer and  Partnership to comply with any
instruction  received by it from the  Administrative  Agent in writing  that (a)
states  that an Event of  Default  has  occurred  and is  continuing  and (b) is
otherwise in  accordance  with the terms of this Pledge  Agreement,  without any
other or further instructions from the Pledgor, and the Pledgor agrees that such
Issuer and Partnership shall be fully protected in so complying.

         21. Authority of  Administrative  Agent. The Pledgor acknowl edges that
the rights and  responsibilities  of the Administrative  Agent under this Pledge
Agreement  with respect to any action taken by the  Administrative  Agent or the
exercise or  non-exercise  by the  Administrative  Agent of any  option,  voting
right,  request,  judgment  or other  right or  remedy  provided  for  herein or
resulting  or  arising  out of this  Pledge  Agreement  shall,  as  between  the
Administrative  Agent and the Lenders,  be governed by the Credit Agreements and
by such other  agreements  with  respect  thereto as may exist from time to time
among them,  but,  as between  the  Administrative  Agent and the  Pledgor,  the
Administrative  Agent shall be  conclusively  presumed to be acting as agent for
itself and the Lenders  with full and valid  authority so to act or refrain from
acting, and neither the Pledgor nor any Issuer or Partnership shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.

         22. Consent to Jurisdiction. The Pledgor hereby irrevocably consents to
the personal jurisdiction of the state and federal courts located in Mecklenburg
County, North Carolina,  in any action, claim or other proceeding arising out of
or any  dispute  in  connection  with  this  Pledge  Agreement,  any  rights  or
obligations  hereunder,  or the performance of such rights and obligations.  The
Pledgor  hereby  irrevocably  consents to the service of a summons and complaint
and  other  process  in  any  action,   claim  or  proceeding   brought  by  the
Administrative Agent or any Lender in connection with this Pledge Agreement, any
rights  or  obligations  hereunder,  or  the  performance  of  such  rights  and
obligations,  on behalf of itself or its  property,  in the manner  provided  in
Section 13.1 of each Credit Agreement. Nothing in this Paragraph 22 shall affect
the right of the Administrative Agent or any Lender to serve legal


<PAGE>



process in any other manner  permitted by Applicable  Law or affect the right of
the Administrative Agent or any Lender to bring any action or proceeding against
the Pledgor or its properties in the courts of any other jurisdictions.

         23.      Binding Arbitration; Waiver of Jury Trial.

         (a) Binding Arbitration.  Upon demand of any party, whether made before
or  after  institution  of  any  judicial  proceeding,  any  dispute,  claim  or
controversy  arising out of, connected with or relating to this Pledge Agreement
or any other  Loan  Documents  ("Disputes"),  between  or among  parties to this
Pledge  Agreement  or any other  Loan  Document  shall be  resolved  by  binding
arbitration as provided herein.  Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration hereunder. Disputes
may include, without limitation, tort claims,  counterclaims,  claims brought as
class actions,  claims arising from Loan  Documents  executed in the future,  or
claims  concerning  any  aspect of the  past,  present  or future  relationships
arising out or connected with the Loan Documents. Arbitration shall be conducted
under and governed by the Commercial  Financial Disputes  Arbitration Rules (the
"Arbitration Rules") of the American Arbitration  Association and Title 9 of the
U.S.  Code.  All  arbitration  hearings  shall be conducted in Charlotte,  North
Carolina.  The  expedited  procedures  set  forth  in Rule  51,  et seq.  of the
Arbitration  Rules shall be  applicable to claims of less than  $1,000,000.  All
applicable  statutes of limitation  shall apply to any Dispute.  A judgment upon
the award may be entered in any court having jurisdiction.  The panel from which
all  arbitrators  are selected  shall be comprised  of licensed  attorneys.  The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction,  state or federal, of the state where
the hearing will be conducted.

         (b)  Jury  Trial.  TO THE  EXTENT  PERMITTED  BY  APPLICABLE  LAW,  THE
ADMINISTRATIVE AGENT, EACH LENDER AND THE PLEDGOR HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE  RIGHTS TO A JURY TRIAL WITH  RESPECT TO ANY  ACTION,  CLAIM OR OTHER
PROCEEDING  ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS PLEDGE  AGREEMENT
OR THE OTHER LOAN DOCUMENTS,  ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER,
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.



<PAGE>



         (c)  Preservation of Certain  Remedies.  Notwithstanding  the preceding
binding  arbitration  provisions,  the  parties  hereto  and the Loan  Documents
preserve,  without diminution,  certain remedies that such Persons may employ or
exercise  freely,  either alone, in conjunction  with or during a Dispute.  Each
such Person shall have and hereby  reserves the right to proceed in any court of
proper  jurisdiction  or by self help to exercise  or  prosecute  the  following
remedies:  (i) all rights to foreclose  against any real or personal property or
other  security by  exercising a power of sale granted in the Loan  Documents or
under  applicable law or by judicial  foreclosure  and sale,  (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and  peaceful  possession  of  property,  (iii)  obtaining  provisional  or
ancillary remedies  including  injunctive  relief,  sequestration,  garnishment,
attachment,  appointment  of receiver  and in filing an  involuntary  bankruptcy
proceeding,  and (iv) when  applicable,  a judgment by  confession  of judgment.
Preservation  of these  remedies  does not limit the power of an  arbitrator  to
grant similar remedies that may be requested by a party in a Dispute.

         24. Entire Agreement; Term of Agreement. This Agreement,  together with
the other Loan Documents,  constitutes the entire  agreement with respect to the
subject matter hereof and supersedes  all prior  agreements  with respect to the
subject  matter hereof.  This Agreement  shall remain in effect from the Closing
Date through and including the date upon which all  Obligations  shall have been
indefeasibly  and  irrevocably  paid and  satisfied in full and the  Commitments
terminated.



<PAGE>



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

[CORPORATE SEAL]


                                            By:
                                            Name:
                                            Title:





<PAGE>



                           ACKNOWLEDGEMENT AND CONSENT

         Each  Issuer of  Pledged  Stock  referred  to in the  foregoing  Pledge
Agreement hereby  acknowledges  receipt of a copy thereof and agrees to be bound
thereby  and to  comply  with  the  terms  thereof  insofar  as such  terms  are
applicable to it. Each Issuer agrees to notify the Administrative Agent promptly
in writing of the occurrence of any of the events described in Paragraph 6(c) of
the Pledge Agreement.  Each Issuer further agrees that the terms of Paragraph 10
of the Pledge  Agreement  shall apply to it with respect to all actions that may
be required of it under or  pursuant  to or arising out of  Paragraph  10 of the
Pledge Agreement.


                                            By:
                                            Name:
                                            Title:



                                            By:
                                            Name:
                                            Title:





<PAGE>



                 ACKNOWLEDGEMENT AND CONSENT BY EACH PARTNERSHIP

         The  undersigned  partners  of  the  Partnership  referred  to  in  the
foregoing Pledge Agreement (a) hereby acknowledge receipt of a copy thereof, (b)
hereby  acknowledge  and consent to the pledge of the Pledgor's  interest in the
Partnership  pursuant thereto and upon exercise by the  Administrative  Agent of
its  remedies  thereunder  and at the option of the  Administrative  Agent,  the
substitution of the  Administrative  Agent as a partner in the Partnership,  and
(c)  agree  that  the  Administrative  Agent  may  freely  assign  its  interest
thereunder without further consent of the partners.


                     ,                                                         ,
__________ Partner of                                      __________ Partner of





<PAGE>



                                                                    SCHEDULE I
                                                                    To Pledge
                                                                    Agreement

                          DESCRIPTION OF PLEDGED STOCK

                                  Subsidiaries


                                                                  Percentage of
                                                                 all Outstanding
                                                                    issued
 Issuer     Class of Stock    Certificate No.   No. of Shares     Capital Stock



                       DESCRIPTION OF PARTNERSHIP INTEREST

                                  Partnerships

Partnership                                           Partnership Interest







<PAGE>



                           PLEDGE AGREEMENT SUPPLEMENT

     PLEDGE  AGREEMENT  SUPPLEMENT,  dated  as of  _______________,  _____  (the
"Supplement"), made by  ______________________________,  a corporation organized
under  the laws of  ______________________  (the  "Pledgor"),  in favor of FIRST
UNION   NATIONAL  BANK  OF  FLORIDA,   a  national   banking   association,   as
Administrative Agent (in such capacity,  the "Administrative  Agent"), under the
Credit  Agreements (as defined in the Pledge Agreement  referred to below),  for
the benefit of itself and the Lenders.

         1. Reference is hereby made to that Pledge Agreement, dated as of April
__, 1997, made by the Pledgor in favor of the Administrative  Agent (as amended,
restated,  supplemented or otherwise modified as of the date hereof, the "Pledge
Agreement").  This  Supplement  supplements the Pledge  Agreement,  forms a part
thereof  and is  subject  to the terms  thereof.  Terms  defined  in the  Pledge
Agreement are used herein as therein defined.

         [2. The Pledgor hereby confirms and reaffirms the security  interest in
the Collateral granted to the  Administrative  Agent, for the ratable benefit of
itself  and  the  Lenders,  under  the  Pledge  Agreement,  and,  as  additional
collateral  security  for the prompt and  complete  payment when due (whether at
stated  maturity,  by acceleration or otherwise) of the Obligations and in order
to induce the  Lenders  to make their  Loans  under the Credit  Agreements,  the
Pledgor hereby delivers to the Administrative  Agent, for the ratable benefit of
itself and the  Lenders,  all of the issued  and  outstanding  shares of capital
stock of  [INSERT  NAME OF NEW  SUBSIDIARY]  (the "New  Issuer")  listed  below,
together  with  all  stock  certificates,  options,  or  rights  of  any  nature
whatsoever  which may be issued or  granted by the New Issuer in respect of such
stock  which the Pledge  Agreement,  as  supplemented  hereby,  is in force (the
"Additional  Pledged Stock";  as used in the Pledge Agreement as supplemented by
this  Supplement,  "Pledged  Stock"  shall be deemed to include  the  Additional
Pledged Stock) and hereby grants to the  Administrative  Agent,  for the ratable
benefit of itself and the Lenders,  a first  priority  security  interest in the
Additional Pledged Stock and all Proceeds thereof.]

                                       or

     [2. The Pledgor hereby confirms and reaffirms the security  interest in the
Collateral  granted to the  Administrative  Agent,  for the  ratable  benefit of
itself and the Lenders, under the Pledge


<PAGE>



Agreement,  and, as additional  collateral  security for the prompt and complete
payment when due (whether at stated  maturity,  by acceleration or otherwise) of
the Obligations and in order to induce the Lenders to make their Loans under the
Credit Agreements,  the Pledgor hereby grants to the  Administrative  Agent, for
the  ratable  benefit  of itself  and the  Lenders,  a first  priority  security
interest  in  the  entire  partnership  interest  of  Pledgor  (the  "Additional
Partnership   Interest")   in  [INSERT  NAME  OF  NEW   SUBSIDIARY]   (the  "New
Partnership")  listed  below and all  Proceeds  thereof;  as used in the  Pledge
Agreement as supplemented by this Supplement,  "Partnership  Interests" shall be
deemed to include the Additional Partnership Interest.]

         3. The Pledgor hereby represents and warrants that the  representations
and  warranties  contained in Paragraph 5 of the Pledge  Agreement  are true and
correct on the date of this Supple ment with references therein to the ["Pledged
Stock" to include the Additional  Pledged Stock] or ["Partnership  Interests" to
include the Additional  Partnership  Interest],  with references  therein to the
["Issuer"  to include  the New  Issuer]  or  ["Partnership"  to include  the New
Partnership],  and with references to the "Pledge  Agreement" to mean the Pledge
Agreement as supplemented by this Supplement.

         4.  The  Pledgor  shall  deliver  to  the   Administrative   Agent  the
Acknowledgement and Consent attached hereto duly executed by the [New Issuer] or
[New  Partnership].  The  Additional  [Pledged  Stock or  Partnership  Interest]
pledged hereby is as follows which [Pledged Stock or Partnership Interest] shall
be deemed part of Schedule I thereto:

                          DESCRIPTION OF PLEDGED STOCK


                                                                 Percentage of
                                                                all Outstanding
                                                                   issued
 Issuer      Class of Stock    Certificate No.  No. of Shares     Capital Stock

  New Issuer


                       DESCRIPTION OF PARTNERSHIP INTEREST

                        Partnership Partnership Interest

New Partnership


<PAGE>




         5. The Pledgor  hereby  agrees to deliver to the  Administrative  Agent
such  certificates  and other  documents  and take such other action as shall be
reasonably  requested by the  Administrative  Agent in order to  effectuate  the
terms hereof and the Pledge Agreement.




<PAGE>



     IN WITNESS  WHEREOF,  the undersigned has caused this Supplement to be duly
executed under seal and delivered as of the date first above written.

[CORPORATE SEAL]


                                            By:
                                            Name:
                                            Title:



<PAGE>



                    ACKNOWLEDGEMENT AND CONSENT OF NEW ISSUER

     The  undersigned  hereby  acknowledges  receipt of a copy of the  foregoing
Supplement   and  the  Pledge   Agreement   referred  to  therein  (the  "Pledge
Agreement").  The undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:

         1. The undersigned  will be bound by the terms of the Pledge  Agreement
and will  comply  with such terms  insofar as such terms are  applicable  to the
undersigned.

         2.       The undersigned will notify the Administrative Agent promptly
in writing of the occurrence of any of the events described in Paragraph
6(c) of the Pledge Agreement.

         3. The Issuer  further  agrees  that the terms of  Paragraph  10 of the
Pledge  Agreement  shall  apply to it with  respect to all  actions  that may be
required of it under or pursuant to or arising out of Paragraph 10 of the Pledge
Agreement.

                                            [NAME OF NEW ISSUER]

                                            By:
                                            Name:
                                            Title:





<PAGE>



                     ACKNOWLEDGEMENT AND CONSENT OF PARTNERS
                               OF NEW PARTNERSHIP

         The  undersigned  partners  of   _________________________   (the  "New
Partnership")  (a)  hereby  acknowledge  receipt  of a  copy  of  the  foregoing
Supplement   and  the  Pledge   Agreement   referred  to  therein  (the  "Pledge
Agreement"),  (b) hereby  acknowledge and consent to the pledge of the Pledgor's
interest  in the New  Partnership  pursuant  thereto,  and (c)  agree  that  the
Administrative  Agent may freely assign its interest  thereunder without further
consent of the partners.


                     ,                                                        ,
__________ Partner of                                     __________ Partner of





<PAGE>



                                    EXHIBIT A
                                       TO
                                PLEDGE AGREEMENT


                             Authorization Statement


                                                            April __, 1997


To:      [Partnership]


                  You are  hereby  instructed  to  register  the  pledge  of the
following uncertificated security as follows:

         [Describe Partnership Interests]


Pledgor                                            Pledgee
[Pledgor name and address]                         First Union National Bank of
                                                   Florida, as Administrative
                                                             Agent
                                                     100 South Ashley Drive,
                                                           Suite 940
                                                       Tampa, Florida 33602
                                                     Attention: Gilbert Reese

                                                     Very truly yours,

                                                     [PLEDGOR]


                                                   By:
                                                   Name:
                                                   Title:


<PAGE>



                                    EXHIBIT B
                                       TO
                                PLEDGE AGREEMENT


                              Transaction Statement


                                                            April __, 1997


To:      [Pledgor name and address]

         and

         First Union National Bank of Florida,
           as Administrative Agent
         100 South Ashley Drive, Suite 940
         Tampa, Florida 33602
         Attention:  Gilbert Reese

         This  statement  is to  advise  you  that a  pledge  of  the  following
uncertificated  securities  has  been  registered  in the  name of  First  Union
National Bank of Florida, as Administrative Agent:


          1.  Uncertificated   Security:   All  limited  partnership  and  other
     ownership interests of [Pledgor] in [Partnership] (the "Pledged Interest").

          2.       Registered Owner:

                   [Pledgor]

                   Taxpayer Identification Number:  __________

          3.       Registered Pledgee:

                   First Union National Bank of Florida,
                     as Administrative Agent
                   100 South Ashley Drive, Suite 940
                   Tampa, Florida 33602
                   Attention:  Gilbert Reese

                   Taxpayer Identification Number:  __________


<PAGE>




          4.  There  are no liens,  restrictions  or other  encumbrances  on the
     Pledged Interest, other than liens in favor of First Union National Bank of
     Florida,  as  Administrative  Agent,  and no  adverse  claims  to which the
     Pledged Interest is or may be subject known to the undersigned.

          5.       The pledge was registered on April __, 1997.

         THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEES
AS OF THE TIME OF ITS ISSUANCE.  DELIVERY OF THIS STATEMENT, OF ITSELF,
CONFERS NO RIGHTS ON THE RECIPIENT.  THIS STATEMENT IS NEITHER A
NEGOTIABLE INSTRUMENT NOR A SECURITY.

                                            Very truly yours,

[SEAL]                                      [PARTNERSHIP]


                                            General Partner

                                            By:
                                            Name:
                                            Title:




<PAGE>



                                    EXHIBIT I
                                       to
              Five-Year Credit Agreement dated as of April 30, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                      FORM OF SUBSIDIARY GUARANTY AGREEMENT


         THIS UNCONDITIONAL  GUARANTY  AGREEMENT (this "Guaranty"),  dated as of
April  ___,  1997,  made by  each of the  Subsidiary  Guarantors  listed  on the
signature pages hereto (the  "Subsidiary  Guarantors"),  in favor of FIRST UNION
NATIONAL BANK OF FLORIDA,  a national  banking  association,  as  Administrative
Agent (the  "Administrative  Agent"),  for the ratable benefit of itself and the
financial  institutions  (the  "Lenders")  that  are,  or may from  time to time
become, parties to the Credit Agreements (as hereinafter defined).

                              STATEMENT OF PURPOSE

         Pursuant to the terms of the Five-Year Credit Agreement of even date by
and among BREED Technologies, Inc. ("BREED") and certain of its subsidiaries, as
Borrowers,  BREED, as Guarantor,  the Lenders party thereto,  the Administrative
Agent  and The  Chase  Manhattan  Bank,  as  Documentation  Agent  (as  amended,
restated,  supplemented or otherwise  modified from time to time, the "Five-Year
Credit  Agreement")  and the 364-Day Credit  Agreement of even date by and among
BREED and certain of its subsidiaries,  as Borrowers,  BREED, as Guarantor,  the
Lenders party thereto, the Administrative Agent and The Chase Manhattan Bank, as
Documentation  Agent (as amended,  restated,  supplemented or otherwise modified
from  time to  time,  the  "364-Day  Credit  Agreement"  and  together  with the
Five-Year  Credit  Agreement,  the "Credit  Agreements"),  the Lenders  extended
certain  credit  facilities  to the  Borrowers  as more  particularly  described
therein.  The Borrowers and the  Subsidiary  Guarantors  comprise one integrated
financial enterprise, and all Loans


<PAGE>



to the Borrowers will inure, directly or indirectly, to the benefit of
each of the Subsidiary Guarantors.

         In  connection  with  the  transactions   contemplated  by  the  Credit
Agreements,  the Lenders have requested,  and each of the Subsidiary  Guarantors
has agreed to execute and deliver, this Guaranty.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
agreements  set forth  herein,  and to induce the  Lenders to  continue  to make
available Loans pursuant to the Credit Agreements, it is agreed as follows:

         SECTION 1.  Definitions.  Capitalized  terms used herein (including the
preamble  hereof)  shall  have  the  meanings  assigned  to them  in the  Credit
Agreements,  unless the context  otherwise  requires or unless otherwise defined
herein. References in the Credit Agreements to a "Subsidiary Guaranty Agreement"
or herein to this "Guaranty" shall include and mean this Guaranty, including all
amendments and supplements hereto now or hereafter in effect.

         SECTION 2. Guaranty of Obligations of the  Borrowers.  Each  Subsidiary
Guarantor  hereby,  jointly and severally with each other Subsidiary  Guarantor,
unconditionally  guarantees to the Administrative  Agent for the ratable benefit
of itself, the Lenders, and their respective successors,  endorsees, transferees
and assigns,  the prompt  payment and  performance  of the Dollar  Amount of all
Obligations  of the Borrowers  under each of the Credit  Agreements  (including,
without limitation, all obligations of BREED as a Guarantor thereunder), whether
primary or secondary  (whether by way of endorsement or otherwise),  whether now
existing  or  hereafter  arising,  whether  or not from time to time  reduced or
extinguished  (except by payment  thereof) or  hereafter  increased or incurred,
whether or not  recovery  may be or  hereafter  become  barred by the statute of
limitations,  whether  enforceable  or  unenforceable  as against any  Borrower,
whether or not  discharged,  stayed or  otherwise  affected  by any  bankruptcy,
insolvency or other similar law or proceeding, whether created directly with the
Administrative  Agent or any Lender or acquired by the  Administrative  Agent or
any Lender  through  assignment,  endorsement or otherwise,  whether  matured or
unmatured, whether joint or several, as and when the same become due and payable
(whether at maturity or earlier, by reason of acceleration,  mandatory repayment
or otherwise),  in accordance with the terms of any such instruments  evidencing
any such  obligations,  including  all  renewals,  extensions  or  modifications
thereof (all  Obligations  of the Borrowers to the  Administrative  Agent or any
Lender, including all of the foregoing,  being hereinafter collectively referred
to as the "Guaranteed


<PAGE>



Obligations"); provided, that notwithstanding anything to the contrary contained
herein,  it is the intention of each Subsidiary  Guarantor and the Lenders that,
in  any  proceeding  involving  the  bankruptcy,  reorganization,   arrangement,
adjustment of debts, relief of debtors, dissolution or insolvency or any similar
proceeding with respect to any Subsidiary Guarantor or its assets, the amount of
such  Subsidiary   Guarantor's   obligations  with  respect  to  the  Guaranteed
Obligations  shall be in, but not in excess of, the maximum  amount  thereof not
subject to  avoidance  or recovery by  operation  of  applicable  law  governing
bankruptcy, reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution,  insolvency,  fraudulent  transfers or conveyances or other similar
laws (including,  without limitation, 11 U.S.C. ss.547, ss.548, ss.550 and other
"avoidance" provisions of Title 11 of the United States Code), applicable in any
such  proceeding to such Subsidiary  Guarantor and this Guaranty  (collectively,
"Applicable  Insolvency  Laws").  To that end,  but only in the event and to the
extent  that  such  Subsidiary  Guarantor's  obligations  with  respect  to  the
Guaranteed   Obligations   or  any  payment  made  pursuant  to  the  Guaranteed
Obligations would, but for the operation of the foregoing proviso, be subject to
avoidance or recovery in any such proceeding under  Applicable  Insolvency Laws,
the  amount of such  Subsidiary  Guarantor's  obligations  with  respect  to the
Guaranteed  Obligations  shall be limited to the  largest  amount  which,  after
giving effect thereto,  would not, under Applicable Insolvency Laws, render such
Subsidiary  Guarantor's  obligations with respect to such Guaranteed Obligations
unenforceable  or avoidable or otherwise  subject to recovery  under  Applicable
Insolvency  Laws.  To the extent  any  payment  actually  made  pursuant  to the
Guaranteed  Obligations  exceeds the limitation of the foregoing  proviso and is
otherwise  subject  to  avoidance  and  recovery  in any such  proceeding  under
Applicable  Insolvency Laws, the amount subject to avoidance shall in all events
be limited to the amount by which such actual  payment  exceeds such  limitation
and the Guaranteed  Obligations as limited by the foregoing proviso shall in all
events  remain in full force and effect and be fully  enforceable  against  such
Subsidiary  Guarantor.  The foregoing proviso is intended solely to preserve the
rights of the Administrative  Agent hereunder against such Subsidiary  Guarantor
in such proceeding to the maximum extent permitted by Applicable Insolvency Laws
and neither  such  Subsidiary  Guarantor,  any  Borrower,  any other  Subsidiary
Guarantor  nor any other Person shall have any right or claim under such proviso
that would not otherwise be available under  Applicable  Insolvency Laws in such
proceeding.

     SECTION 3. Nature of Guaranty.  Each Subsidiary  Guarantor agrees that this
Guaranty is a continuing,  unconditional guaranty of payment and performance and
not of collection, and that its obligations under


<PAGE>



     this Guaranty shall be primary,  absolute and  unconditional,  irrespective
of, and unaffected by:

                  (a) the genuineness,  validity, regularity,  enforceability or
         any future  amendment of, or change in, either Credit  Agreement or any
         other Loan Document or any other  agreement,  document or instrument to
         which any Borrower or any Subsidiary thereof is or may become a party;

                  (b)      any structural change in, restructuring of or other
         similar change of any Borrower or any of their Subsidiaries
         (including, without limitation, each Subsidiary Guarantor);

                  (c) the absence of any action to enforce this Guaranty, either
         Credit Agreement or any other Loan Document or the waiver or consent by
         the  Administrative  Agent or any  Lender  with  respect  to any of the
         provisions of this Guaranty,  either Credit Agreement or any other Loan
         Document;

                  (d) the  existence,  value or  condition  of,  or  failure  to
         perfect its Lien  against,  any security  for or other  guaranty of the
         Guaranteed  Obligations or any action, or the absence of any action, by
         the  Administrative  Agent or any Lender in respect of such security or
         guaranty  (including,  without  limitation,  the  release  of any  such
         security or guaranty); or

                   (e)   any other action or circumstances which might otherwise
         constitute a legal or equitable discharge or defense of a surety or
         guarantor;

it being agreed by each  Subsidiary  Guarantor  that,  subject to the proviso in
Section 2 hereof,  its  obligations  under this Guaranty shall not be discharged
until the final and  indefeasible  payment  and perfor  mance,  in full,  of the
Guaranteed  Obligations  and the termination of the  Commitments.  To the extent
permitted by law, each Subsidiary  Guarantor  expressly waives all rights it may
now or in the  future  have  under  any  statute,  or at  law or in  equity,  or
otherwise,  to compel  the  Administrative  Agent or any  Lender to  proceed  in
respect of the Guaranteed Obligations against any Borrower or any other party or
against any  security  for or other  guaranty of the payment and perfor mance of
the  Guaranteed  Obligations  before  proceeding  against,  or as a condition to
proceeding against, such Subsidiary  Guarantor.  To the extent permitted by law,
each Subsidiary  Guarantor  further expressly waives and agrees not to assert or
take advantage of any defense based upon the failure of the Administrative Agent
or any Lender to commence


<PAGE>



an action in respect of the Guaranteed  Obligations  against any Borrower,  such
Subsidiary Guarantor, any other guarantor or any other party or any security for
the payment and  performance  of the  Guaranteed  Obligations.  Each  Subsidiary
Guarantor  agrees  that  any  notice  or  directive  given  at any  time  to the
Administrative Agent or any Lender which is inconsistent with the waivers in the
preceding  two  sentences  shall  be null and  void  and may be  ignored  by the
Administrative  Agent or  Lender,  and,  in addi  tion,  may not be  pleaded  or
introduced  as evidence in any  litigation  relating  to this  Guaranty  for the
reason that such pleading or introduction  would be at variance with the written
terms of this Guaranty, unless the Administrative Agent and the Required Lenders
have specifically agreed otherwise in writing.  The foregoing waivers are of the
essence of the transaction  contemplated by the Loan Documents and, but for this
Guaranty and such waivers, the Administrative Agent and Lenders would decline to
enter into the Credit Agreements.

         SECTION 4. Demand by the Administrative Agent. In addition to the terms
set forth in Section 3, and in no manner  imposing any limitation on such terms,
if all or any portion of the then outstanding  Guaranteed  Obligations under the
Credit  Agreements  are declared to be  immediately  due and  payable,  then the
Subsidiary   Guarantors   shall,   upon  demand  in  writing   therefor  by  the
Administrative Agent to the Subsidiary Guarantors,  pay the Dollar Amount of all
or such portion of the outstanding  Guaranteed Obligations then declared due and
payable.   Payment  by  the   Subsidiary   Guarantors   shall  be  made  to  the
Administrative   Agent,   to  be  credited  and  applied  upon  the   Guaranteed
Obligations,  in immediately  available Dollars to an account  designated by the
Administrative  Agent or at the  address  referenced  herein  for the  giving of
notice to the Administrative Agent or at any other address that may be specified
in writing from time to time by the Administrative Agent.

         SECTION 5. Waivers.  In addition to the waivers contained in Section 3,
each  Subsidiary  Guarantor,  to the extent  permitted by law, waives and agrees
that it shall not at any time insist upon, plead or in any manner whatever claim
or take the benefit or advantage of, any appraisal,  valuation, stay, extension,
marshalling  of assets or redemption  laws, or exemption,  whether now or at any
time  hereafter  in force,  which may  delay,  prevent or  otherwise  affect the
performance by


<PAGE>



such Subsidiary  Guarantor of its  obligations  under, or the enforcement by the
Administrative Agent or the Lenders of, this Guaranty. Each Subsidiary Guarantor
further  hereby waives  diligence,  presentment,  demand,  protest and notice of
whatever kind or nature with respect to any of the  Guaranteed  Obligations  and
waives the  benefit of all  provisions  of law which are or might be in conflict
with the terms of this Guaranty. Each Subsidiary Guarantor represents,  warrants
and agrees that its  obligations  under this  Guaranty  are not and shall not be
subject  to any  counterclaims,  offsets or  defenses  of any kind  against  the
Administrative Agent, the Lenders or the Borrowers whether now existing or which
may arise in the future.

         SECTION 6.  Benefits of Guaranty.  The  provisions of this Guaranty are
for the benefit of the  Administrative  Agent,  the Lenders and their respective
successors,  transferees,  endorsees and assigns,  and nothing herein  contained
shall  impair,  as  between  the  Borrowers,  the  Administrative  Agent and the
Lenders, the obligations of the Borrowers under the Loan Documents. In the event
all or any part of the Guaran  teed  Obligations  are  transferred,  endorsed or
assigned by the Administrative Agent or any Lender to any Person or Persons, any
reference to an  "Administrative  Agent",  or "Lender" herein shall be deemed to
refer equally to such Person or Persons.

         SECTION 7.  Modification  of Loan Documents etc. If the  Administrative
Agent or the Lenders shall at any time or from time to time, with or without the
consent of, or notice to, the Subsidiary Guarantors:

                  (a)     change or extend the manner, place or terms of payment
         of, or renew or alter all or any portion of, the Guaranteed Obliga
         tions;

                  (b) take any action under or in respect of the Loan  Documents
         in the exercise of any remedy,  power or privilege contained therein or
         available  to it at law,  in equity or  otherwise,  or waive or refrain
         from exercising any such remedies, powers or privileges;

                  (c) amend or modify, in any manner whatsoever, the Loan Docu-
         ments;

               (d) extend or waive the time for  performance  by any  Subsidiary
          Guarantor,  any other guarantor,  any Borrower or any other Person of,
          or compliance with, any term, covenant or


<PAGE>



         agreement on its part to be performed or observed under a Loan Document
         (other than this Guaranty),  or waive such performance or compliance or
         consent  to a failure  of, or  departure  from,  such per  formance  or
         compliance;

                  (e) take and hold  security or  collateral  for the payment of
         the Guaranteed Obligations or sell, exchange,  release,  dispose of, or
         otherwise deal with, any property pledged, mortgaged or conveyed, or in
         which the Administrative Agent or the Lenders have been granted a Lien,
         to secure any Debt of any Subsidiary Guarantor,  any other guarantor or
         any Borrower to the Administrative Agent or the Lenders;

                  (f)  release  anyone who may be liable in any manner for the
          payment of any amounts owed by any Subsidiary  Guarantor,  any other 
          guarantor or any Borrower to the Administrative Agent or any Lender;

                  (g)  modify or  terminate  the terms of any  intercreditor  or
         subordination  agreement pursuant to which claims of other creditors of
         any  Subsidiary  Guarantor,  any other  guarantor  or any  Borrower are
         subordinated to the claims of the  Administrative  Agent or any Lender;
         or

                  (h) apply any sums by whomever paid or however realized to any
         amounts owing by any Subsidiary  Guarantor,  any other guarantor or any
         Borrower  to the  Administrative  Agent or any Lender in such manner as
         the  Administrative   Agent  or  any  Lender  shall  determine  in  its
         reasonable discretion;

then neither the  Administrative  Agent nor any Lender shall incur any liability
to any Subsidiary Guarantor as a result thereof, and no such action shall impair
or release the obligations of any Subsidiary Guarantor under this Guaranty.

         SECTION 8. Reinstatement. Each Subsidiary Guarantor agrees that, if any
payment made by any Borrower or any other Person  applied to the  Obligations is
at  any  time  annulled,  set  aside,  rescinded,  invalidated,  declared  to be
fraudulent or preferential or otherwise required to be refunded or repaid or the
proceeds of any  collateral  are  required to be refunded by the  Administrative
Agent or any Lender to any Borrower, its estate, trustee,  receiver or any other
party,  including,  without  limitation,  any  Subsidiary  Guarantor,  under any
Applicable Law or


<PAGE>



equitable  cause,  then,  to the  extent  of such  payment  or  repayment,  each
Subsidiary   Guarantor's   liability  hereunder  (and  any  Lien  securing  such
liability)  shall be and  remain in full force and  effect,  as fully as if such
payment had never been made,  and, if prior  thereto,  this Guaranty  shall have
been  canceled  or  surrendered  (and if any Lien or  collateral  securing  such
Subsidiary   Guarantor's   liability  hereunder  shall  have  been  released  or
terminated by virtue of such cancellation or surrender), this Guaranty (and such
Lien) shall be reinstated in full force and effect,  and such prior cancellation
or surrender shall not diminish,  release, discharge, impair or otherwise affect
the  obligations of such  Subsidiary  Guarantor in respect of the amount of such
payment (or any Lien securing such obligation).

         SECTION 9.  Representations and Warranties.  To induce the Lenders
to make any Loans, each Subsidiary Guarantor hereby represents and
warrants that:

                  (a) such Subsidiary  Guarantor has the corporate right,  power
         and  authority to execute,  deliver and perform  this  Guaranty and has
         taken all  necessary  corporate  action  to  authorize  its  execution,
         delivery and performance of, this Guaranty;

                  (b) this  Guaranty  constitutes  the legal,  valid and binding
         obligation of such Subsidiary Guarantor  enforceable in accordance with
         its terms,  except as  enforceability  may be  limited  by  bankruptcy,
         insolvency,  reorganization,  moratorium or similar laws  affecting the
         enforcement of creditors'  rights  generally and by the availability of
         equitable remedies;

                  (c) the execution,  delivery and  performance of this Guaranty
         will not  violate  any  provision  of any  Applicable  Law or  material
         contractual obligation of such Subsidiary Guarantor and will not result
         in the creation or  imposition  of any Lien upon or with respect to any
         property or revenues of such Subsidiary Guarantor;

                  (d) no consent or authorization  of, filing with, or other act
         by or in respect of, any  arbitrator or  Governmental  Authority and no
         consent  of  any  other  Person  (including,  without  limitation,  any
         stockholder or creditor of such Subsidiary  Guarantor),  is required in
         connection with the


<PAGE>



         execution,  delivery,  performance,  validity  or  enforceability  of 
         this Guaranty;

                  (e) no actions,  suits or proceedings before any arbitrator or
         Governmental  Authority  are  pending  or,  to the  knowledge  of  such
         Subsidiary   Guarantor,   threatened  by  or  against  such  Subsidiary
         Guarantor  or  against  any of its  properties  with  respect  to  this
         Guaranty or any of the transactions contemplated hereby;

                  (f)  such  Subsidiary  Guarantor  has  such  title to the real
         property  owned  by it and a  valid  leasehold  interest  in  the  real
         property leased by it, and has good and marketable  title to all of its
         personal  property  sufficient to carry on its business free of any and
         all Liens of any type whatsoever, except those permitted by Section 9.3
         of each Credit Agreement; and

                  (g) as of the Closing Date, such Subsidiary  Guarantor (a) has
         capital  sufficient to carry on its business and  transactions  and all
         business  and  transactions  in which it engages and is able to pay its
         debts as they mature,  (b) owns property  having a value,  both at fair
         valuation and at present fair saleable  value,  greater than the amount
         required to pay its probable liabilities (including  contingencies) and
         (c) does not believe that it will incur debts or liabilities beyond its
         ability to pay such debts or liabilities as they mature.

         SECTION 10.  Remedies.

         (a) Upon the  occurrence  of any Event of Default,  with the consent of
the Required Lenders,  the Administrative  Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, enforce against the Subsidiary
Guarantors their respective  obligations and liabilities  hereunder and exercise
such other rights and remedies as may be available to the  Administrative  Agent
hereunder, under the Loan Documents or otherwise.

         (b) No right or remedy herein conferred upon the  Administrative  Agent
is intended to be exclusive of any other right or remedy  contained herein or in
any other Loan Document or otherwise,  and every such right or remedy  contained
herein and therein or now or hereafter existing at


<PAGE>



law, or in equity, or by statute, or otherwise shall be cumulative. The Required
Lenders  may  instruct  the  Administrative  Agent to pursue,  or  refrain  from
pursuing,  any remedy available to the Administrative Agent at such times and in
such order as the Required  Lenders shall determine,  and the Required  Lenders'
election  as to  such  remedies  shall  not  impair  any  remedies  against  any
Subsidiary Guarantor not then exercised.  In addition,  any election of remedies
which  results in the denial or  impairment  of the right of the  Administrative
Agent to seek a deficiency  judgment  against any Borrower  shall not impair any
Subsidiary  Guarantor's  obligation  to pay the full  amount  of the  Guaranteed
Obligations.

         SECTION 11. No Subrogation.  Notwithstanding any payment or payments by
any of the  Subsidiary  Guarantors  hereunder,  or any set-off or application of
funds of any of the  Subsidiary  Guarantors by the  Administrative  Agent or any
Lender, or the receipt of any amounts by the Administrative  Agent or any Lender
with  respect  to any of the  Guaranteed  Obligations,  none  of the  Subsidiary
Guarantors  shall be  entitled  to be  subrogated  to any of the  rights  of the
Administrative  Agent or any Lender  against  any  Borrower  or any of the other
Subsidiary   Guarantors  or  against  any   collateral   security  held  by  the
Administrative Agent or any Lender for the payment of the Guaranteed Obligations
nor shall  any of the  Subsidiary  Guarantors  seek any  reimbursement  from any
Borrower or any of the other  Subsidiary  Guarantors in respect of payments made
by such  Subsidiary  Guarantor in connection  with the  Guaranteed  Obligations,
until all amounts owing to the  Administrative  Agent and the Lenders on account
of the  Guaranteed  Obligations  are  paid  in  full  and  the  Commitments  are
terminated.  If any amount shall be paid to any Subsidiary  Guarantor on account
of such  subrogation  rights at any time when all of the Guaranteed  Obligations
shall not have been paid in full,  such amount shall be held by such  Subsidiary
Guarantor in trust for the Administrative Agent,  segregated from other funds of
such Subsidiary Guarantor,  and shall, forthwith upon receipt by such Subsidiary
Guarantor, be turned over to the Administrative Agent in the exact form received
by such Subsidiary  Guarantor (duly endorsed by such Subsidiary Guarantor to the
Administrative  Agent,  if  required)  to  be  applied  against  the  Guaranteed
Obligations,  whether  matured or  unmatured,  in such order as set forth in the
Credit Agreement.



<PAGE>



         SECTION 12.  Miscellaneous.

         (a) Entire  Agreement;  Amendments.  This  Guaranty,  together with the
other Loan Documents,  constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes  all prior  agreements  with
respect to the  subject  matter  hereof  and may not be amended or  supplemented
except by a writing signed by each Subsidiary  Guarantor and the  Administrative
Agent,  consented to by such Lenders as required by Section  13.11 of the Credit
Agreements.

         (b)      Headings.  Titles and captions of sections and subsections in
this Guaranty are for convenience of reference only, and neither limit
or amplify the provisions of this Guaranty.

         (c)  Severability.  In the event that any one or more of the provisions
contained  in this  Guaranty  shall be  determined  to be  invalid,  illegal  or
unenforceable  in any  respect  for  any  reason,  the  validity,  legality  and
enforceability  of any such  provision or  provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.

         (d)      Notices.  All notices and communications hereunder shall be
given in accordance with Section 13.1 of the Credit Agreements.

         (e) Binding Effect. This Guaranty shall bind each Subsidiary  Guarantor
and shall  inure to the  benefit of the  Administrative  Agent,  the Lenders and
their respective successors and assigns. No Subsidiary Guarantor may assign this
Guaranty or delegate any of its duties hereunder,  other than in connection with
the merger of such  Subsidiary  Guarantor into such other Person as permitted by
Section 9.5 of the Credit Agreements.

         (f) Non-Waiver.  The failure of the Administrative  Agent or any Lender
to enforce any right or remedy hereunder,  or promptly to enforce any such right
or remedy,  shall not constitute a waiver thereof, nor give rise to any estoppel
against  the  Administrative  Agent or any  Lender,  nor excuse  any  Subsidiary
Guarantor  from its  obligations  hereun  der.  Any  waiver of any such right or
remedy by the Lenders must be in writing and signed by the Required Lenders.

         (g)  Termination.  This Guaranty  shall  terminate and be of no further
force  or  effect  on  the  date  when  the  Guaranteed  Obligations  have  been
indefeasibly paid in full and the Commitments terminated.


<PAGE>



     (h) Governing  Law.  This  Guaranty  shall be governed by and construed and
enforced in  accordance  with the laws of the State of North  Carolina,  without
reference to the conflicts or choice of law principles thereof.

         (i)  Consent  to   Jurisdiction.   Each  Subsidiary   Guarantor  hereby
irrevocably  consents  to the  personal  jurisdiction  of the state and  federal
courts located in Mecklenburg County,  North Carolina,  in any action,  claim or
other  proceeding  arising out of any dispute in connection  with this Guaranty,
any rights or  obligations  hereunder,  or the  performance  of such  rights and
obligations.  Each  Subsidiary  Guarantor  hereby  irrevocably  consents  to the
service of a summons and  complaint  and other  process in any action,  claim or
proceeding brought by the Administrative  Agent or any Lender in connection with
this Guaranty, any rights or obligations  hereunder,  or the performance of such
rights  and  obligations,  on behalf of itself or its  property,  in the  manner
referenced  in Section  12(d).  Nothing in this  Section  12(i) shall affect the
right of the  Administrative  Agent or any Lender to serve legal  process in any
other  manner   permitted  by  Applicable   Law  or  affect  the  right  of  the
Administrative Agent or any Lender to bring any action or proceeding against any
Subsidiary Guarantor or its properties in the courts of any other jurisdictions.

         (j)      Binding Arbitration; Waiver of Jury Trial.

                  (i) Binding  Arbitration.  Upon  demand of any party,  whether
         made  before  or after  institution  of any  judicial  proceeding,  any
         dispute,  claim  or  controversy  arising  out  of,  connected  with or
         relating  to this  Guaranty or any other Loan  Documents  ("Disputes"),
         between or among  parties to this  Guaranty or any other Loan  Document
         shall  be  resolved  by  binding   arbitration   as  provided   herein.
         Institution  of a  judicial  proceeding  by a party  does not waive the
         right of that  party to  demand  arbitration  hereunder.  Disputes  may
         include, without limitation, tort claims, counterclaims, claims brought
         as class actions,  claims  arising from Loan Documents  executed in the
         future, or claims concerning any aspect of the past,  present or future
         relationships  arising  out  or  connected  with  the  Loan  Documents.
         Arbitration  shall be conducted  under and  governed by the  Commercial
         Financial Disputes  Arbitration Rules (the "Arbitration  Rules") of the
         American  Arbitration  Association  and Title 9 of the U.S.  Code.  All
         arbitration  hearings shall be conducted in Charlotte,  North Carolina.
         The  expedited  procedures  set  forth  in  Rule  51,  et  seq.  of the
         Arbitration Rules


<PAGE>



         shall be applicable to claims of less than  $1,000,000.  All applicable
         statutes of limitation shall apply to any Dispute.  A judgment upon the
         award may be entered in any court having  jurisdiction.  The panel from
         which all  arbitrators  are  selected  shall be  comprised  of licensed
         attorneys. The single arbitrator selected for expedited procedure shall
         be a retired  judge from the  highest  court of  general  jurisdiction,
         state or federal, of the state where the hearing will be conducted.

                  (ii) Jury Trial.  TO THE EXTENT  PERMITTED BY APPLICABLE  LAW,
         THE  Administrative  Agent,  EACH LENDER AND EACH SUBSIDIARY  GUARANTOR
         HEREBY  IRREVOCABLY  WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH
         RESPECT TO ANY  ACTION,  CLAIM OR OTHER  PROCEEDING  ARISING OUT OF ANY
         DISPUTE IN CONNECTION  WITH THIS GUARANTY OR THE OTHER LOAN  DOCUMENTS,
         ANY RIGHTS OR OBLIGATIONS  HEREUNDER OR THEREUNDER,  OR THE PERFORMANCE
         OF SUCH RIGHTS AND OBLIGATIONS.

                  (iii)  Preservation of Certain Remedies.  Notwithstanding  the
         preceding binding  arbitration  provisions,  the parties hereto and the
         Loan Documents preserve, without diminution, certain remedies that such
         Persons may employ or exercise  freely,  either alone,  in  conjunction
         with or  during a  Dispute.  Each such  Person  shall  have and  hereby
         reserves the right to proceed in any court of proper jurisdiction or by
         self help to exercise or  prosecute  the  following  remedies:  (A) all
         rights to  foreclose  against  any real or  personal  property or other
         security by exercising a power of sale granted in the Loan Documents or
         under  applicable  law or by  judicial  foreclosure  and sale,  (B) all
         rights of self help  including  peaceful  occupation  of  property  and
         collection of rents, set off, and peaceful possession of property,  (C)
         obtaining   provisional  or  ancillary  remedies  including  injunctive
         relief, sequestration, garnishment, attachment, appointment of receiver
         and in  filing  an  involuntary  bankruptcy  proceeding,  and (D)  when
         applicable, a judgment by confession of judgment. Preservation of these
         remedies  does not limit the power of an  arbitrator  to grant  similar
         remedies that may be requested by a party in a Dispute.

         (k)  Limitation of Liability.  Neither the  Administrative  Agent,  the
Lenders nor any Affiliate  thereof shall have any liability with respect to, and
each Subsidiary  Guarantor  hereby waives,  releases and agrees not to sue upon,
any  claim for any  special,  indirect,  punitive,  exemplary  or  consequential
damages suffered by such Subsidiary  Guarantor in connection  with,  arising out
of, or in any way related to this


<PAGE>



Guaranty and the other Loan Documents,  the transactions  contemplated herein or
therein,  or any act,  omission or event  occurring  in  connection  herewith or
therewith.

         (l) Expenses.  The Subsidiary Guarantors agree that they will reimburse
the  Administrative  Agent  and each  Lender  for all  reasonable  out-of-pocket
expenses  (including  reasonable  attorneys' fees and expenses)  incurred by the
Administrative  Agent or such Lender in connection  with the  enforcement of the
obligations of the Subsidiary  Guarantors under this Guaranty and any other Loan
Documents  and  all  reasonable  out-of-pocket  expenses  (including  reasonable
attorneys' fees and expenses) incurred by the Administrative Agent in connection
with the amendment or modification of this Guaranty.

         (m)  Indemnities.   Each  Subsidiary   Guarantor  agrees  to  hold  the
Administrative  Agent and the  Lenders  harmless  from and  against  all  losses
suffered by the Administrative  Agent and the Lenders in connection with (i) the
exercise  by the  Administrative  Agent or the  Lenders  of any  right or remedy
granted to them under this  Guaranty,  (ii) any claim,  and the  prosecution  or
defense thereof,  arising out of or in any way connected with this Guaranty, and
(iii)  the  collection  or  enforcement  of  the  Obligations,   the  Guaranteed
Obligations or any of them;  provided,  that such Subsidiary Guarantor shall not
be obligated to reimburse the Administrative  Agent or the Lenders for costs and
expenses,  or indemnify  the  Administrative  Agent or the Lenders for any loss,
resulting from the gross negligence or willful  misconduct of the Administrative
Agent or such Lenders.  Notwithstanding  any  termination of this Guaranty,  the
indemnities  to which the  Administrative  Agent and Lenders are entitled  under
this  Guaranty  shall  continue  in full force and effect and shall  protect the
Administrative   Agent  and  the  Lenders  against  events  arising  after  such
termination as well as before.



<PAGE>



         IN WITNESS WHEREOF,  each of the Subsidiary Guarantors has executed and
delivered this Guaranty under seal as of the date first above written.

[CORPORATE SEAL]

                                            By:
                                            Name:
                                            Title:


[CORPORATE SEAL]

                                            By:
                                            Name:
                                            Title:


[CORPORATE SEAL]

                                            By:
                                            Name:
                                            Title:


[CORPORATE SEAL]

                                            By:
                                            Name:
                                            Title:





<PAGE>



                   UNCONDITIONAL GUARANTY AGREEMENT SUPPLEMENT

         UNCONDITIONAL  GUARANTY AGREEMENT  SUPPLEMENT,  dated as of __________,
(the   "Supplement"),   made   by   [INSERT   NAME   OF   NEW   SUBSIDIARY],   a
____________________  (the "New Subsidiary Guarantor"),  in favor of FIRST UNION
NATIONAL  BANK OF  FLORIDA,  as agent  (in such  capacity,  the  "Administrative
Agent")  under the  Credit  Agreements  (as  defined in the  Guaranty  Agreement
referred to below) for the ratable benefit of itself and the Lenders.

         1. Reference is hereby made to the Guaranty Agreement dated as of April
__, 1997, made by certain Subsidiaries of BREED Technologies, Inc. party thereto
(the "Subsidiary  Guarantors"),  as guarantors,  in favor of the  Administrative
Agent (as amended,  restated,  supplemented or otherwise modified as of the date
hereof,  the "Guaranty  Agreement").  This  Supplement  supplements the Guaranty
Agreement, forms a part thereof and is subject to the terms thereof. Capitalized
terms used and not  defined  herein  shall have the  meanings  given  thereto or
referenced in the Guaranty Agreement.

         2.  The New  Subsidiary  Guarantor  hereby  agrees  to  unconditionally
guarantee to the  Administrative  Agent for the ratable  benefit of itself,  the
Lenders and their respective successors, endorsees, transferees and assigns, the
prompt payment  (whether at stated  maturity,  by acceleration or otherwise) and
performance of all  Obligations of the Borrowers to the same extent and upon the
same terms and conditions as are contained in the Guaranty Agreement.

         3. The New Subsidiary Guarantor hereby agrees that it is a party to the
Guaranty  Agreement as if a signatory  thereto on the Closing Date of the Credit
Agreement,  and the New Subsidiary Guarantor shall comply with all of the terms,
covenants,  conditions and agreements and hereby makes each  representation  and
warranty,  in each case set forth therein.  The New Subsidiary  Guarantor agrees
that the "Guaranty Agreement" or "Guaranty" as used therein or in any other Loan
Documents shall mean the Guaranty Agreement as supplemented hereby.

         4.       The New Subsidiary Guarantor hereby acknowledges it has
received a copy of the Guaranty Agreement and that it has read and
understands the terms thereof.




<PAGE>



         IN WITNESS WHEREOF, the undersigned hereby causes this Supplement to be
executed and delivered as of the date first above written.

[CORPORATE SEAL]                            [INSERT NAME OF NEW SUBSIDIARY]


                                            By:
                                            Name:
                                            Title:



<PAGE>





                           FIVE-YEAR CREDIT AGREEMENT

                           dated as of April 30, 1997,

                                  by and among

                            BREED TECHNOLOGIES, INC.,
               and certain Subsidiaries thereof designated herein,

                                  as Borrowers,

                            BREED TECHNOLOGIES, INC.,

                                  as Guarantor,

                         the Lenders referred to herein,

                      FIRST UNION NATIONAL BANK OF FLORIDA,

                            as Administrative Agent,

                                       and

                            THE CHASE MANHATTAN BANK,

                             as Documentation Agent,

                                  evidencing a

                             FIVE-YEAR, $200,000,000
                                 CREDIT FACILITY





<PAGE>





ARTICLE I

        DEFINITIONS..........................................................  1
        SECTION 1.1          Definitions.....................................  1
        SECTION 1.2          General......................................... 18
        SECTION 1.3          Other Definitions and Provisions................ 19

ARTICLE II

        CREDIT FACILITY...................................................... 19
        SECTION 2.1          Revolving Credit Loans.......................... 19
        SECTION 2.2          Finnish Mark Loans.............................. 20
        SECTION 2.3          Swingline Loans................................. 22
        SECTION 2.4          Procedure for Advances of Revolving Credit Loans,
                                Finnish Mark Loans and Swingline Loans....... 23
        SECTION 2.5          Repayment of Revolving Credit Loans, Finnish
                                Mark Loans and Swingline Loans............... 26
        SECTION 2.6          Notes............................................28
                             
        SECTION 2.7          Permanent Reduction of the Aggregate
                                 Commitment.................................. 28
        SECTION 2.8          Termination of Credit Facility.................. 29
                                  
        SECTION 2.9          Use of Proceeds................................. 30
                                  
        SECTION 2.10         Nature of Obligations........................... 30
                                  
        SECTION 2.11         Security........................................ 30
                                  

ARTICLE III

        GENERAL LOAN PROVISIONS.............................................. 30
        SECTION 3.1          Interest........................................ 30
        SECTION 3.2          Notice and Manner of Conversion or
                                 Continuation of Revolving Credit Loans and
                                 Finnish Mark Loans.......................... 33
        SECTION 3.3          Fees............................................ 34
                                  
        SECTION 3.4          Manner of Payment............................... 36
                                  
        SECTION 3.5          Crediting of Payments and Proceeds.............. 37
                                  
        SECTION 3.6          Adjustments..................................... 37
                                  
        SECTION 3.7          Nature of Obligations of Lenders Regarding Loans;
                                 Assumption by the Administrative Agent...... 38

        SECTION 3.8          Mandatory Redenomination of Alternative
                                 Currency Loans.............................. 40
        
        SECTION 3.9          Regulatory Limitation........................... 40
                                 


<PAGE>



        SECTION 3.10         Changed Circumstances........................... 40
                                  
        SECTION 3.11         Indemnity....................................... 43
                                  
<PAGE>



        SECTION 3.12         Capital Requirements............................ 43
                                  
        SECTION 3.13         Taxes........................................... 46
                                 

ARTICLE IV

        CLOSING; CONDITIONS OF CLOSING AND BORROWING......................... 47
        SECTION 4.1          Closing......................................... 47
        SECTION 4.2          Conditions to Closing and Initial Loans......... 47
        SECTION 4.3          Conditions to All Loans......................... 52
      
        REPRESENTATIONS AND WARRANTIES OF THE BORROWERS...................... 53
        SECTION 5.1          Representations and Warranties.................. 53
        SECTION 5.2          Survival of Representations and Warranties,
                                  
                             Etc............................................ 60

ARTICLE VI

        FINANCIAL INFORMATION AND NOTICES.................................... 60
        SECTION 6.1          Financial Statements and Projections............ 60
        SECTION 6.2          Officer's Compliance Certificate................ 61
        SECTION 6.3          Accountants' Certificate........................ 62
        SECTION 6.4          Other Reports................................... 62
        SECTION 6.5          Notice of Litigation and Other Matters.......... 63
        SECTION 6.6          Accuracy of Information......................... 64

ARTICLE VII

        AFFIRMATIVE COVENANTS................................................ 64
        SECTION 7.1          Preservation of Corporate Existence and
                                  
                             Related Matters................................. 64
        SECTION 7.2          Maintenance of Property......................... 64
                                 
        SECTION 7.3          Insurance....................................... 64
                                  
        SECTION 7.4          Accounting Methods and Financial Records........ 65
                                 
        SECTION 7.5          Payment and Performance of Obligations.......... 65
                                  
        SECTION 7.6          Compliance With Laws and Approvals.............. 65
                                  
        SECTION 7.7          Environmental Laws.............................. 65
                                  
        SECTION 7.8          Compliance with ERISA........................... 66
                             
        SECTION 7.9          Compliance With Agreements...................... 66
                             
        SECTION 7.10         Conduct of Business............................. 66
                             
        SECTION 7.11         Visits and Inspections.......................... 66
                             
        SECTION 7.12.        Additional Subsidiary Guarantors and
                                Subsidiary Pledgors.......................... 67


<PAGE>



        SECTION 7.13         Intercompany Notes.............................. 68
                             
        SECTION 7.14         Further Assurances.............................. 68
                             

ARTICLE VIII

        FINANCIAL COVENANTS.................................................. 69
        SECTION 8.1.         Leverage Ratio.................................. 69
        SECTION 8.2          Minimum Net Worth............................... 69
        SECTION 8.3.         Interest Coverage Ratio......................... 69

ARTICLE IX

        NEGATIVE COVENANTS................................................... 69
        SECTION 9.1          Limitations on Debt............................. 70
                                  
        SECTION 9.2          Limitations on Contingent Obligations........... 71
                                  
        SECTION 9.3          Limitations on Liens............................ 71
                                  
        SECTION 9.4          Limitations on Loans, Advances, Investments
                                and Acquisitions............................. 72
        SECTION 9.5          Limitations on Mergers and Liquidation.......... 74
                                  
        SECTION 9.6          Limitations on Sale of Assets................... 74
                                  
        SECTION 9.7          Limitations on Dividends and Distributions...... 75
                                  
        SECTION 9.8          Transactions with Affiliates.................... 76
                                  
        SECTION 9.9          Certain Accounting Changes...................... 76
                                  
        SECTION 9.10         Restrictive Agreements.......................... 76
                                  
        SECTION 9.11         Payments under Convertible Preferred Stock...... 76
                                  

ARTICLE X

        UNCONDITIONAL GUARANTY............................................... 76
        SECTION 10.1         Guaranty of Obligations......................... 76
        SECTION 10.2         Nature of Guaranty.............................. 77
        SECTION 10.3         Demand by the Administrative Agent...............78
        SECTION 10.4         Waivers......................................... 78
        SECTION 10.5         Modification of Loan Documents etc.............. 79
        SECTION 10.6         Reinstatement................................... 79
        SECTION 10.7         No Subrogation.................................. 80

ARTICLE XI



<PAGE>



        DEFAULT AND REMEDIES................................................. 80
        SECTION 11.1         Events of Default............................... 80
        SECTION 11.2         Remedies........................................ 83
        SECTION 11.3         Rights and Remedies Cumulative; Non-Waiver;
                                  etc........................................ 84
        SECTION 11.4         Judgment Currency............................... 84
                                  

ARTICLE XII

        THE ADMINISTRATIVE AGENT............................................. 85
        SECTION 12.1         Appointment..................................... 85
        SECTION 12.2         Delegation of Duties............................ 85
        SECTION 12.3         Exculpatory Provisions.......................... 85
        SECTION 12.4         Reliance by the Administrative Agent............ 86
        SECTION 12.5         Notice of Default............................... 86
        SECTION 12.6         Non-Reliance on the Administrative Agent
                                and Other Lenders............................ 87
        SECTION 12.7         Indemnification................................. 87
        SECTION 12.8         The Administrative Agent in Its Individual
                                 Capacity.................................... 88
        SECTION 12.9         Resignation of the Administrative Agent;
                                 Successor Administrative Agent.............. 88
        SECTION 12.10        Documentation Agent............................. 89
                       

ARTICLE XIII

        MISCELLANEOUS........................................................ 89
        SECTION 13.1         Notices......................................... 89
        SECTION 13.2         Expenses; Indemnity............................. 90
        SECTION 13.3         Set-off......................................... 91
        SECTION 13.4         Governing Law................................... 91
        SECTION 13.5         Consent to Jurisdiction......................... 92
        SECTION 13.6         Binding Arbitration; Waiver of Jury Trial....... 92
        SECTION 13.7         Reversal of Payments............................ 93
        SECTION 13.8         Injunctive Relief; Punitive Damages............. 93
        SECTION 13.9         Accounting Matters.............................. 94
        SECTION 13.10        Successors and Assigns; Participations.......... 94
        SECTION 13.11        Amendments, Waivers and Consents................ 98
        SECTION 13.12        Performance of Duties........................... 98
        SECTION 13.13        All Powers Coupled with Interest................ 98
        SECTION 13.14        Survival of Indemnities......................... 99
        SECTION 13.15        Releases........................................ 99
        SECTION 13.16        Titles and Captions............................. 99


<PAGE>



        SECTION 13.17        Severability of Provisions...................... 99
        SECTION 13.18        Counterparts.................................... 99
        SECTION 13.19        Term of Agreement............................... 99
                                  













<PAGE>


                             Exhibits and Schedules


Exhibits

Exhibit A-1                -        Form of Revolving Credit Note
Exhibit A-2                -        Form of Finnish Mark Note
Exhibit A-3                -        Form of Swingline Note
Exhibit B                  -        Form of Notice of Borrowing
Exhibit C                  -        Form of Notice of Prepayment
Exhibit D                  -        Form of Notice of Conversion/Continuation
Exhibit E                  -        Form of Officer's Compliance Certificate
Exhibit F                  -        Form of Assignment and Acceptance
Exhibit G                  -        Form of Notice of Account Designation
Exhibit H                  -        Form of Pledge Agreement
Exhibit I                  -        Form of Subsidiary Guaranty Agreement


Schedules

Schedule 1.1(a)            -       A/C Borrowers
Schedule 1.1(b)            -       Lenders and Commitments
Schedule 1.1(c)            -       Finnish Mark Lenders and Finnish Mark
                                            Commitments
Schedule 1.1(d)            -       Pledge Agreement and Issuers
Schedule 1.1(e)            -       Subsidiary Guarantors
Schedule 2.1               -       Applicable Alternative Currencies
Schedule 4.2(a)            -       Foreign Jurisdiction Pledge Agreement Issuers
Schedule 4.2(b)            -       Foreign Jurisdiction Organizational Issues
Schedule 4.2(c)            -       Schedule of Insurance
Schedule 5.1(a)            -       Jurisdictions of Organization and
                                            Qualification
Schedule 5.1(b)            -       Subsidiaries and Capitalization
Schedule 5.1(i)            -       ERISA Plans
Schedule 5.1(m)            -       Labor and Collective Bargaining
                                            Agreements
Schedule 5.1(t)            -       Debt and Contingent Obligations
Schedule 5.1(u)            -       Litigation
Schedule 9.2               -       Contingent Obligations
Schedule 9.3               -       Existing Liens
Schedule 9.4               -       Existing Loans, Advances and
                                            Investments



<PAGE>
                 FIRST AMENDMENT TO FIVE-YEAR CREDIT AGREEMENT

         THIS  FIRST  AMENDMENT  TO  FIVE-YEAR  CREDIT  AGREEMENT  (this  "First
Amendment")  is made and  entered  into as of the 28th day of June,  1997 by and
among BREED TECHNOLOGIES,  INC., a Delaware corporation,  ("BREED"), and certain
Subsidiaries  thereof  designated on the signature  pages hereto  (collectively,
with BREED, the "Borrowers"),  BREED, as guarantor (the "Guarantor") the lenders
who are or may become a party to the  Credit  Agreement  referred  to below (the
"Lenders"), FIRST UNION NATIONAL BANK (successor to First Union National Bank of
Florida),  a  national  banking  association,  as  Administrative  Agent for the
Lenders ("First Union" or the "Administrative  Agent"),  and THE CHASE MANHATTAN
BANK, a national banking  association,  as  Documentation  Agent for the Lenders
(the "Documentation Agent").


                              Statement of Purpose

         The Lenders have previously  agreed to extend certain credit facilities
to the Borrowers  pursuant to the Five-Year  Credit  Agreement dated as of April
30,  1997  by  and  among  the  Borrowers,   the  Guarantor,  the  Lenders,  the
Administrative  Agent and the Documentation Agent (as further amended,  restated
or otherwise modified, the "Credit Agreement").

         The Borrowers and the Guarantor  have requested  certain  modifications
and  amendments  to the Credit  Agreement  and the  Lenders  have agreed to such
modifications and amendments as set forth more fully below, subject to the terms
and conditions contained herein.

         NOW THEREFORE,  for and in  consideration  of the premises,  the mutual
agreements  and  covenants  hereinafter  set forth and other  good and  valuable
consideration,  the receipt and adequacy of which are hereby  acknowledged,  the
parties hereto hereby agree as follows:

         SECTION           1.      Capitalized Terms.  All capitalized undefined
terms used in this First Amendment shall have the meanings assigned
thereto in the Credit Agreement.



<PAGE>



         SECTION           2.      Modification of Credit Agreement.  The Credit
Agreement is hereby modified as follows:

         (a)      Section 2.3 (a) shall be deleted in its entirety and the
following Section 2.3(a) shall be substituted in lieu thereof:

         "(a)  Availability.  Subject  to  the  terms  and  conditions  of  this
Agreement,  the Swingline  Lender agrees to make  Swingline  Loans to BREED from
time to time from the Closing  Date  through  the  Swingline  Termination  Date;
provided,  that (i) all Swingline Loans shall be denominated in Dollars and (ii)
the aggregate principal amount of all outstanding  Swingline Loans (after giving
effect to any amount requested) shall not exceed the lesser of (A) the Aggregate
Commitment less the sum of the Dollar Amount of the aggregate  principal  amount
of all outstanding  Revolving  Credit Loans less the sum of the Dollar Amount of
the aggregate principal amount of all outstanding Finnish Mark Loans and (B) the
Swingline  Commitment  less  the  sum  of the  Dollar  Amount  of the  aggregate
principal  amount of all  outstanding  Swingline Loans under the 364- Day Credit
Agreement."

         (b)      Section 2.7(b) shall be deleted in its entirety and the
following Section 2.7(b) shall be substituted in lieu thereof:

         "(b)     Mandatory Permanent Reductions.

                  (i) Incurrence of Debt. The Total Aggregate  Commitment  shall
         be permanently reduced by an amount equal to one hundred percent (100%)
         of the amount of any Debt  incurred  pursuant to Section  9.1(j),  with
         such  reduction to be applied first to the Aggregate  Commitment  under
         the 364-Day Credit Agreement and then to the Aggregate Commitment under
         this  Agreement.  Such  reduction  shall  be  made  promptly  upon  the
         incurrence of such Debt.

             (ii)  Sale of  Assets.  The  Total  Aggregate  Commitment  shall be
         permanently reduced by an amount equal to seventy-five percent (75%) of
         the  aggregate  Net  Proceeds  from any sale or  disposition  of assets
         permitted pursuant to Section 9.6(e) (each such sale or disposition, an
         "Asset Sale"), with such reduction to be applied first to the Aggregate
         Commitment under the 364-Day Credit Agreement and then to the Aggregate
         Commitment under this Agreement; provided that, so long as the



<PAGE>



         Leverage Ratio is less than or equal to 2.50 to 1.00 as of (A) the date
         of  such  Asset  Sale  (as  evidenced  by a  certificate  of the  chief
         financial   officer  or  treasurer  of  BREED  in  form  and  substance
         satisfactory to the Administrative Agent delivered immediately prior to
         the  consummation  of such  Asset  Sale)  and (B) the  date of the most
         recent Officer's Compliance Certificate, the Total Aggregate Commitment
         shall be permanently  reduced by an amount equal to fifty percent (50%)
         of such aggregate Net Proceeds.  Such reduction  shall be made promptly
         upon the consummation of any such sale or disposition.

             (iii) Equity  Issuance.  The Total  Aggregate  Commitment  shall be
         permanently  reduced by an amount equal to fifty  percent  (50%) of the
         aggregate net proceeds from any Equity  Issuance  permitted  under this
         Agreement,  with such  reduction to be applied  first to the  Aggregate
         Commitment  under  the  364-  Day  Credit  Agreement  and  then  to the
         Aggregate  Commitment  under this Agreement;  provided that, so long as
         the Leverage  Ratio is less than or equal to 2.50 to 1.00 as of (A) the
         date of such Equity  Issuance  (as  evidenced by a  certificate  of the
         chief  financial  officer or treasurer  of BREED in form and  substance
         satisfactory to the Administrative  Agent) and (B) the date of the most
         recent Officer's Compliance Certificate, no mandatory reduction will be
         required on account of any such Equity  Issuance.  Such reduction shall
         be made promptly upon the consummation of any Equity Issuance."

          (c) Section  3.1(c)(ii) and the remainder of Section 3.1(c)  appearing
          thereafter  shall be  deleted  in  their  entirety  and the  following
          provisions shall be substituted in lieu thereof:

                  "(ii) for the period  commencing  on the fifth (5th)  Business
         Day  following  receipt by the  Administrative  Agent of the  financial
         statements of BREED and its  Subsidiaries for the fiscal quarter ending
         June 30, 1997 and the accompanying Officer's Compliance Certificate and
         continuing through and including the Credit Facility  Termination Date,
         be determined  by reference to the Leverage  Ratio as of the end of the
         fiscal  quarter  immediately  preceding the delivery of the  applicable
         Officer's Compliance Certificate in accordance with the chart below:




<PAGE>



                                   Applicable Margin Per Annum
    Leverage Ratio                 Base Rate +                LIBOR Rate +

         Greater than 4.00         0.00%                      1.375%

         Less than or equal
         to 4.00 and greater
         than 3.50                 0.00%                      1.125%

         Less than or equal
         to 3.50 and greater
         than 3.25                 0.00%                      0.950%

         Less than or equal
         to 3.25 and greater
         than 3.00                 0.00%                      0.700%

         Less than or equal
         to 3.00 and greater
         than 2.50                 0.00%                      0.500%

         less than or equal
         to 2.50 but greater
         than 2.00                 0.00%                      0.375%


         less than or equal
         to 2.00                   0.00%                      0.300%

         Adjustments,  if any,  in the  Applicable  Margin  shall be made by the
         Administrative  Agent on the tenth (10th) Business Day (the "Adjustment
         Date")  after  receipt  by the  Administrative  Agent of the  quarterly
         financial   statements   for  BREED  and  its   Subsidiaries   and  the
         accompanying   Officer's  Compliance   Certificate  setting  forth  the
         Leverage  Ratio as of the most recent  fiscal  quarter end.  Subject to
         Section  3.1(d),  in the  event  the  Borrowers  fail to  deliver  such
         financial  statements  and  certificate  within  the time  required  by
         Section  6.2  hereof,  the  Applicable  Margin  shall  be  the  highest
         Applicable  Margin set forth above until the delivery of such financial
         statements and certificate.




<PAGE>



                  Notwithstanding  anything to the contrary contained herein, in
         the event  the  Interest  Coverage  Ratio (as  determined  pursuant  to
         Section  8.3 of  this  Agreement)  is  less  than  3.00  to  1.00,  the
         Applicable  Margin set forth in this  Section 3.1 shall be deemed to be
         1.000% with resect to LIBOR Rate Loans  (unless the  Applicable  Margin
         with respect to LIBOR Rate Loans is determined  to be greater  pursuant
         to the terms of this Section 3.1(c) in which case the Applicable Margin
         shall be deemed to be such greater amount)."

          (d)  Section  3.3(a)(ii)  and  the  remainder  of  Section  3.3(a)(ii)
          appearing  thereafter  shall  be  deleted  in their  entirety  and the
          following provisions shall be substituted in lieu thereof:

          "(ii) for the  period  commencing  on the  fifth  (5th)  Business  Day
          following  receipt  by  the  Administrative  Agent  of  the  financial
          statements of BREED and its Subsidiaries for the fiscal quarter ending
          June 30, 1997 and the accompanying  Officer's  Compliance  Certificate
          and continuing  through and including the Credit Facility  Termination
          Date, be  determined by reference to the Leverage  Ratio as of the end
          of the  fiscal  quarter  immediately  preceding  the  delivery  of the
          applicable  Officer's  Compliance  Certificate in accordance  with the
          chart below:

         Leverage Ratio                                       Facility Fee Rate

         Greater than 3.50                                              0.375%



         Less than or equal
         to 3.50 and greater
         than 3.25                                                      0.300%

         Less than or equal
         to 3.25 and greater
         than 3.00                                                      0.300%

         Less than or equal
         to 3.00 and greater
         than 2.50                                                      0.250%




<PAGE>



         less than or equal
         to 2.50 but greater
         than 2.00                                                      0.250%

         less than or equal
         to 2.00                                                        0.200%

         Adjustments,  if any,  in the  facility  fee rate  shall be made by the
         Administrative  Agent on the tenth (10th) Business Day (the "Adjustment
         Date")  after  receipt  by the  Administrative  Agent of the  quarterly
         financial   statements   for  BREED  and  its   Subsidiaries   and  the
         accompanying   Officer's  Compliance   Certificate  setting  forth  the
         Leverage Ratio as of the most
         recent fiscal  quarter end. In the event the Borrowers  fail to deliver
         such financial  statements and certificate  within the time required by
         Section 6.2 hereof, the facility fee rate shall be the highest facility
         fee  rate  set  forth  above  until  the  delivery  of  such  financial
         statements and certificate.

                  Notwithstanding  anything to the contrary contained herein, in
         the event  the  Interest  Coverage  Ratio (as  determined  pursuant  to
         Section 8.3 of this  Agreement) is less than 3.00 to 1.00, the facility
         fee rate set forth in this Section  3.3(a) shall be deemed to be 0.300%
         (unless the facility fee rate is determined  to be greater  pursuant to
         the terms of this  Section  3.3(a) in which case the  facility fee rate
         shall be deemed to be such greater amount)."

          (e) Section  8.1 shall be deleted in its  entirety  and the  following
          Section 8.1 shall be substituted in lieu thereof:

         "8.1 Leverage Ratio.  As of the end of any fiscal  quarter,  permit the
         ratio (the "Leverage  Ratio") of (a) the Consolidated Debt of BREED and
         its  Subsidiaries  as of  such  date to (b)  EBITDA  of  BREED  and its
         Subsidiaries  for the period of four (4)  consecutive  fiscal  quarters
         ending  on such  date,  to exceed  the  ratio  set forth  below on such
         corresponding date:

                  June 30, 1997                      3.70 to 1.00

                  September 30, 1997                 4.10 to 1.00




<PAGE>



                  December 31, 1997                  3.90 to 1.00

                  March 31, 1998                     3.75 to 1.00

                  June 30, 1998 and
                  each fiscal quarter-end
                  thereafter                         3.50 to 1.00;

provided, however, that, notwithstanding anything herein to the contrary, in the
event of any one or more Equity  Issuances  with net proceeds of  $50,000,000 or
more in the  aggregate,  the Leverage  Ratio as of the fiscal  quarter ending on
September 30, 1997 shall not exceed 3.75 to 1.00 and for each fiscal quarter-end
thereafter shall not exceed 3.50 to 1.00."

         (f)      Section 8.3 shall be deleted in its entirety and the
following Section 8.3 shall be substituted in lieu thereof:

         "8.3  Interest  Coverage  Ratio.  As of the end of any fiscal  quarter,
         permit  the  ratio of (a) EBIT of BREED  and its  Subsidiaries  for the
         period of four (4)  consecutive  fiscal quarters ending on such date to
         (b) Interest Expense of BREED and its Subsidiaries for such period,  to
         be less than the ratio set forth below on such corresponding date:

                  June 30, 1997                      1.70 to 1.00

                  September 30, 1997                 1.30 to 1.00

                  December 31, 1997                  1.30 to 1.00

                  March 31, 1998                     1.55 to 1.00




<PAGE>



                  June 30, 1998                      2.00 to 1.00

                  September 30, 1998                 2.25 to 1.00

                  December 31, 1998                  2.50 to 1.00

                  March 31, 1999                     2.75 to 1.00

                  June 30, 1999 and
                  each fiscal quarter-end
                  thereafter                         3.00 to 1.00"

         (g)  Schedule  1.1(a) to the Credit  Agreement  shall be deleted in its
entirety and Schedule 1.1(a) attached hereto shall be substituted therefor.

         SECTION 3.  Termination  of Certain  Borrowers and A/C  Borrowers.  The
parties hereto hereby agree and acknowledge that, as of the date hereof, (i) the
parties listed on Exhibit 1 hereto (collectively,  the "Former Borrowers") shall
no longer be Borrowers or A/C Borrowers under the Credit  Agreement or any other
Loan Document,  (ii) all rights of the Former  Borrowers and  obligations of the
Lenders to the Former  Borrowers  under the Credit  Agreement  or any other Loan
Document  are  hereby  terminated  and (iii) the  pledge of stock of the  Former
Borrowers by reason of their being A/C Borrowers as of the Closing Date shall no
longer be required as set forth in Section  4.2(c) of the Credit  Agreement.  To
the extent that any of the Former Borrowers becomes a Material Subsidiary at any
time  after the date  hereof,  the  Borrowers  shall  cause to be  executed  and
delivered  to the  Administrative  Agent each of the  documents  required  under
Section 7.12(b) of the Credit Agreement as and when required thereunder.

          SECTION  4.  Agreements.  (a) The date for  delivery  of the pledge of
          stock of BREED Italia,  S.r.l. ("BREED Italia") by reason of its being
          a Material  Subsidiary as required  under Section 4.2(c) of the Credit
          Agreement  shall be,  and hereby  is,  extended  to that date which is
          ninety (90) days from the date hereof.

          (b)  The  date  for  delivery  of  the  pledge  of  stock  of  Gallino
          Plasturgia,  S.r.l. ("Gallino") by reason of its being an A/C Borrower
          and Material Subsidiary as required under Section 4.2(c) of the Credit
          Agreement shall be, and hereby is, extended to that



<PAGE>



date which is ninety (90) days from the date hereof; provided that Gallino shall
not be permitted to make any borrowings  under the Credit Agreement nor shall it
be  permitted to receive the proceeds of any  borrowings  thereunder  unless and
until all documents as required  under Section 4.2(c) thereof have been executed
and delivered to the Administrative Agent.

         (c) The  Administrative  Agent and the Lenders hereby consent and agree
that, if Gallino is not either an A/C Borrower or a Material  Subsidiary on that
date which is ninety (90) days from the date hereof,  a pledge of its stock will
not be  required  under the terms of  Section  4.2(c) of the  Credit  Agreement;
provided  that in such event the rights of Gallino  and the  obligations  of the
Lenders to Gallino under the Credit  Agreement or any other Loan Document  shall
then and  thereafter  be  terminated.  To the  extent  that  Gallino at any time
thereafter again becomes a Material Subsidiary,  the Borrowers shall cause to be
executed  and  delivered  to the  Administrative  Agent  each  of the  documents
required  under  Section  7.12(b) of the Credit  Agreement as and when  required
thereunder.

         (d) The  Administrative  Agent and the Lenders hereby consent and agree
that Gallino and BREED Italia may, at any time during the ninety (90) day period
after the date hereof,  reincorporate  themselves  as a S.p.A (i.e.  Societa per
Azioni).

Failure  to comply  with any  provision  of this  Section 4 shall be an Event of
Default under the Credit Agreement.

         SECTION           5.       Conditions.  The effectiveness of the
amendments set forth herein shall be conditioned upon delivery to
the Administrative Agent of the following items:

         (a)      First Amendment.  Receipt by the Administrative Agent of
this First Amendment executed by the Borrowers, the Guarantor and
Lenders constituting Required Lenders.

         (b)      First Amendment to 364-Day Credit Agreement.  Receipt by
the Administrative Agent of that certain First Amendment to 364-Day
Credit Agreement executed by the Borrowers, the Guarantor and
Lenders constituting Required Lenders.

         (c)      Officer's Certificate.  A certificate from the chief
executive officer or chief financial officer of BREED in form and



<PAGE>



substance reasonably  satisfactory to Administrative  Agent, to the effect that,
after giving effect to the  transactions  contemplated by this First  Amendment,
all  representations  and  warranties  of the  Borrowers  (including  the Former
Borrowers)  contained in the Credit  Agreement and the other Loan  Documents are
true, correct and complete;  that the Borrowers (including the Former Borrowers)
are not in violation of any of the covenants  contained in the Credit  Agreement
and  the  other  Loan  Documents;  and  that  no  Default  has  occurred  and is
continuing.

         (d) Amendment Fees. Payment of (i) the amendment fees and other fees to
the  Administrative  Agent  for  the  ratable  benefit  of  the  Lenders  to  be
distributed  to the  Lenders  in  accordance  with the terms  contained  in that
certain  letter  dated as of July __,  1997 from First  Union to the Lenders and
(ii) the  amendment  and  other  fees to the  Administrative  Agent  for its own
account pursuant to that certain fee letter dated as of July __, 1997 from First
Union to BREED, all of which such fees are hereby  acknowledged and consented to
by the Borrowers.

         (e)  Opinions  of  Counsel.  The Agent  shall have  received  favorable
opinions  addressed  to the  Lenders  from  counsel  to the  Borrowers  and  the
Guarantor in form and substance satisfactory to the Administrative Agent.

         (f)      Additional Documents.  Receipt by the Administrative
Agent of any other document or instrument reasonably requested by
the Administrative Agent, the Documentation Agent or the Lenders in
connection with the execution of this First Amendment.

         (g)  Amendment  Expenses.  Payment by the  Borrowers of all  reasonable
out-of-pocket  expenses  of the  Administrative  Agent  in  connection  with the
preparation,  execution and delivery of this First Amendment,  including without
limitation,   the  reasonable  fees  and   disbursements   of  counsel  for  the
Administrative Agent.

         SECTION 6. Representations and Warranties/No  Default. By its execution
hereof,  the  Borrowers  hereby  certify  that each of the  representations  and
warranties  set forth in the Credit  Agreement  and the other Loan  Documents is
true and correct as of the date hereof as if fully set forth  herein and that as
of the  date  hereof  no  Default  or  Event  of  Default  has  occurred  and is
continuing.




<PAGE>



         SECTION 7. Limited  Amendment.  Except as expressly  amended and waived
herein,  each provision of the Credit Agreement and each provision of each other
Loan Document shall continue to be, and shall remain,  in full force and effect.
This First  Amendment  shall not be deemed or  otherwise  construed  (a) to be a
waiver of, or consent to, or a  modification  or amendment of, any other term or
condition  of the  Credit  Agreement  or any other  Loan  Document,  (b) to be a
commitment or any other  undertaking  by the Lenders or any of them to engage in
any  further  restructuring  of any  aspect of the  Credit  Agreement,  the Loan
Documents or the Obligations,  (c) to constitute any obligation to further amend
or  otherwise  modify  the  Credit  Agreement  or any  Loan  Document  or (d) to
prejudice  any  other  right or  rights  which  the  Administrative  Agent,  the
Documentation  Agent or Lenders may now have or may have in the future  under or
in  connection  with the Credit  Agreement  or the Loan  Documents or any of the
instruments  or  agreements  referred  to  therein,  as the same may be amended,
restated or otherwise modified.

         SECTION 8.  Confirmation of Guaranty.  The Guarantor  hereby  expressly
acknowledges and consents to the  modifications and amendments set forth in this
First Amendment and hereby confirms,  represents and agrees that its obligations
under the Guaranty shall remain in full force and effect.

         SECTION           9.       References.  From and after the date hereof,
all references in the Loan Documents to the Credit Agreement shall
be deemed to be references to the Credit Agreement as modified by
this First Amendment.

         SECTION 10. No Defenses. Each of the Borrowers and the Guarantor hereby
acknowledges and affirms that such party has no defenses, legal or equitable, to
the  validity  and  enforceability  of any  Loan  Document  (including,  without
limitation, the Credit Agreement as amended by this First Amendment).

         SECTION 11. Entire Agreement.  This First Amendment,  together with the
Credit Agreement and the other Loan Documents,  constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements.  The Borrowers  acknowledge that there are no other agreements
of any kind,  whether  written or oral  pertaining to the subject matter hereof,
not memorialized in the First Amendment,  together with the Credit Agreement and
the other Loan Documents.



<PAGE>



         SECTION           12.     Governing Law.  This First Amendment shall be
governed by and construed in accordance with the laws of the State
of North Carolina.

         SECTION           13.      Counterparts.  This First Amendment may be
executed in separate counterparts, each of which when executed and
delivered is an original but all of which taken together constitute
one and the same instrument.


                                             [Signature Pages Follow]



<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the date and year first above written.








<PAGE>



                                 SCHEDULE 1.1(a)

                              LIST OF A/C BORROWERS


         Name of Company                           Place of Incorporation

BREED Technologies, Inc.*                          Delaware, USA
United Steering Systems, Inc.                      Delaware, USA
BREED European Holdings Limited                    United Kingdom
Auto Trim, Inc.                                    Texas, USA
Custom Trim, Ltd.                                  Ontario, Canada
Hamlin Electronics Europe Limited                  United Kingdom
Hamlin Electronics, GmbH                           Germany
VTI Hamlin Oy*                                     Finland
Momo, S.p.A.                                       Italy
Gallino Plasturgia, S.r.l.                         Italy
United Steering Systems Clifford Limited           United Kingdom



* These are the only entities permitted to borrow in Finnish Marks.







<PAGE>


                                    EXHIBIT 1

                                FORMER BORROWERS


BREED Italia, S.r.l.

Italtest, S.r.l.

BREED Italian Holdings, S.r.l.
<PAGE>

                            364-DAY CREDIT AGREEMENT

         CREDIT AGREEMENT, dated as of the 30th day of April, 1997, by and among
BREED  TECHNOLOGIES,  INC., a corporation  organized  under the laws of Delaware
("BREED"),  and the  Subsidiaries  thereof  designated as Borrowers  herein,  as
Borrowers (collectively,  including BREED, the "Borrowers"), BREED, as Guarantor
(the  "Guarantor"),  the Lenders who are or may become a party to this Agreement
(collectively,  the "Lenders"), FIRST UNION NATIONAL BANK OF FLORIDA, a national
banking   association,   as   Administrative   Agent   for  the   Lenders   (the
"Administrative  Agent"),  and THE CHASE  MANHATTAN  BANK,  a  national  banking
association, as Documentation Agent for the Lenders (the "Documentation Agent").

                              STATEMENT OF PURPOSE

         The Borrowers have  requested,  and the Lenders have agreed,  to extend
certain  credit  facilities to the Borrowers on the terms and conditions of this
Agreement.

         BREED,  as parent of the other  Borrowers,  will  benefit  directly and
indirectly from the extension of such credit facilities to such other Borrowers.
As a precondition to making any extensions of credit hereunder, the Lenders have
required,  and BREED has agreed,  to execute this  Agreement as Guarantor on the
terms and conditions of this Agreement.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree as follows:


                                    ARTICLE I

                                   DEFINITIONS

         SECTION  1.1  Definitions.  The  following  terms  when  used  in  this
Agreement shall have the meanings assigned to them below:

         "A/C Borrowers"  means the Borrowers  listed as such on Schedule 1.1(a)
attached hereto.


                                        1

<PAGE>



         "Administrative   Agent"   means  First   Union  in  its   capacity  as
Administrative Agent hereunder,  and any successor thereto appointed pursuant to
Section 12.9.

         "Administrative Agent's Correspondent" means First Union National Bank,
London  Branch,   or  any  other   financial   institution   designated  by  the
Administrative  Agent to act as its correspondent  hereunder with respect to the
distribution and payment of Alternative Currency Loans.

         "Administrative  Agent's Office" means the office of the Administrative
Agent  specified in or determined in accordance  with the  provisions of Section
13.1.

         "Affiliate"  means, with respect to any Person, any other Person (other
than  a  Subsidiary)   which   directly  or  indirectly   through  one  or  more
intermediaries,  controls, or is controlled by, or is under common control with,
such first Person or any of its  Subsidiaries.  The term "control" means (a) the
power to vote  five  percent  (5%) or more of the  securities  or  other  equity
interests of a Person  having  ordinary  voting  power,  or (b) the  possession,
directly or  indirectly,  of any other power to direct or cause the direction of
the management  and policies of a Person,  whether  through  ownership of voting
securities, by contract or otherwise; provided that Integrated Sensor Solutions,
Inc., a California corporation,  shall not be deemed to be an Affiliate of BREED
for the purposes of this Agreement.

         "Aggregate  Commitment"  means the  aggregate  amount  of the  Lenders'
Commitments hereunder,  as such amount may be reduced or modified at any time or
from time to time  pursuant  to the  terms  hereof.  On the  Closing  Date,  the
Aggregate Commitment shall be Two Hundred Fifty Million Dollars ($250,000,000).

         "Agreement"  means  this  Credit  Agreement,   as  amended,   restated,
supplemented or otherwise modified from time to time.

         "Alternative  Currency" means Pounds Sterling,  Italian Lire,  Deutsche
Marks  and,  except  as  otherwise  expressly  excluded  under the terms of this
Agreement,   Finnish  Marks,   and,  with  the  prior  written  consent  of  the
Administrative  Agent and the Lenders,  which consent shall not be  unreasonably
withheld,  any other  lawful  currency  (other  than  Dollars)  which is readily
transferable and

                                        2

<PAGE>



convertible  into  Dollars  in the United  States  currency  market and  readily
available to all of the Lenders in the London interbank  deposit market.  Except
as otherwise  expressly  set forth  herein,  any  reference  to an  "Alternative
Currency" shall include Finnish Marks.

         "Alternative  Currency  Amount" means with respect to each Loan made or
continued (or to be made or continued) in an Alternative Currency, the amount of
such Alternative Currency which is equivalent to the principal amount in Dollars
of such  Loan  at the  most  favorable  spot  exchange  rate  determined  by the
Administrative Agent to be available to its London branch at approximately 11:00
a.m.  (Charlotte  time)  two  (2)  Business  Days  before  such  Loan is made or
continued (or to be made or continued).  When used with respect to any other sum
expressed in Dollars,  "Alternative  Currency  Amount"  shall mean the amount of
such  Alternative  Currency  which is  equivalent  to the amount so expressed in
Dollars  at  the  most   favorable   spot  exchange   rate   determined  by  the
Administrative Agent to be available to it at the relevant time.

         "Alternative   Currency   Commitment"   means  Fifty  Million   Dollars
($50,000,000),  as such  amount may be reduced or  modified  at any time or from
time to time pursuant to the terms hereof.

         "Alternative  Currency  Loan"  means  (i)  any  Revolving  Credit  Loan
denominated  in an Alternative  Currency and (ii) except as otherwise  expressly
set forth herein, any Finnish Mark Loan.

         "Applicable  Law" means all  applicable  provisions of consti  tutions,
statutes,  laws,  rules,  treaties,  regulations and orders of all  Governmental
Authorities and all orders and decrees of all courts and arbitrators.

         "Applicable Margin" shall have the meaning assigned thereto in
Section 3.1(c).

         "Assignment and Acceptance" shall have the meaning assigned
thereto in Section 13.10.

         "Base Rate" means, at any time, the higher of (a) the Prime Rate or (b)
the  Federal  Funds Rate plus 1/2 of 1%; each change in the Base Rate shall take
effect  simultaneously  with the corre  sponding  change or changes in the Prime
Rate or the Federal Funds Rate.

         "Base Rate Loan" means any Loan  bearing  interest at a rate based upon
the Base Rate as provided in Section 3.1(a).

         "Borrowers" means the collective reference to BREED and the
other A/C Borrowers.

         "BREED" means BREED Technologies,  Inc., a corporation  organized under
the laws of Delaware, and its successors.

         "Business  Day" means (a) for all  purposes  other than as set forth in
clause (b)  below,  any day other than a  Saturday,  Sunday or legal  holiday on
which  banks in  Charlotte,  North  Carolina  are open for the  conduct of their
domestic and international  commercial banking business, and (b) with respect to
all notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan,  any day (i) that is a Business Day  described
in  clause  (a) and  that is also a day for  trading  by and  between  banks  in
deposits for the applicable  Permitted  Currency in the London  interbank market
and  (ii) on  which  banks  are  open for the  conduct  of  their  domestic  and
international  banking business in the place where the  Administrative  Agent or
the  Administrative  Agent's  Correspondent  shall make available  Loans in such
Permitted Currency.

         "Capital Lease" means, with respect to BREED and its Subsidiaries,  any
lease of any property that should,  in accordance  with GAAP, be classified  and
accounted  for as a capital lease on a  Consolidated  balance sheet of BREED and
its Subsidiaries.

         "Change in Control" shall have the meaning assigned thereto in
Section 11.1(i).

         "Closing Date" means the date of this Agreement.

         "Code"  means  the  Internal  Revenue  Code of 1986,  and the rules and
regulations thereunder, each as amended or supplemented from time to time.

         "Collateral" means any assets pledged by BREED or any of its
Subsidiaries to the Administrative Agent, for the ratable benefit

                                        3

<PAGE>



of itself and the Lenders, in order to secure the Obligations or
any portion thereof.

         "Commitment"  means, as to any Lender, the obligation of such Lender to
make Loans to the Borrowers  hereunder in an aggregate  principal or face amount
at any time  outstanding  not to  exceed  the  amount  set forth  opposite  such
Lender's name on Schedule 1.1(b) hereto,  as the same may be reduced or modified
at any time or from time to time pursuant to the terms hereof.

         "Commitment  Percentage" means, as to any Lender at any time, the ratio
of (a) the  amount  of the  Commitment  of  such  Lender  to (b)  the  Aggregate
Commitment of all of the Lenders.

         "Consolidated"  means, when used with reference to financial statements
or financial statement items of the BREED and its Subsidiaries,  such statements
or items on a consolidated  basis in accordance  with  applicable  principles of
consolidation under GAAP.

         "Contingent   Obligation"   means,   with  respect  to  BREED  and  its
Subsidiaries,  without duplication, any obligation,  contingent or otherwise, of
any such  Person  pursuant  to which such  Person  has  directly  or  indirectly
guaranteed  any  Debt or other  obligation  of any  other  Person  and,  without
limiting the generality of the foregoing,  any  obligation,  direct or indirect,
contingent or  otherwise,  of any such Person (a) to purchase or pay (or advance
or supply  funds for the  purchase or payment of) such Debt or other  obligation
(whether  arising by virtue of  partnership  arrangements,  by agreement to keep
well, to purchase assets, goods,  securities or services, to take-or-pay,  or to
maintain financial statement condition or otherwise) or (b) entered into for the
purpose  of  assuring  in any other  manner  the  obligee  of such Debt or other
obligation  of the payment  thereof or to protect such  obligee  against loss in
respect  thereof  (in whole or in part);  provided,  that,  except to the extent
Breed or any of its  Subsidiaries  shall be advised or required to  establish or
maintain reserves therefor, the term Contingent Obligation shall not include (i)
endorsements for collection or deposit in the ordinary course of business,  (ii)
warranty  obligations  in the  ordinary  course of business  related to products
supplied  by  BREED  and  its  Subsidiaries,  including  defense  and  indemnity
obligations  pursuant thereto and (iii) Contingent  Obligations  incurred in the
ordinary course of business for which

                                        4

<PAGE>



a specific  dollar amount of liability  cannot be determined  but which,  in the
aggregate, would not have a Material Adverse Effect.

         "Convertible  Preferred  Stock" means any  preferred  stock issued by a
Subsidiary  of  BREED  formed  pursuant  to  Section  9.4(e)  that is  otherwise
permitted  hereunder,  for so long as such preferred  stock is not accounted for
under stockholder's  equity in the Consolidated  financial  statements of BREED;
provided  that  such  Convertible  Preferred  Stock  shall  be  subject  to  the
satisfaction  of each of the  conditions  set forth in  subsections  (i) through
(iii) below:

                  (i)  Under  the  terms  and  conditions  of  the   Convertible
         Preferred Stock, the applicable Subsidiary shall have the right, in its
         sole  discretion,  to defer  payment of  interest or  dividends  on the
         Convertible  Preferred Stock for up to twenty (20) consecutive quarters
         (the "Deferral Period");

             (ii) GAAP shall not require that the Convertible Preferred Stock be
         included as a liability on the  Consolidated  financial  statements  of
         BREED; and

            (iii)  If a  Subsidiary  elects  to defer  payment  of  interest  or
         dividends,  after any such  deferral at least five (5)  quarters  shall
         remain in the Deferral Period;

In the event any of the above conditions is not satisfied, the
Convertible Preferred Stock shall thereafter constitute
Subordinated Debt and not preferred stock.

         "Credit  Facility"  means the  revolving  credit  facility  established
pursuant to Article II hereof.

         "Credit  Facility  Termination  Date"  means the  earliest of the dates
referred to in Section 2.8.

         "Debt" means,  with respect to any Person and its  Subsidiaries  at any
date and without duplication,  the sum of the following calculated in accordance
with GAAP: (a) all liabilities,  obligations and indebtedness for borrowed money
including but not limited to obligations evidenced by bonds,  debentures,  notes
or other similar  instruments of any such Person, (b) all obligations to pay the
deferred  purchase price of property or services of any such Person  (including,
without limitation, all obligations under

                                        5

<PAGE>



non-competition  agreements),  except  trade  payables  arising in the  ordinary
course of business not more than one hundred twenty (120) days past due, (c) all
obligations of any such Person as lessee under Capital  Leases,  (d) all Debt of
any other  Person  secured  by a Lien on any asset of any such  Person,  (e) all
Contingent  Obligations of any such Person,  (f) all obligations,  contingent or
otherwise,  of any such Person relative to the face amount of letters of credit,
whether or not drawn,  including,  without limitation,  any banker's acceptances
issued for the  account of any such  Person and (g) all  obligations  to redeem,
repurchase,  exchange,  defease or otherwise make payments in respect of capital
stock or other securities of such Person.

         "Default" means any of the events  specified in Section 11.1 which with
the  passage  of time,  the  giving  of notice  or any  other  condition,  would
constitute an Event of Default.

         "Deutsche Marks or DEM" means, at any time of  determination,  the then
official currency of Germany.

         "Documentation Agent" means The Chase Manhattan Bank in its
capacity as Documentation Agent hereunder

         "Dollars" or "$" means, unless otherwise  qualified,  dollars in lawful
currency of the United States.

         "Dollar  Amount"  means (a) with respect to each Loan made or continued
(or to be made or continued) in Dollars,  the principal  amount  thereof and (b)
with respect to each Loan made or continued  (or to be made or  continued) in an
Alternative Currency, the amount of Dollars which is equivalent to the principal
amount of such Loan at the most favorable  spot exchange rate  determined by the
Administrative  Agent at  approximately  11:00  a.m.  (Charlotte  time)  two (2)
Business  Days  before  such  Loan  is  made  or  continued  (or to be  made  or
continued).  When used with respect to any other sum expressed in an Alternative
Currency,  "Dollar  Amount" shall mean the amount of Dollars which is equivalent
to the amount so expressed in such  Alternative  Currency at the most  favorable
spot exchange rate determined by the Administrative  Agent to be available to it
at the relevant time.


                                        6

<PAGE>



         "Domestic Subsidiary" means any Subsidiary of BREED organized under the
laws of any State of the United States or the District of Columbia.

         "EBIT"  means,  with  respect  to BREED  and its  Subsidiaries  for any
period,  the sum of (a) Net  Income  for  such  period,  plus (b) the sum of the
following to the extent deducted in the determination of Net Income:  (i) income
and franchise taxes and (ii) Interest Expense.

         "EBITDA"  means,  with  respect to BREED and its  Subsidiaries  for any
period,  the sum of (a) Net  Income  for  such  period,  plus (b) the sum of the
following to the extent deducted in the determination of Net Income:  (i) income
and franchise taxes, (ii) Interest Expense and (iii) amortization,  depreciation
and other non-cash  charges  (including  amortization  of goodwill,  transaction
expenses, covenants not to compete and other intangible assets). EBITDA shall be
adjusted in a manner  reasonably  satisfactory  to the  Administrative  Agent to
include on a pro forma basis as of the first day of any  calculation  period any
acquisition  consummated  during such period and exclude on a pro forma basis as
of the first day of any calculation  period any Subsidiary or assets sold during
such period.

         "Eligible  Assignee"  means,  with  respect  to any  assignment  of the
rights,  interest and obligations of a Lender hereunder, a Person that is at the
time of such  assignment (a) a commercial  bank organized  under the laws of the
United  States or any state  thereof,  having  combined  capital  and surplus in
excess of  $500,000,000,  (b) a commercial  bank organized under the laws of any
other country that is a member of the  Organization of Economic  Cooperation and
Development,  or a political  subdivision of any such country,  having  combined
capital and surplus in excess of $500,000,000,  (c) a finance company, insurance
company or other financial  institution which in the ordinary course of business
extends  credit of the type  extended  hereunder  and that has  total  assets in
excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original
party to this Agreement or as the assignee of another Lender), (e) the successor
(whether by transfer of assets, merger or otherwise) to all or substantially all
of the commercial  lending  business of the assigning  Lender,  or (f) any other
Person  that has been  approved  in writing  as an  Eligible  Assignee  by BREED
(unless

                                        7

<PAGE>



an Event of Default has occurred and is continuing) and the
Administrative Agent.

         "Employee  Benefit  Plan" means any  employee  benefit  plan within the
meaning of Section 3(3) of ERISA which is  maintained  for employees of BREED or
any ERISA Affiliate.

         "Environmental  Laws"  means  any  and  all  federal,  foreign,  state,
provincial and local laws, statutes,  ordinances,  rules, regulations,  permits,
licenses,  approvals,  interpretations  and  orders of  courts  or  Governmental
Authorities,  relating to the  protection  of human  health or the  environment,
including,  but not  limited to,  requirements  pertaining  to the  manufacture,
processing,  distribution,  use, treatment,  storage, disposal,  transportation,
handling,  reporting,  licensing,  permitting,  investigation  or remediation of
Hazardous Materials.

         "Equity  Issuance"  means the issuance,  sale or other  disposition  by
BREED or any of its Subsidiaries of its capital stock,  any rights,  warrants or
options to purchase or acquire  any shares of its  capital  stock,  or any other
security or instrument  representing,  convertible  into or exchangeable  for an
equity  interest  in BREED or any of its  Subsidiaries  other  than  Convertible
Preferred Stock.

         "ERISA" means the Employee  Retirement Income Security Act of 1974, and
the rules and regulations  thereunder,  each as amended or modified from time to
time.

         "ERISA  Affiliate"  means any Person who together with BREED is treated
as a single employer  within the meaning of Section  414(b),  (c), (m) or (o) of
the Code or Section 4001(b) of ERISA.

         "Event of Default"  means any of the events  specified in Section 11.1;
provided,  that any  requirement for passage of time,  giving of notice,  or any
other condition, has been satisfied.

         "Existing Credit  Agreement" means the Revolving Credit Agreement dated
as of December 7, 1995 by and among BREED, as Borrower,  Chemical Bank, as agent
and lender,  NBD Bank, as lender,  and First Union National Bank of Florida,  as
lender, as amended, modified or supplemented.


                                        8

<PAGE>



         "FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.

         "Federal  Funds Rate" means,  the rate per annum (rounded  upwards,  if
necessary,  to the next higher 1/100th of 1%)  representing  the daily effective
federal  funds  rate as quoted by the  Administrative  Agent  and  confirmed  in
Federal  Reserve  Board  Statistical  Release  H.15  (519) or any  successor  or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not  available,  then "Federal  Funds Rate" shall mean a daily rate
which is determined,  in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national  federal funds
market at 9:00 a.m.  (Charlotte  time).  Rates for weekends or holidays shall be
the same as the rate for the most immediate preceding Business Day.

         "Finnish Mark Aggregate Commitment" means the aggregate amount
of the Finnish Mark Commitments of the Finnish Mark Lenders, as
such amount may be reduced or modified at any time or from time to
time pursuant to the terms hereof.  On the Closing Date, the
Finnish Mark Aggregate Commitment shall be Ten Million Dollars
($10,000,000).

         "Finnish Mark  Commitment"  means,  as to any Finnish Mark Lender,  the
obligation  of such  Finnish  Mark Lender to make  Finnish Mark Loans to the A/C
Borrowers hereunder in an aggregate Dollar Amount at any time outstanding not to
exceed the amount set forth opposite such Finnish Mark Lender's name on Schedule
1.1(c)  hereto,  as the same may be reduced or modified at any time or from time
to time pursuant to the terms hereof.

         "Finnish  Mark  Commitment  Percentage"  means,  as to any Finnish Mark
Lender at any time,  the ratio of (a) the amount of the Finnish Mark  Commitment
of such Finnish Mark Lender to (b) the Finnish Mark Aggregate  Commitment of all
of the Finnish Mark Lenders.

         "Finnish Mark Lenders"  means each Lender listed on Schedule  1.1(c) in
its capacity as a Finnish Mark lender hereunder.

         "Finnish  Mark  Loans"  means the Loans in  Finnish  Marks  made by the
Finnish Mark Lenders to the applicable A/C Borrower or A/C Borrowers pursuant to
Section 2.2.


                                        9

<PAGE>



         "Finnish Mark Notes" means the separate  Finnish Mark Notes made by the
applicable  A/C Borrowers  indicated on Schedule  1.1(a) payable to the order of
each Finnish Mark Lender,  substantially in the form of Exhibit A-2 hereto,  and
any amendments and  modifications  thereto,  any substitutes  therefor,  and any
replacements,  restatements, renewals or extension thereof, in whole or in part;
"Finnish Mark Note" means any of such Finnish Mark Notes.

         "Finnish Marks or FIM" means,  at any time of  determination,  the then
official currency of Finland.

         "First Union" means First Union  National  Bank of Florida,  a national
banking association, and its successors.

         "Fiscal  Year"  means the  fiscal  year of BREED  and its  Subsidiaries
ending on June 30.

         "Five-Year  Credit  Agreement"  means the Five-Year Credit Agreement of
even  date  by  and  among  the  Borrowers,  the  Guarantor,  the  Lenders,  the
Administrative  Agent  and  the  Documentation  Agent,  as  amended,   restated,
supplemented or otherwise modified from time to time.

         "Foreign  Subsidiary" means any Subsidiary of BREED not organized under
the laws of any State of the United States or the District of Columbia.

         "GAAP" means generally accepted accounting principles, as recognized by
the  American  Institute  of  Certified  Public  Accountants  and the  Financial
Accounting Standards Board,  consistently applied and maintained on a consistent
basis  for  BREED and its  Subsidiaries  throughout  the  period  indicated  and
consistent  with the prior  financial  practice of BREED and, to the extent each
Subsidiary was a Subsidiary of BREED, each such Subsidiary.

         "Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of,  registrations and filings with, and reports to, all
Governmental Authorities.

         "Governmental Authority" means any nation, province, state or political
subdivision  thereof,  and any  government or any Person  exercising  executive,
legislative, regulatory or administrative

                                       10

<PAGE>



functions of or pertaining to  government,  and any  corporation or other entity
owned or controlled, through stock or capital owner ship or otherwise, by any of
the foregoing.

         "Guaranteed Obligations" shall have the meaning assigned
thereto in Section 10.1.

         "Guarantor" means BREED in its capacity as guarantor under
Article X.

         "Guaranty" means the unconditional guaranty agreement of BREED
set forth in Article X.

         "Hazardous  Materials"  means any substances or materials (a) which are
or  become  defined  as  hazardous  wastes,  hazardous  substances,  pollutants,
contaminants,  chemical  substances  or mixtures or toxic  substances  under any
Environmental  Law,  (b)  which  are  toxic,  explosive,  corrosive,  flammable,
infectious, radioactive,  carcinogenic,  mutagenic or otherwise harmful to human
health  or the  environment  and are or  become  regulated  by any  Governmental
Authority,  (c) the presence of which require investigation or remediation under
any Environmental Law or common law, (d) the discharge or emission or release of
which  requires  a  permit  or  license  under  any  Environmental  Law or other
Governmental Approval, (e) which are deemed to constitute a nuisance, a trespass
or pose a health or safety  hazard to persons  or  neighboring  properties,  (f)
which are materials  consisting of  underground  or  aboveground  storage tanks,
whether  empty,  filled or  partially  filled with any  substance,  or (g) which
contain,  without  limitation,   asbestos,   polychlorinated   biphenyls,   urea
formaldehyde  foam  insulation,   petroleum   hydrocarbons,   petroleum  derived
substances or waste, crude oil, nuclear fuel, natural gas or synthetic gas.

         "Hedging  Agreement"  means any  agreement  with respect to an interest
rate swap,  collar,  cap, floor or a forward rate  agreement or other  agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrowers  under this  Agreement,  and
any  confirming  letter  executed  pursuant to such  hedging  agreement,  all as
amended, restated, supplemented or otherwise modified from time to time.


                                       11

<PAGE>



         "Intercompany  Trust  Debt"  shall  mean  Debt of BREED  issued  to any
Subsidiary  referred to in Section  9.4(e) in  consideration  of the issuance of
Convertible  Preferred  Stock  (which  Debt may or may not be  convertible  into
common stock of BREED) and which is  subordinate  to the  Obligations;  provided
that such Debt shall not be deemed  Intercompany Trust Debt if at any time it is
distributed to any person other than BREED or a Subsidiary.

         "Interest  Expense" means,  with respect to BREED and its  Subsidiaries
for any period,  the gross  interest  expense  (including,  without  limitation,
interest expense attributable to Capital Leases, all net obligations pursuant to
Hedging  Agreements  and all  interest  paid  under  or in  connection  with the
Convertible  Preferred Stock) of BREED and its Subsidiaries,  all determined for
such period on a Consolidated  basis and,  except as otherwise set forth in this
definition, in accordance with GAAP.

         "Interest Period" shall have the meaning assigned thereto in
Section 3.1(b).

         "Italian  Lire or ITL" means,  at any time of  determination,  the then
official currency of Italy.

         "Lender"  means  each  Person  executing  this  Agreement  as a  lender
(including, as applicable,  each Finnish Mark Lender) set forth on the signature
pages hereto and each Person that hereafter becomes a party to this Agreement as
a lender pursuant to Section 13.10.

         "Lending  Office"  means (a) with respect to any Lender,  the office of
such Lender maintaining such Lender's Commitment  Percentage of the Loans or (b)
with respect to any Finnish Mark Lender,  the office of such Finnish Mark Lender
maintaining such Finnish Mark Lender's Finnish Mark Commitment Percentage.

         "Leverage Ratio" means the ratio calculated in accordance with
Section 8.1.

         "LIBOR" means the rate of interest per annum determined on the basis of
the rate for deposits in Dollars in minimum  amounts of at least  $5,000,000 (or
the  Alternative  Currency Amount thereof with respect to a borrowing to be made
in an Alternative Currency) for a period equal to the applicable Interest Period
which appears on

                                       12

<PAGE>



the  Telerate  Page  3750 at  approximately  11:00  a.m.  (London  time) two (2)
Business Days prior to the first day of the applicable  Interest Period (rounded
upward, if necessary,  to the nearest one-sixteenth of one percent (1/16%)). If,
for any reason,  such rate does not appear on Telerate  Page 3750,  then "LIBOR"
shall be determined by the  Administrative  Agent to be the  arithmetic  average
(rounded  upward,  if  necessary,  to the nearest  one-sixteenth  of one percent
(1/16%)) of the rate per annum at which  deposits in the  Permitted  Currency in
which the applicable  Loan is denominated  would be offered by first class banks
in  the  London   interbank   market  to  the   Administrative   Agent  (or  the
Administrative  Agent's Correspondent) at approximately 11:00 a.m. (London time)
two (2) Business Days prior to the first day of the applicable  Interest  Period
for a period equal to such Interest Period and in an amount  substantially equal
to the amount of the applicable Loan.

         "LIBOR Rate" means a rate per annum (rounded upwards, if necessary,  to
the next higher 1/16th of 1%) determined by the Administrative Agent pursuant to
the following formula:

         LIBOR Rate =              LIBOR
                                      1.00 - Reserve Percentage

         "LIBOR Rate Loan" means any Loan bearing  interest at a rate based upon
the LIBOR Rate as provided in Section 3.1(a).

         "Lien" means,  with respect to any asset, any mortgage,  lien,  pledge,
charge,  security interest,  hypothecation or encumbrance of any kind in respect
of such asset.  For the purposes of this Agreement,  a Person shall be deemed to
own  subject to a Lien any asset which it has  acquired or holds  subject to the
interest of a vendor or lessor under any  conditional  sale  agreement,  Capital
Lease or other title retention agreement relating to such asset.

         "Loan" means any Revolving Credit Loan,  Finnish Mark Loan or Swingline
Loan made to any Borrower pursuant to Section 2.1, 2.2 or 2.3, and "Loans" means
all such Loans collectively as the context requires.

         "Loan Documents" means,  collectively,  this Agreement,  the Notes, any
Hedging  Agreement  executed  by any  Lender,  the  Security  Documents  and any
supplements  thereto and each other document,  instrument and agreement executed
and delivered by any Borrower or

                                       13

<PAGE>



any Subsidiary  thereof in connection with this Agreement or otherwise  referred
to herein or contemplated hereby, all as may be amended, supplemented,  restated
or otherwise modified from time to time.

         "Loan Parties" means the collective reference to the Borrowers, each of
the Subsidiary  Guarantors and each entity whose stock is pledged  pursuant to a
Pledge Agreement and "Loan Party" means any one of such Persons.

         "Material  Adverse Effect" means,  with respect to the Borrowers or any
of  their  Subsidiaries,  a  material  adverse  effect  on (a)  the  properties,
business,  prospects,  operations  or condition  (financial or otherwise) of the
Borrower  and its  Subsidiaries  taken  as a whole  or (b)  the  ability  of the
Borrower and its Subsidiaries  taken as a whole to perform its obligations under
the Loan Documents or Material Contracts.

         "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.

         "Material  Domestic  Subsidiary"  means any direct or indirect Domestic
Subsidiary of BREED which is a Material Subsidiary.

         "Material  Foreign  Subsidiary"  means any direct or  indirect  Foreign
Subsidiary of BREED which is a Material Subsidiary.

         "Material  Subsidiary" means any direct or indirect Subsidiary of BREED
which has total assets equal to or in excess of $15,000,000;  provided, however,
that  notwithstanding  the foregoing,  BREED and the Subsidiaries of BREED which
comprise "Material  Subsidiaries"  shall at all times have total assets equal to
or greater than ninety percent (90%) of the  Consolidated  total assets of BREED
and its Subsidiaries.

         "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 within the preceding six years.


                                       14

<PAGE>



         "Net Income" means,  with respect to BREED and its Subsidiaries for any
period,  the Consolidated net income (or loss) of BREED and its Subsidiaries for
such period  determined in accordance with GAAP;  provided,  that there shall be
excluded  from net  income  (or  loss):  (a) the  income (or loss) of any Person
(other than a  Subsidiary  of such Person) in which such Person has an ownership
interest unless received by such Person in a cash  distribution,  (b) the income
(or loss) of any Person accrued prior to the date it became a Subsidiary of such
first Person or is merged into or consolidated  with such first Person,  and (c)
to the  extent  not  included  in  clauses  (a) and  (b)  above,  any  after-tax
extraordinary gains and non-cash losses.

         "Net  Proceeds"  means the  proceeds in cash or other cash  equivalents
received by BREED and its  Subsidiaries in connection with any permitted sale or
disposition  of assets  pursuant  to  Section  9.6(e)  net of (a)  direct  costs
relating to such permitted sale or disposition,  excluding any amount payable to
Affiliates  of BREED and its  Subsidiaries  other than upon fair and  reasonable
arm's  length  terms  approved  by  disinterested  members  of BREED,  (b) sale,
transfer, excise, use and other transaction taxes paid or payable as a result of
such permitted sale or disposition  and (c) any temporary  escrows or retainages
required in  connection  therewith  provided  that all such  amounts  ultimately
returned  to Breed or any of its  Subsidiaries  will  immediately  be applied to
reduce the Total Aggregate Commitment as required herein.

         "Net Worth" means,  with respect to BREED and its  Subsidiaries  at any
date, the sum of (a) Consolidated stockholders' equity, calculated in accordance
with GAAP, and (b) Convertible Preferred Stock.

         "Non-Core  Assets"  shall  mean  any  assets  of  BREED  or  any of its
Subsidiaries not related to steering wheels,  sensors,  electronics,  inflators,
airbag modules or complete airbag sensors.

         "Notes" means the Revolving  Credit Notes,  the Finnish Mark Notes, the
Swingline Note, or any combination  thereof,  made by the applicable Borrower or
Borrowers payable to the order of each Lender; "Note" means any of such Notes.

         "Notice of Account Designation" shall have the meaning assigned thereto
in Section 4.2(f)(i).

                                       15

<PAGE>



         "Notice of Borrowing" shall have the meaning assigned thereto
in Section 2.4(a).

         "Notice of Conversion/Continuation" shall have the meaning
assigned thereto in Section 3.2.

         "Notice of Prepayment" shall have the meaning assigned thereto
in Section 2.5(d).

         "Obligations"  means,  in  each  case,  whether  now  in  existence  or
hereafter  arising:  (a) the  principal of and interest on  (including  interest
accruing after the filing of any bankruptcy or similar  petition) the Loans, (b)
all payment and other  obligations  owing by a Borrower to any Lender  under any
Hedging Agreement  permitted pursuant to Section 9.1, (c) the obligations of the
Guarantor  pursuant  to  Article  X,  and (d) all  other  fees  and  commissions
(including  attorney's  fees),  charges,   indebtedness,   loans,   liabilities,
financial accommodations,  obligations, covenants and duties owing by a Borrower
or the Guarantor to the Lenders or the Administrative Agent, under or in respect
of this Agreement,  any Note or any of the other Loan Documents,  of every kind,
nature and description,  direct or indirect,  absolute or contingent,  due or to
become due, contractual or tortious, liquidated or unliquidated,  and whether or
not evidenced by any note, and whether or not for the payment of money.

         "Officer's  Compliance  Certificate"  shall have the  meaning  assigned
thereto in Section 6.2.

         "Other Taxes" shall have the meaning assigned thereto in
Section 3.13(b).

         "PBGC" means the Pension Benefit Guaranty Corporation or any
successor agency.

         "Pension  Plan"  means  any  Employee   Benefit  Plan,   other  than  a
Multiemployer  Plan,  which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which is  maintained  for  employees of BREED or any
ERISA Affiliates.

         "Permitted Currency" means Dollars or any Alternative Currency, or each
such currency, as the context requires.


                                       16

<PAGE>



         "Person" means an individual,  corporation,  partnership,  association,
trust, business trust, joint venture, joint stock company, pool, syndicate, sole
proprietorship, unincorporated organization, Governmental Authority or any other
form of entity or group thereof.

         "Pledge  Agreement"  means each of the Pledge  Agreements  executed  by
BREED or a Subsidiary thereof, as pledgor, in favor of the Administrative  Agent
for the ratable benefit of the Lenders,  substantially  in the form of Exhibit H
hereto (with any and all necessary  modifications  for each  applicable  foreign
jurisdiction),  as amended,  restated,  supplemented or otherwise  modified from
time to time,  pursuant to which the capital stock of the Subsidiaries listed on
Schedule  1.1(d) and the  capital  stock of those  Subsidiaries  required  to be
pledged  under  Section  7.12 is  pledged  to the  Administrative  Agent for the
ratable benefit of the Lenders.

         "Pounds Sterling or GBP" means, at any time of determination,  the then
official currency of the United Kingdom.

         "Prime  Rate"  means,  at any  time,  the rate of  interest  per  annum
publicly  announced  from time to time by First  Union as its prime  rate.  Each
change in the Prime Rate shall be effective as of the opening of business on the
day such change in the Prime Rate occurs.  The parties hereto  acknowledge  that
the rate announced publicly by First Union as its Prime Rate is an index or base
rate and shall  not  necessarily  be its  lowest  or best  rate  charged  to its
customers or other banks.

         "Register" shall have the meaning assigned thereto in Section
13.10(d).

         "Required Lenders" means, at any date, any combination of holders of at
least fifty-one percent (51%) of the aggregate unpaid principal Dollar Amount of
the Revolving Credit Notes at such date, or if no amounts are outstanding  under
the  Revolving  Credit  Notes,  any  combination  of  Lenders  whose  Commitment
Percentages aggregate at least fifty-one percent (51%).

         "Reserve Percentage" means the maximum daily arithmetic
reserve requirement imposed by the Board of Governors of the
Federal Reserve System (or any successor) under Regulation D on
Eurocurrency liabilities (as defined in Regulation D) for the

                                       17

<PAGE>



applicable  Interest  Period as of the first day of such  Interest  Period,  but
subject to any changes in such reserve requirement becoming effective during the
Interest Period. For purposes of calculating the Reserve Percentage, the reserve
requirement  shall be as set forth in Regulation D without benefit of credit for
prorations, exemptions or offsets under Regulation D, and further without regard
to whether or not any Lender elects to actually fund any Loan or portion thereof
with Eurocurrency  liabilities.  Each calculation by the Administrative Agent of
the LIBOR Rate shall be conclusive and binding for all purposes, absent manifest
error.

         "Revolving  Credit  Loans"  means  the  collective   reference  to  the
revolving credit loans made pursuant to Section 2.1.

         "Revolving Credit Notes" means the separate Revolving Credit Notes made
by the  applicable  Borrower or  Borrowers  payable to the order of each Lender,
substantially  in the form of Exhibit A-1 hereto with respect to each  Borrower,
and any amendments and modifications  thereto, any substitutes therefor, and any
replacements,  restatements, renewals or extension thereof, in whole or in part;
"Revolving Credit Note" means any of such Revolving Credit Notes.

         "Security  Documents"  means the  collective  reference  to the  Pledge
Agreements,  the  Subsidiary  Guaranty  Agreement  and each other  agreement  or
writing  pursuant to which BREED or any Subsidiary  thereof  pledges or grants a
security  interest  in the  Collateral  or any  other  collateral  securing  the
Obligations  or any such Person  guaranties  the payment or  performance  of the
Obligations or any portion thereof.

         "Senior Debt" means all Debt of the Borrower other than
Subordinated Debt.

         "Solvent" means, as to BREED and its Subsidiaries on a particular date,
that any such Person (a) has capital  sufficient  to carry on its  business  and
transactions  and all business and  transactions  in which it is about to engage
and is able to pay its debts as they mature,  (b) owns property  having a value,
both at fair  valuation  and at present fair  saleable  value,  greater than the
amount required to pay its probable liabilities (including  contingencies),  and
(c) does not believe that it will incur debts

                                       18

<PAGE>



or liabilities beyond its ability to pay such debts or liabilities
as they mature.

         "Subordinated Debt" means the collective  reference to Debt on Schedule
5.1(t) hereof designated as Subordinated Debt and any other Debt of Breed or any
of its Subsidiaries subordinated in right and time of payment to the Obligations
on terms  (including,  without  limitation,  terms and  conditions  relating  to
maturity and covenants) satisfactory to the Required Lenders.

         "Subsidiary" means as to any Person,  any corporation,  partner ship or
other entity of which more than fifty percent (50%) of the  outstanding  capital
stock or other  ownership  interests  having  ordinary  voting  power to elect a
majority  of the  board of  directors  or other  managers  of such  corporation,
partnership or other entity is at the time, directly or indirectly,  owned by or
the management is otherwise  controlled by such Person (irrespective of whether,
at the time,  capital  stock of any other  class or classes of such  corporation
shall  have or  might  have  voting  power by  reason  of the  happening  of any
contingency).   Unless  otherwise  qualified,   references  to  "Subsidiary"  or
"Subsidiaries"  herein  shall  refer to those of BREED and its  Subsidiaries.  A
Subsidiary  shall also include any  statutory  business  trust  created to issue
Convertible  Preferred  Stock provided that a majority of the common  securities
thereof are owned, directly or indirectly, by BREED.

         "Subsidiary Guarantor" means each of the Material Domestic Subsidiaries
of BREED listed on Schedule 1.1(e) and each other Material  Domestic  Subsidiary
of BREED which becomes party to the Subsidiary  Guaranty Agreement in accordance
with Section 7.12.

         "Subsidiary  Guaranty  Agreement"  means  the  unconditional   guaranty
agreement  executed by each  Subsidiary  Guarantor party thereto in favor of the
Administrative  Agent  for the  ratable  benefit  of  itself  and  the  Lenders,
substantially  in  the  form  of  Exhibit  I  hereto,   as  amended,   restated,
supplemented or otherwise modified from time to time.

         "Swingline  Commitment" means the lesser of (a) Fifteen Million Dollars
($15,000,000) and (b) the Aggregate Commitment.

         "Swingline Lender" means First Union in its capacity as
swingline lender hereunder.

                                       19

<PAGE>



         "Swingline  Loan" means any swingline loan made by the Swingline Lender
to BREED pursuant to Section 2.3, and all such Loans collectively as the context
requires.

         "Swingline  Note" means the separate  Note made by BREED payable to the
order of the Swingline Lender,  substantially in the form of Exhibit A-3 hereto,
and any amendments and modifications  thereto, any substitutes therefor, and any
replacements, restatements, renewals or extension thereof, in whole or in part.

         "Swingline  Rate"  means a rate to be agreed  upon from time to time by
BREED and the Swingline Lender.

         "Swingline  Termination  Date"  means the  earlier  to occur of (a) the
resignation  of First  Union as the  Administrative  Agent  in  accordance  with
Section 12.9 without a substitute  being  appointed as provided  therein and (b)
the Credit Facility Termination Date.

         "Taxes" shall have the meaning assigned thereto in Section
3.13(a).

         "Termination  Event"  means:  (a) a  "Reportable  Event"  described  in
Section 4043 of ERISA,  or (b) 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 (c) 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 (d) the institution of proceedings to terminate, or the appointment of
a trustee with respect to, any Pension Plan by the PBGC,  or (e) any other event
or condition which 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 (f) the partial or complete  withdrawal of BREED or any ERISA Affiliate
from a  Multiemployer  Plan, or (g) the imposition of a Lien pursuant to Section
412 of the Code or Section  302 of ERISA,  or (h) any event or  condition  which
results  in the  reorganization  or  insolvency  of a  Multiemployer  Plan under
Sections 4241 or 4245 of ERISA,  or (i) any event or condition  which results in
the  termination  of a  Multiemployer  Plan under  Section 4041A of ERISA or the
institution  by PBGC of  proceedings  to  terminate a  Multiemployer  Plan under
Section 4042 of ERISA.


                                       20

<PAGE>



         "Total  Aggregate  Commitment"  means the  collective  reference to the
Aggregate  Commitment  under this  Agreement  and the Aggregate  Commitment  (as
defined in the Five-Year Credit Agreement) under the Five-Year Credit Agreement.

         "Trust  Preferred  Guarantee" means a guarantee by BREED of payments on
Convertible  Preferred  Stock but only to the  extent  the  Subsidiary  that has
issued such Convertible Preferred Stock has funds available therefor,  and which
guarantee is subordinated to the Obligations on terms and conditions  acceptable
to the Required Lenders.

         "UCC" means the Uniform Commercial Code as in effect in the
State of North Carolina.

         "United States" means the United States of America.

         "Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all of
the shares of capital stock or other ownership  interests of which are, directly
or  indirectly,  owned  or  controlled  by  BREED  and/or  one  or  more  of its
Wholly-Owned Subsidiaries.

         SECTION 1.2 General.  Unless otherwise  specified,  a reference in this
Agreement  to  a  particular  section,  subsection,  Schedule  or  Exhibit  is a
reference to that section,  subsection,  Schedule or Exhibit of this  Agreement.
Terms defined in this Agreement and in the Five-Year  Credit  Agreement shall be
construed  consistently,  and  no  term  defined  herein  shall  be  limited  or
restricted by any similar definition in the Five-Year Credit Agreement nor shall
any such term limit or restrict any similar  definition in the Five-Year  Credit
Agreement. Wherever from the context it appears appropriate, each term stated in
either the  singular or plural  shall  include  the  singular  and  plural,  and
pronouns  stated in the  masculine,  feminine or neuter gender shall include the
masculine, the feminine and the neuter. Any reference herein to "Charlotte time"
shall refer to the applicable time of day in Charlotte, North Carolina.

         SECTION 1.3       Other Definitions and Provisions.

         (a)      Use of Capitalized Terms.  Unless otherwise defined
therein, all capitalized terms defined in this Agreement shall have
the defined meanings when used in this Agreement, the Notes and the

                                       21

<PAGE>



other  Loan  Documents  or any  certificate,  report or other  document  made or
delivered pursuant to this Agreement.

         (b)  Miscellaneous.  The words  "hereof",  "herein" and "hereunder" and
words  of  similar  import  when  used in this  Agreement  shall  refer  to this
Agreement as a whole and not to any particular provision of this Agreement.

         (c)  Knowledge of Borrowers.  The words "to the best of the  Borrowers'
knowledge",  "to the best of BREED's  knowledge",  "to the best knowledge of the
Borrowers and their  Subsidiaries" and words of similar import when used in this
Agreement  shall mean to the best knowledge and belief of the applicable  Person
after reasonable and due  investigation  and review of all matters  pertinent to
the subject matter thereof.


                                   ARTICLE II

                                 CREDIT FACILITY

         SECTION 2.1 Revolving Credit Loans. Subject to the terms and conditions
of this Agreement,  each Lender  severally agrees to make Revolving Credit Loans
in a Permitted  Currency (other than Finnish Marks,  Loans with respect to which
shall only be made by the Finnish Mark Lenders in  accordance  with the terms of
Section 2.2) to the applicable  Borrower or Borrowers from time to time from the
Closing Date through the Credit  Facility  Termination  Date as requested by the
applicable  Borrower or Borrowers in  accordance  with the terms of Section 2.4;
provided,  that, based upon the Dollar Amount of all outstanding  Loans, (a) the
Dollar Amount of the aggregate  principal  amount of all  outstanding  Revolving
Credit Loans (after giving effect to any amount  requested) shall not exceed the
Aggregate  Commitment  less  the  sum  of the  Dollar  Amount  of the  aggregate
principal  amount of all  outstanding  Finnish  Mark  Loans  less the sum of the
Dollar Amount of the aggregate  principal  amount of all  outstanding  Swingline
Loans, (b) the sum of (i) the Dollar Amount of the aggregate principal amount of
all outstanding  Revolving  Credit Loans made in Alternative  Currencies  (other
than Finnish Marks) and (ii) the Dollar Amount of the aggregate principal amount
of all outstanding Finnish Mark Loans shall not exceed the Alternative  Currency
Commitment  and (c) the Dollar Amount of the aggregate  principal  amount of all
outstanding

                                       22

<PAGE>



Revolving  Credit Loans from any Lender to the  Borrowers  shall not at any time
exceed such Lender's Commitment. Each Revolving Credit Loan by a Lender shall be
in a principal amount equal to such Lender's Commitment Percentage of the Dollar
Amount of the aggregate  principal amount of Revolving Credit Loans requested on
such  occasion.  Revolving  Credit Loans to be made in an  Alternative  Currency
(other than Finnish Marks) shall be funded in an amount equal to the Alternative
Currency Amount of such Revolving  Credit Loan.  Revolving Credit Loans to BREED
may be denominated in Dollars or in the applicable  Alternative  Currency (other
than Finnish  Marks) as set forth on Schedule 2.1 and Revolving  Credit Loans to
each other A/C  Borrower  shall be  denominated  in the  applicable  Alternative
Currency (other than Finnish Marks) as set forth on Schedule 2.1. Subject to the
terms and  conditions  hereof,  the  Borrowers  may borrow,  repay and  reborrow
Revolving Credit Loans hereunder until the Credit Facility Termination Date.

         SECTION 2.2       Finnish Mark Loans.

         (a)  Availability.   Subject  to  the  terms  and  conditions  of  this
Agreement,  the Finnish Mark Lenders  severally agree to make Finnish Mark Loans
to the  applicable  A/C  Borrower  or A/C  Borrowers  from time to time from the
Closing Date through the Credit  Facility  Termination  Date as requested by the
applicable A/C Borrower or A/C Borrowers in accordance with the terms of Section
2.4; provided,  that, based upon the Dollar Amount of all outstanding Loans, (a)
the Dollar Amount of the aggregate  principal amount of all outstanding  Finnish
Mark Loans (after  giving effect to any amount  requested)  shall not exceed the
lesser of (i) the Aggregate  Commitment less the sum of the Dollar Amount of the
aggregate  principal  amount of all outstanding  Revolving Credit Loans less the
sum of the Dollar Amount of the aggregate  principal  amount of all  outstanding
Swingline Loans and (ii) the Finnish Mark Aggregate  Commitment,  (b) the sum of
(i) the  Dollar  Amount of the  aggregate  principal  amount of all  outstanding
Finnish Mark Loans and (ii) the Dollar Amount of the aggregate  principal amount
of all  outstanding  Alternative  Currency Loans made in Alternative  Currencies
(other than Finnish Marks) shall not exceed the Alternative  Currency Commitment
and (c) the Dollar Amount of the aggregate  principal  amount of all outstanding
Finnish Mark Loans from any Finnish Mark Lender to the A/C  Borrowers  shall not
at any time exceed such Lender's Finnish Mark Commitment. Each Finnish Mark Loan
by a Finnish Mark Lender shall be in a principal amount equal to such

                                       23

<PAGE>



Finnish  Mark  Lender's  Commitment  Percentage  of  the  Dollar  Amount  of the
aggregate  principal  amount of Finnish Mark Loans  requested on such  occasion.
Finnish  Mark  Loans  shall be  funded  in an  amount  equal to the  Alternative
Currency  Amount of such Finnish Mark Loan.  Subject to the terms and conditions
hereof,  the  Borrowers  may  borrow,  repay and  reborrow  Finnish  Mark  Loans
hereunder until the Credit Facility Termination Date.

         (b)      Refunding of Finnish Mark Loans.

                  (i) Upon the occurrence and during the continuance of an Event
of Default,  each Finnish Mark Loan may, at the discretion of the Administrative
Agent,  be  converted  immediately  to a Base Rate Loan funded in Dollars by the
Lenders in an amount  equal to the Dollar  Amount of such  Finnish Mark Loan for
the remainder of the Interest Period  applicable to such Finnish Mark Loan. Such
Base Rate Loan shall  thereafter be reflected as a Revolving  Credit Loan of the
Lenders on the books and records of the Administrative  Agent. Each Lender shall
fund its respective  Commitment Percentage of such Base Rate Loan as required to
repay  Finnish  Mark Loans  outstanding  to the Finnish  Mark  Lenders upon such
demand by the Administrative  Agent in no event later than 2:00 p.m.  (Charlotte
time) on the next succeeding Business Day after such demand is made. No Lender's
obligation to fund its  respective  Commitment  Percentage of any Base Rate Loan
required to repay such Finnish Mark Loan shall be affected by any other Lender's
failure to fund its Commitment  Percentage of such Base Rate Loan, nor shall any
Lender's  Commitment  Percentage be increased as a result of any such failure of
any other Lender to fund its Commitment Percentage of such Base Rate Loan.

             (ii) The Borrowers shall pay to the  Administrative  Agent, for the
account of the Finnish Mark  Lenders,  on demand the amount of such Finnish Mark
Loans to the  extent  that the  Lenders  fail to refund in full the  outstanding
Finnish  Mark Loans  requested  or required to be  refunded.  In  addition,  the
Borrowers hereby authorize the  Administrative  Agent or any Finnish Mark Lender
to charge any account maintained by any Borrower with the  Administrative  Agent
or any  Finnish  Mark  Lender (up to the amount  available  therein) in order to
immediately  pay the Finnish  Mark Lenders the amount of such Finnish Mark Loans
to the extent  amounts  received from the Lenders are not sufficient to repay in
full the outstanding Finnish Mark Loans requested or required to be

                                       24

<PAGE>



refunded.  If any portion of any such amount  paid to the Finnish  Mark  Lenders
shall be  recovered  by or on behalf of the  Borrowers  from the  Administrative
Agent or the Finnish Mark Lenders in bankruptcy  or  otherwise,  the loss of the
amount so recovered  shall be ratably shared among all the Lenders in accordance
with their respective Commitment Percentages.

            (iii) Each Lender  acknowledges  and agrees that its  obligation  to
refund  Finnish Mark Loans in  accordance  with the terms of this Section 2.2 is
absolute  and  unconditional  and  shall  not be  affected  by any  circumstance
whatsoever;  provided, that if prior to the refunding of any outstanding Finnish
Mark Loans pursuant to this Section 2.2, one of the events  described in Section
11.1(j) or (k) shall have occurred, each Lender will, on the date the applicable
Revolving  Credit Loan would have been made to refund such  Finnish  Mark Loans,
purchase an  undivided  participating  interest in such Finnish Mark Loans in an
amount  equal to its  Commitment  Percentage  of the  aggregate  amount  of such
Finnish Mark Loan. Each Lender will immediately  transfer to the  Administrative
Agent,  for the account of the Finnish Mark Lenders,  in  immediately  available
funds in Dollars,  the amount of its  participation and upon receipt thereof the
Administrative  Agent will deliver to such Lender a certificate  evidencing such
partici  pation  dated the date of receipt  of such  funds and for such  amount.
Whenever,  at any time  after the  Administrative  Agent has  received  from any
Lender such Lender's  participating interest in the refunded Finnish Mark Loans,
the  Administrative  Agent or any Finnish  Mark Lender  receives  any payment on
account  thereof,  the  Administrative  Agent or such Finnish  Mark  Lender,  as
applicable,  will distribute to such Lender its  participating  interest in such
amount (appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender's participating interest was outstanding
and funded).

         SECTION 2.3       Swingline Loans.

         (a)  Availability.   Subject  to  the  terms  and  conditions  of  this
Agreement,  the Swingline  Lender agrees to make  Swingline  Loans to BREED from
time to time from the Closing  Date  through  the  Swingline  Termination  Date;
provided,  that (i) all Swingline Loans shall be denominated in Dollars and (ii)
the aggregate principal amount of all outstanding  Swingline Loans (after giving
effect to any amount requested) shall not exceed the lesser of (A) the

                                       25

<PAGE>



Aggregate  Commitment  less  the  sum  of the  Dollar  Amount  of the  aggregate
principal  amount of all outstanding  Revolving Credit Loans less the sum of the
Dollar Amount of the aggregate  principal amount of all outstanding Finnish Mark
Loans and (B) the Swingline Commitment.

         (b)      Refunding.

                  (i) Swingline Loans shall be refunded by the Lenders on demand
to the Swingline Lender and at the sole discretion of the Swingline Lender. Such
refundings  shall be made by the  Lenders in  accordance  with their  respective
Commitment  Percentages  and shall  thereafter be reflected as Revolving  Credit
Loans of the Lenders on the books and records of the Administrative  Agent. Each
Lender shall fund its respective Commitment Percentage of Revolving Credit Loans
as required to repay  Swingline Loans  outstanding to the Swingline  Lender upon
demand by the Swingline  Lender but in no event later than 2:00 p.m.  (Charlotte
time) on the next succeeding Business Day after such demand is made. No Lender's
obligation to fund its  respective  Commitment  Percentage  of a Swingline  Loan
shall  be  affected  by any  other  Lender's  failure  to  fund  its  Commitment
Percentage of a Swingline Loan, nor shall any Lender's Commitment  Percentage be
increased  as a result  of any such  failure  of any  other  Lender  to fund its
Commitment Percentage of a Swingline Loan.

             (ii) BREED shall pay to the  Swingline  Lender on demand the amount
of such Swingline Loans to the extent that the Lenders fail to repay in full the
outstanding  Swingline Loans requested or required to be refunded.  In addition,
BREED  hereby  authorizes  the  Administrative   Agent  to  charge  any  account
maintained  by BREED  with the  Swingline  Lender  (up to the  amount  available
therein) in order to  immediately  pay the  Swingline  Lender the amount of such
Swingline  Loans  to the  extent  amounts  received  from  the  Lenders  are not
sufficient  to  repay in full  the  outstanding  Swingline  Loans  requested  or
required to be refunded. If any portion of any such amount paid to the Swingline
Lender shall be recovered by or on behalf of BREED from the Swingline  Lender in
bankruptcy  or otherwise,  the loss of the amount so recovered  shall be ratably
shared  among all the Lenders in  accordance  with their  respective  Commitment
Percentages.

            (iii) Each Lender acknowledges and agrees that its
obligation to refund Swingline Loans in accordance with the terms

                                       26

<PAGE>



of this Section 2.3 is absolute and  unconditional  and shall not be affected by
any  circumstance  whatsoever;  provided,  that if prior to the refunding of any
outstanding  Swingline  Loans  pursuant to this  Section  2.3, one of the events
described in Section  11.1(j) or (k) shall have  occurred,  each Lender will, on
the date the  applicable  Revolving  Credit  Loan would have been made to refund
such  Swingline  Loan,  purchase  an  undivided  participating  interest in such
Swingline Loan in an amount equal to its Commitment  Percentage of the aggregate
amount of such  Swingline  Loan.  Each Lender will  immediately  transfer to the
Swingline   Lender,   in  immediately   available   funds,  the  amount  of  its
participation and upon receipt thereof the Swingline Lender will deliver to such
Lender a certificate  evidencing such participation dated the date of receipt of
such funds and for such amount. Whenever, at any time after the Swingline Lender
has received from any Lender such Lender's participating interest in a Swingline
Loan,  the  Swingline  Lender  receives  any  payment  on account  thereof,  the
Swingline  Lender will distribute to such Lender its  participating  interest in
such  amount  (appropriately  adjusted,  in the case of  interest  payments,  to
reflect the period of time during which such Lender's participating interest was
outstanding and funded).

         SECTION 2.4       Procedure for Advances of Revolving Credit
Loans, Finnish Mark Loans and Swingline Loans.

         (a) Requests for Borrowing.  The applicable Borrower or Borrowers shall
give the  Administrative  Agent  irrevocable  prior  written  notice in the form
attached hereto as Exhibit B (a "Notice of Borrowing") not later than 12:00 noon
(Charlotte  time) (i) on the same Business Day as each Swingline  Loan,  (ii) at
least one  Business  Day before  each Base Rate Loan,  (iii) at least  three (3)
Business  Days  before each LIBOR Rate Loan  denominated  in Dollars and (iv) at
least four (4)  Business  Days  before  each LIBOR Rate Loan  denominated  in an
Alternative  Currency,  of its or their intention to borrow,  specifying (A) the
date of such borrowing,  which shall be a Business Day, (B) whether such Loan is
to be a Revolving  Credit Loan,  Finnish Mark Loan or a Swingline  Loan,  (C) if
such Loan is a Revolving Credit Loan,  whether such Loan shall be denominated in
Dollars or in an Alternative  Currency,  (D) if denominated in Dollars,  whether
the Loans are to be LIBOR Rate Loans or Base Rate Loans,  (E) the amount of such
borrowing,  which shall be (u) with respect to LIBOR Rate Loans  denominated  in
Dollars in an aggregate principal amount of $10,000,000 or a whole

                                       27

<PAGE>



multiple of $1,000,000 in excess  thereof,  (v) with respect to LIBOR Rate Loans
denominated  in  an  Alternative  Currency  (other  than  Finnish  Marks)  in an
aggregate  principal  Alternative  Currency  Amount  of  $10,000,000  or a whole
multiple of $1,000,000 in excess  thereof,  (x) with respect to LIBOR Rate Loans
denominated  in Finnish  Marks in an aggregate  principal  Alternative  Currency
Amount of $2,000,000 or a whole multiple of $100,000 in excess thereof, (y) with
respect to Base Rate Loans in an aggregate  principal  amount of $1,000,000 or a
whole multiple of $500,000 in excess thereof,  and (z) with respect to Swingline
Loans in an aggregate  principal  amount of $100,000 or a whole multiple thereof
and (F) in the case of a LIBOR Rate Loan,  the duration of the  Interest  Period
applicable thereto.  Notices received after 12:00 noon (Charlotte time) shall be
deemed  received  on the next  Business  Day.  The  Administrative  Agent  shall
promptly  notify (i) the Lenders of each Notice of  Borrowing  with respect to a
Revolving  Credit  Loan and (ii) the  Finnish  Mark  Lenders  of each  Notice of
Borrowing with respect to a Finnish Mark Loan.

         (b) Disbursement of Revolving  Credit Loans  Denominated in Dollars and
Swingline  Loans.  Not later  than 2:00 p.m.  (Charlotte  time) on the  proposed
borrowing date for any Loan  denominated  in Dollars,  (i) each Lender will make
available to the  Administrative  Agent, for the account of BREED, at the office
of the  Administrative  Agent in Dollars in funds  immediately  available to the
Administrative  Agent,  such  Lender's  Commitment  Percentage  of the requested
Revolving  Credit Loan to be made on such  borrowing date and (ii) the Swingline
Lender  will make  available  to the  Administrative  Agent,  for the account of
BREED, at the office of the Administrative Agent in Dollars in funds immediately
available to the  Administrative  Agent, the Swingline Loans to be made to BREED
on such borrowing date. BREED hereby  irrevocably  authorizes the Administrative
Agent to disburse  the  proceeds of each  borrowing  requested  pursuant to this
Section 2.4 in  immediately  available  funds by  crediting  such  proceeds to a
deposit  account of BREED  maintained with the  Administrative  Agent or by wire
transfer  from such  deposit  account to another  account as may be requested by
BREED by prior written notice to the  Administrative  Agent.  Subject to Section
3.7 hereof,  the  Administrative  Agent shall not be  obligated  to disburse the
portion of the  proceeds of any Loan  requested  pursuant to this Section 2.4 to
the extent that any Lender has not made  available to the  Administrative  Agent
its Commitment Percentage of such Loan. Revolving Credit Loans to be

                                       28

<PAGE>



made for the purpose of refunding  Swingline  Loans shall be made by the Lenders
as provided in Section 2.3(b) hereof.

         (c) Disbursement of Alternative Currency Loans (other than Finnish Mark
Loans).  Not later  than  10:00  a.m.  (the time of the  Administrative  Agent's
Correspondent) on the proposed borrowing date for any Alternative  Currency Loan
(other  than  Finnish  Mark  Loans),  each  Lender  will make  available  to the
Administrative  Agent for the  account of the  applicable  A/C  Borrower  or A/C
Borrowers  at the  office of the  Administrative  Agent's  Correspondent  in the
requested   Alternative   Currency  in  funds   immediately   available  to  the
Administrative  Agent,  such  Lender's  Commitment  Percentage  of the requested
borrowing to be  denominated  in such  Alternative  Currency.  The A/C Borrowers
hereby irrevocably  authorize the Administrative  Agent to disburse the proceeds
of  each  borrowing  requested  pursuant  to  this  Section  2.4 in  immediately
available  funds by crediting  such proceeds to an account of the applicable A/C
Borrower  maintained with the  Administrative  Agent's  Correspondent or by wire
transfer  from such  deposit  account to another  account as may be requested by
such A/C Borrower by prior written notice to the Administrative  Agent.  Subject
to Section 3.7  hereof,  the  Administrative  Agent  shall not be  obligated  to
disburse  the  portion of the  proceeds of any Loan  requested  pursuant to this
Section  2.4 to the  extent  that  any  Lender  has not  made  available  to the
Administrative Agent its Commitment Percentage of such Loan.

         (d)  Disbursement of Finnish Mark Loans. Not later than 10:00 a.m. (the
time of the Administrative Agent's Correspondent) on the proposed borrowing date
for any Finnish Mark Loan,  each Finnish Mark Lender will make  available to the
Administrative  Agent for the  account of the  applicable  A/C  Borrower  or A/C
Borrowers at the office of the Administrative  Agent's  Correspondent in Finnish
Marks in funds immediately  available to the Administrative  Agent, such Finnish
Mark Lender's Commitment Percentage of the requested borrowing to be denominated
in  Finnish  Marks.   The  A/C  Borrowers  hereby   irrevocably   authorize  the
Administrative  Agent to  disburse  the  proceeds  of each  borrowing  requested
pursuant to this Section 2.4 in  immediately  available  funds by crediting such
proceeds  to an account  of the  applicable  A/C  Borrower  maintained  with the
Administrative  Agent's  Correspondent  or by wire  transfer  from such  deposit
account to another  account as may be  requested  by such A/C  Borrower by prior
written notice to the Administrative  Agent.  Subject to Section 3.7 hereof, the
Administrative Agent shall not

                                       29

<PAGE>



be  obligated  to disburse  the portion of the proceeds of any Finnish Mark Loan
requested  pursuant to this  Section  2.4 to the extent  that any  Finnish  Mark
Lender  has not  made  available  to the  Administrative  Agent  its  Commitment
Percentage of such Finnish Mark
Loan.

         SECTION 2.5       Repayment of Revolving Credit Loans, Finnish
Mark Loans and Swingline Loans.

         (a) Repayment. The applicable Borrower or Borrowers shall repay (i) the
principal Dollar Amount of all outstanding Revolving Credit Loans in full in the
currency in which each such Revolving Credit Loan was initially funded, together
with all accrued but unpaid interest thereon, on the Credit Facility Termination
Date, (ii) the principal Dollar Amount of all outstanding  Finnish Mark Loans in
full in Finnish Marks, together with all accrued but unpaid interest thereon, on
the Credit  Facility  Termination  Date (or in accordance with Section 2.2(b) if
earlier) and (iii) the principal  amount of all  outstanding  Swingline Loans in
full,  together with all accrued but unpaid interest thereon, in accordance with
Section 2.3(b).

         (b)      Mandatory Repayment of Excess Loans.

              (i)  Aggregate  Commitment.  If at any time (as  determined by the
Administrative  Agent  under  Section  2.5(b)(iv)),  and  for  any  reason,  the
aggregate  principal  Dollar Amount of all outstanding  Revolving  Credit Loans,
Finnish  Mark Loans and  Swingline  Loans  exceeds one hundred and five  percent
(105%) of the Aggregate  Commitment,  the applicable Borrower or Borrowers shall
(A)  first,  if  (and  to  the  extent)  necessary  to  eliminate  such  excess,
immediately repay outstanding Revolving Credit Loans that are Base Rate Loans by
the Dollar  Amount of such  excess in the  currency  in which each such Loan was
initially funded (and/or reduce any pending request for a Base Rate Loan on such
day by the Dollar Amount of such excess) and (B) second,  if (and to the extent)
necessary to eliminate  such excess,  immediately  repay LIBOR Rate Loans in the
currency in which each such Loan was initially funded (and/or reduce any pending
requests for a borrowing or  continuation  or conversion of such Loans submitted
in  respect of such  Loans on such day) by the  Dollar  Amount of any  remaining
excess.


                                       30

<PAGE>



             (ii) Excess  Finnish Mark Loans.  If at any time and for any reason
the outstanding  principal amount of all outstanding  Finnish Mark Loans exceeds
the  lesser  of (A) the  Aggregate  Commitment  less the sum of the  outstanding
principal  Dollar  Amount  of all  Revolving  Credit  Loans  less the sum of the
outstanding  principal  Dollar Amount of all Swingline Loans and (B) the Finnish
Mark Aggregate  Commitment,  such excess shall be immediately  repaid in Finnish
Marks by the  applicable  A/C Borrower or A/C  Borrowers  to the  Administrative
Agent for the account of the Finnish Mark Lenders.

            (iii) Excess  Swingline Loans. If at any time and for any reason the
outstanding  principal  amount of all  outstanding  Swingline  Loans exceeds the
lesser of (A) the Aggregate Commitment less the sum of the outstanding principal
Dollar  Amount of all  Revolving  Credit  Loans less the sum of the  outstanding
principal  Dollar  Amount  of all  Finnish  Mark  Loans  and (B)  the  Swingline
Commitment,   such  excess  shall  be   immediately   repaid  by  BREED  to  the
Administrative Agent for the account of the Swingline Lender.

             (iv) Compliance and Payments.  Each Borrower's compliance with this
Section 2.5(b) shall be tested from time to time by the Administrative  Agent at
its sole  discretion,  but in any event on each day an  interest  payment is due
under  Section  3.1(e).  All payments  pursuant to this Section  2.5(b) shall be
accompanied by any amount required to be repaid under Section 3.11.

         (c)      Other Mandatory Repayments.  The Borrowers shall repay
the Loans in accordance with Section 2.7 in connection with any
permanent reduction in the Aggregate Commitment.

         (d) Optional Repayments.  Any Borrower may at any time and from time to
time repay the Loans made  thereto in the  currency  in which each such Loan was
initially  funded,  in whole or in  part,  with  respect  to  LIBOR  Rate  Loans
denominated  in  an  Alternative  Currency,   upon  irrevocable  notice  to  the
Administrative  Agent  made no later than  12:00  noon  (Charlotte  time) on the
Business Day that is at least four (4) Business Days' prior to such  prepayment,
upon at least three (3) Business Days' irrevocable  notice to the Administrative
Agent with respect to LIBOR Rate Loans denominated in Dollars,  one (1) Business
Day's irrevocable  notice with respect to Base Rate Loans, and same Business Day
irrevocable  notice with respect to Swingline Loans, in the form attached hereto
as Exhibit

                                       31

<PAGE>



C (a "Notice of  Prepayment"),  specifying  the date and amount of repayment and
whether  the  repayment  is of LIBOR Rate Loans  denominated  in an  Alternative
Currency (including,  without limitation,  Finnish Mark Loans), LIBOR Rate Loans
denominated  in Dollars,  Base Rate Loans,  Swingline  Loans,  or a  combination
thereof,  and, if of a combination  thereof,  the amount allocable to each. Upon
receipt of such notice,  the  Administrative  Agent shall  promptly  notify each
Lender.  If any such notice is given,  the amount specified in such notice shall
be due and  payable  on the date set forth in such  notice.  Partial  repayments
shall be in an aggregate amount of $1,000,000 or a whole multiple of $500,000 in
excess thereof with respect to Base Rate Loans,  $10,000,000 or a whole multiple
of  $1,000,000  in excess  thereof  with  respect  to LIBOR  Rate Loans (or with
respect to  Alternative  Currency  Loans  other than  Finnish  Mark  Loans,  the
Alternative  Currency  Amount  thereof),  the  Alternative  Currency  Amount  of
$2,000,000  or a whole  multiple of $100,000 in excess  thereof  with respect to
Finnish Mark Loans,  and a whole  multiple of $100,000 with respect to Swingline
Loans.  Each such repayment  shall be  accompanied by any amount  required to be
paid pursuant to Section 3.11 hereof.

         (e) Limitation on Repayment of LIBOR Rate Loans.  No Borrower may repay
any  LIBOR  Rate  Loan  (including,  without  limitation,  any  LIBOR  Rate Loan
denominated in an Alternative Currency) on any day other than on the last day of
the Interest Period  applicable  thereto unless such repayment is accompanied by
any amount required to be paid pursuant to Section 3.11 hereof.

         SECTION 2.6       Notes.

         (a) Revolving  Credit Notes.  Each Lender's  Revolving Credit Loans and
the  obligation of each Borrower to repay such  Revolving  Credit Loans shall be
evidenced by a Revolving  Credit Note executed by each  Borrower  payable to the
order of such Lender  representing  each such Borrower's  obligation to pay such
Lender's  Commitment or, if less, the aggregate  unpaid  principal amount of all
Revolving  Credit  Loans  made and to be made by such  Lender  to such  Borrower
hereunder,  plus  interest  and all other fees,  charges  and other  amounts due
thereon.  Each  Revolving  Credit  Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable  interest
rate per annum specified in Section 3.1.


                                       32

<PAGE>



         (b) Finnish Mark Notes.  Each Finnish Mark Lender's  Finnish Mark Loans
and the  obligation of each  applicable  A/C Borrower to repay such Finnish Mark
Loans shall be evidenced  by a Finnish  Mark Note  executed by such A/C Borrower
payable  to the  order  of  such  Finnish  Mark  Lender  representing  such  A/C
Borrower's  obligation to pay such Finnish Mark Lender's Finnish Mark Commitment
or, if less,  the aggregate  unpaid  principal  amount of all Finnish Mark Loans
made and to be made by such Finnish Mark Lender to such A/C Borrower  hereunder,
plus interest and all other fees,  charges and other  amounts due thereon.  Each
Finnish Mark Note shall be dated the date hereof and shall bear  interest on the
unpaid  principal  amount  thereof  at the  applicable  interest  rate per annum
specified in Section 3.1.

         (c) Swingline Notes. The Swingline Loans and the obligation of BREED to
repay such Swingline  Loans shall be evidenced by the Swingline Note executed by
BREED  payable  to  the  order  of the  Swingline  Lender  representing  BREED's
obligation to pay the Swingline  Commitment  or, if less,  the aggregate  unpaid
principal  amount of all  Swingline  Loans made and to be made by the  Swingline
Lender to BREED hereunder,  plus interest and all other fees,  charges and other
amounts due thereon. The Swingline Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable  interest
rate specified in Section 3.1.

         SECTION 2.7       Permanent Reduction of the Aggregate
Commitment.

         (a) Voluntary Reduction. The Borrowers shall have the right at any time
and from time to time,  upon at least  five (5)  Business  Days'  prior  written
notice to the Administrative  Agent, to permanently reduce, in whole at any time
or in part  from  time to  time,  without  premium  or  penalty,  the  Aggregate
Commitment in an aggregate  principal  amount not less than  $10,000,000  or any
whole multiple of $1,000,000 in excess thereof. To the extent that the Aggregate
Commitment is reduced to an amount below the Alternative  Currency Commitment or
the Finnish Mark Aggregate Commitment,  there shall be a corresponding permanent
reduction of the Alternative  Currency  Commitment or the Finnish Mark Aggregate
Commitment,  as  applicable,  to the amount of the  Aggregate  Commitment  as so
reduced.


                                       33

<PAGE>



         (b)      Mandatory Permanent Reductions.

                  (i) Incurrence of Debt. The Total Aggregate  Commitment  shall
         be permanently reduced by an amount equal to one hundred percent (100%)
         of the amount of any Debt  incurred  pursuant to Section  9.1(j),  such
         application to the Aggregate Commitment under this Agreement and/or the
         Five-Year  Credit  Agreement to be determined by the Borrowers in their
         sole  discretion.  Such  reduction  shall  be made  promptly  upon  the
         incurrence of such Debt.

             (ii)  Sale of  Assets.  The  Total  Aggregate  Commitment  shall be
         permanently  reduced by an amount equal to fifty  percent  (50%) of the
         aggregate Net Proceeds from any sale or disposition of assets permitted
         pursuant  to  Section  9.6(e),   such   application  to  the  Aggregate
         Commitment  under this Agreement  and/or the Five-Year Credit Agreement
         to be  determined  by the  Borrowers  in their  sole  discretion.  Such
         reduction shall be made promptly upon the consummation of any such sale
         or disposition.

         (c) Additional Payments. Each permanent reduction permitted or required
pursuant to this  Section  2.7 shall be  accompanied  by a payment of  principal
sufficient to reduce the aggregate  principal  Dollar Amount of the  outstanding
Loans of the Lenders  after such  reduction to the  Aggregate  Commitment  as so
reduced.  All prepayments required by this Section 2.7(b) shall be applied first
to the aggregate  outstanding principal amount of Swingline Loans, second to the
aggregate  outstanding  principal  amount of Finnish Mark Loans and third to the
aggregate  outstanding principal amount of Revolving Credit Loans. Any permanent
reduction of the Aggregate Commitment to zero shall be accompanied by payment of
all outstanding Obligations and, if such reduction is permanent,  termination of
the  Commitments  and the Credit  Facility.  If the  reduction of the  Aggregate
Commitment  requires the repayment of any LIBOR Rate Loan, such reduction may be
made only on the last day of the then current Interest Period applicable thereto
unless such repayment is accompanied by any amount  required to be paid pursuant
to Section 3.11 hereof.

         SECTION 2.8 Termination of Credit  Facility.  The Credit Facility shall
terminate  on the  earliest of (a) April __,  1998,  (b) the date of a permanent
reduction of the Aggregate Commitment in

                                       34

<PAGE>



whole  pursuant  to  Section  2.7(a)  or  Section  2.7(b),  and (c) the  date of
termination  by the  Administrative  Agent on behalf of the Lenders  pursuant to
Section  11.2(a);  provided  that the Borrowers may request on an annual basis a
364-day  extension  of the date set forth in clause (a) above by  providing  the
Administrative  Agent and each of the  Lenders  with a written  request for such
extension  not more than  ninety  (90) days and not fewer  than  sixty (60) days
prior to the then existing Credit Facility  Termination  Date;  provided further
that each such extension  shall be subject to the  satisfaction by the Borrowers
of each of the conditions  set forth in Section 4.3 on the then existing  Credit
Facility  Termination  Date. Each of the Lenders shall provide written notice to
the Administrative Agent on or prior to the thirtieth (30th) day before the then
existing Credit Facility  Termination  Date of its desire to extend or not to so
extend such date.  No Lender  shall be under any  obligation  or  commitment  to
extend such date and no such  obligation or commitment on the part of any Lender
shall be inferred from the  provisions of this Section 2.8.  Failure on the part
of any Lender to respond to such  request by the  required  date set forth above
shall be deemed to be a denial of such  request by such  Lender.  The  requested
extension shall not be granted unless Lenders holding Commitments aggregating at
least seventy-five  percent (75%) of the Aggregate Commitment at such time shall
have  consented in writing to such  extension.  If Lenders  holding  Commitments
aggregating  less than one hundred  percent  (100%) but equal to or greater than
seventy-five   percent  (75%)  of  the  Aggregate  Commitment  consent  to  such
extension, the Borrowers may elect by written notice to the Administrative Agent
and Lenders to (i) continue the Credit Facility for such additional  period with
an Aggregate  Commitment equal to the then effective  Aggregate  Commitment less
the total  Commitments  of Lenders who have not  consented  to such an extension
("Non-Consenting  Lenders") and with a Finnish Mark Commitment equal to the then
effective Finnish Mark Commitment less the total of the individual  Finnish Mark
Commitments  of  Non-Consenting  Lenders  who are Finnish  Mark  Lenders or (ii)
require any such  Non-Consenting  Lender to transfer and assign without recourse
(in  accordance  with the  provisions of Section 13.10) its Commitment and other
interests,  rights and obligations  under this Agreement to an Eligible Assignee
(who consents thereto),  which shall assume such obligations upon its consent to
assume such  obligations;  provided that (A) no such  assignment  shall conflict
with any Applicable Law, (B) such assignment shall be at the cost and expense of
the Borrowers and (C) the purchase price to be paid to such NonConsenting Lender
shall be an amount  equal to the  outstanding  principal  amount of the Loans of
such Non-Consenting  Lender plus all interest accrued and unpaid thereon and all
other amounts owing to such  Non-Consenting  Lender thereon.  The Administrative
Agent shall provide prompt notice to the Borrowers and the Lenders in writing as
to whether the requested extension has been granted and, if applicable, the list
of Non-Consenting  Lenders. If the extension is granted,  upon the then existing
Credit Facility  Termination  Date, the date set forth in clause (a) above shall
be extended to the date which is 364 days from the then  current  date set forth
therein.

         SECTION 2.9 Use of Proceeds.  The  Borrowers  shall use the proceeds of
the Loans (a) to finance  investments  and  acquisitions  permitted by the terms
hereof,  (b) for  working  capital  and general  corporate  requirements  of the
Borrowers,  including  the  payment of certain  fees and  expenses  incurred  in
connection  with  the  transactions  contemplated  hereby  and (c) to  refinance
existing debt.

         SECTION 2.10 Nature of  Obligations.  Except as otherwise  set forth in
the other Loan  Documents,  the  obligations of the Borrowers  under the Note or
Notes  executed  thereby and the other  Obligations  of the  Borrowers  shall be
several and not joint and several among the Borrowers.

         SECTION  2.11  Security.  The  Obligations  of each Loan Party shall be
secured in accordance with the terms of the applicable Security Documents.


                                   ARTICLE III

                            GENERAL LOAN PROVISIONS

         SECTION 3.1       Interest.

         (a) Interest  Rate Options.  Subject to the  provisions of this Section
3.1, at the election of the applicable  Borrower or Borrowers,  Revolving Credit
Loans  denominated  in Dollars shall bear interest at the Base Rate or the LIBOR
Rate plus, in each case, the Applicable Margin as set forth below, and Revolving
Credit Loans denominated in an Alternative Currency and Finnish Mark Loans shall

                                       35

<PAGE>



bear interest at the LIBOR Rate plus the  Applicable  Margin as set forth below.
Each  Swingline  Loan shall bear interest at the Swingline  Rate. The applicable
Borrower or Borrowers shall select the rate of interest and Interest Period,  if
any,  applicable to any Revolving Credit Loan or Finnish Mark Loan at the time a
Notice of Borrowing is given  pursuant to Section 2.4 or at the time a Notice of
Conversion/Continuation  is given  pursuant to Section 3.2. Each Loan or portion
thereof bearing  interest based on the Base Rate shall be a "Base Rate Loan" and
each Loan or portion thereof bearing interest based on the LIBOR Rate shall be a
"LIBOR Rate Loan".  Any Loan or any portion  thereof as to which the  applicable
Borrower or Borrowers has not duly specified an interest rate as provided herein
shall be deemed a Base Rate Loan denominated in Dollars.

         (b) Interest  Periods.  In  connection  with each LIBOR Rate Loan,  the
applicable  Borrower or Borrowers,  by giving  notice at the times  described in
Section 3.1(a),  shall elect an interest period (each, an "Interest  Period") to
be applicable to such Loan,  which Interest Period shall be a period of one (1),
two (2),  three (3), six (6), or if made available by the  Administrative  Agent
and the Lenders (in their sole  discretion),  twelve (12) months with respect to
each LIBOR Rate Loan; provided, that:

                        (i) the Interest  Period  shall  commence on the date of
         advance of or  conversion  to any LIBOR  Rate Loan and,  in the case of
         immediately  successive  Interest  Periods,  each  successive  Interest
         Period shall commence on the date on which the next preceding  Interest
         Period expires;

                       (ii) if any Interest Period would  otherwise  expire on a
         day that is not a Business Day,  such  Interest  Period shall expire on
         the next succeeding Business Day; provided, that if any Interest Period
         would otherwise expire on a day that is not a Business Day but is a day
         of the month after which no further  Business Day occurs in such month,
         such Interest Period shall expire on the next preceding Business Day;

                      (iii) any Interest Period that 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

                                       36

<PAGE>



         Business Day of the relevant calendar month at the end of such
         Interest Period;

                       (iv)         no Interest Period shall extend beyond the
         Credit Facility Termination Date; and

                        (v)       there shall be no more than eight (8) Interest
         Periods outstanding at any time.

         (c)      Applicable Margin.  The Applicable Margin provided for in
Section 3.1(a) with respect to the Loans (the "Applicable Margin")
shall:

                  (i) for the period  commencing  on the Closing Date and ending
         on  the  date  immediately  preceding  the  fifth  (5th)  Business  Day
         following  receipt  by  the  Administrative   Agent  of  the  financial
         statements of BREED and its  Subsidiaries for the fiscal quarter ending
         March 31, 1997 and the accompanying  Officer's Compliance  Certificate,
         be  determined  based on the Leverage  Ratio set forth in the Financial
         Condition  Certificate  delivered  pursuant  to Section  4.2(e)(ii)  in
         accordance with the chart below;

             (ii) for the period  commencing  on the fifth  (5th)  Business  Day
         following  receipt  by  the  Administrative   Agent  of  the  financial
         statements of BREED and its  Subsidiaries for the fiscal quarter ending
         June 30, 1997 and the accompanying Officer's Compliance Certificate and
         continuing through and including the Credit Facility  Termination Date,
         be determined  by reference to the Leverage  Ratio as of the end of the
         fiscal  quarter  immediately  preceding the delivery of the  applicable
         Officer's Compliance Certificate in accordance with the chart below:

                           Applicable Margin Per Annum
         Leverage Ratio                     Base Rate +       LIBOR Rate +

         Greater than 3.25                     0.00%                      1.050%

         Less than or equal
         to 3.25 and greater
         than 3.00                             0.00%                      0.800%


                                       37

<PAGE>



         Less than or equal
         to 3.00 and greater
         than 2.50                             0.00%                      0.600%

         less than or equal
         to 2.50 but greater
         than 2.00                             0.00%                      0.475%

         less than or equal
         to 2.00                               0.00%                      0.375%


Adjustments,   if  any,  in  the   Applicable   Margin  shall  be  made  by  the
Administrative  Agent on the tenth (10th) Business Day (the  "Adjustment  Date")
after receipt by the Administrative  Agent of quarterly financial statements for
BREED and its Subsidiaries and the accompanying Officer's Compliance Certificate
setting  forth the  Leverage  Ratio as of the most recent  fiscal  quarter  end.
Subject to  Section  3.1(d),  in the event the  Borrowers  fail to deliver  such
financial  statements  and  certificate  within the time required by Section 6.2
hereof,  the Applicable Margin shall be the highest  Applicable Margin set forth
above until the delivery of such financial statements and certificate.

         Notwithstanding anything to the contrary contained herein, in the event
the  Interest  Coverage  Ratio (as  determined  pursuant  to Section 8.3 of this
Agreement) is less than 3.00 to 1.00 during the  applicable  period set forth in
such Section 8.3, the  Applicable  Margin set forth in this Section 3.1 shall be
deemed to be 1.000%  with  respect to LIBOR Rate Loans  (unless  the  Applicable
Margin with respect to LIBOR Rate Loans is determined  to be 1.250%  pursuant to
the terms of this Section 3.1(c)).

         (d) Default Rate.  Upon the occurrence and during the continuance of an
Event of Default,  (i) the Borrowers  shall no longer have the option to request
LIBOR Rate Loans, (ii) all outstanding LIBOR Rate Loans shall bear interest at a
rate per annum two percent (2%) in excess of the rate then  applicable  to LIBOR
Rate Loans, as applicable,  until the end of the applicable  Interest Period and
thereafter  at a rate  equal to two  percent  (2%) in  excess  of the rate  then
applicable  to Base  Rate  Loans,  and  (iii) all  outstanding  Base Rate  Loans
(including,  without limitation,  Swingline Loans) shall bear interest at a rate
per annum equal to

                                       38

<PAGE>



two  percent  (2%) in  excess of the rate then  applicable  to Base Rate  Loans.
Interest  shall  continue  to accrue on the Notes after the filing by or against
any Borrower of any petition  seeking any relief in  bankruptcy or under any act
or law  pertaining to insolvency or debtor  relief,  whether  state,  federal or
foreign.

         (e) Interest Payment and  Computation.  Interest on each Base Rate Loan
and each  Swingline Loan shall be payable in arrears on the last Business Day of
each fiscal  quarter  commencing  June 30, 1997 and  interest on each LIBOR Rate
Loan  shall  be  payable  on the  last day of each  Interest  Period  applicable
thereto,  and if such Interest Period extends over three (3) months,  at the end
of each three (3) month  interval  during such  Interest  Period.  All  interest
rates, fees and commissions provided hereunder shall be computed on the basis of
a 360-day  year and assessed for the actual  number of days  elapsed;  provided,
that (i) interest  rates on each Loan  denominated  in Pounds  Sterling shall be
computed  on the basis of a 365-day  year and (ii)  interest  rates on each Base
Rate  Loan  and  each  Swingline  Loan  shall  be  computed  on the  basis  of a
365/366-day year.

         (f) Maximum  Rate.  In no  contingency  or event  whatsoever  shall the
aggregate  of all amounts  deemed  interest  hereunder or under any of the Notes
charged or collected  pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible  under any Applicable Law which
a  court  of  competent  jurisdiction  shall,  in a  final  determination,  deem
applicable  hereto.  In the event that such a court  determines that the Lenders
have charged or received interest  hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate  permitted by Applicable  Law and the Lenders  shall at the  Administrative
Agent's  option  promptly  refund to the  applicable  Borrower or Borrowers  any
interest received by Lenders in excess of the maximum lawful rate or shall apply
such excess to the principal balance of the Obligations. It is the intent hereof
that  the   Borrowers  not  pay  or  contract  to  pay,  and  that  neither  the
Administrative Agent nor any Lender receive or contract to receive,  directly or
indirectly  in any manner  whatsoever,  interest  in excess of that which may be
paid by the Borrowers under Applicable Law.

         SECTION 3.2       Notice and Manner of Conversion or Continuation
of Revolving Credit Loans and Finnish Mark Loans.  Provided that no

                                       39

<PAGE>



Default or Event of Default has occurred and is then  continuing,  the Borrowers
shall  have the  option to (a)  convert  at any time all or any  portion  of any
outstanding  Base Rate  Loans that are  Revolving  Credit  Loans in a  principal
amount  equal to  $10,000,000  or any whole  multiple  of  $1,000,000  in excess
thereof into one or more LIBOR Rate Loans  denominated in Dollars,  (b) upon the
expiration of any Interest  Period,  convert all or any part of any  outstanding
LIBOR  Rate  Loans  denominated  in  Dollars  in a  principal  amount  equal  to
$1,000,000  or a whole  multiple of $500,000  in excess  thereof  into Base Rate
Loans that are Revolving  Credit Loans,  (c) upon the expiration of any Interest
Period,  continue  any LIBOR Rate Loan  denominated  in any  Permitted  Currency
(other than Finnish  Marks) in a principal  amount of  $10,000,000  or any whole
multiple of  $1,000,000  in excess  thereof (or with respect to LIBOR Rate Loans
denominated in an Alternative Currency other than Finnish Marks, the Alternative
Currency Amount in each case thereof) as a LIBOR Rate Loan in the same Permitted
Currency or (d) upon the expiration of any Interest  Period,  continue any LIBOR
Rate Loan  denominated  in Finnish  Marks in a  principal  Alternative  Currency
Amount of  $2,000,000 or any whole  multiple of $100,000 in excess  thereof as a
LIBOR Rate Loan in Finnish Marks.  Whenever any Borrower or Borrowers  desire to
convert or continue Loans as provided  above,  such Borrower or Borrowers  shall
give the  Administrative  Agent  irrevocable  prior  written  notice in the form
attached  as Exhibit D (a "Notice  of  Conversion/Continuation")  not later than
11:00 a.m.  (Charlotte  time) four (4) Business  Days (with  respect to any Loan
denominated  in an  Alternative  Currency)  and three (3)  Business  Days  (with
respect to any Loan  denominated in Dollars)  before the day on which a proposed
conversion or  continuation  of such Loan is to be effective  specifying (A) the
Loans to be converted or  continued,  and, in the case of any LIBOR Rate Loan to
be  converted  or  continued,  the  Permitted  Currency  in which  such  Loan is
denominated and the last day of the Interest Period therefor,  (B) the effective
date of such conversion or continuation (which shall be a Business Day), (C) the
principal  amount  of such  Loans  to be  converted  or  continued,  and (D) the
Interest Period to be applicable to such converted or continued LIBOR Rate Loan.
The  Administrative  Agent shall  promptly  notify the Lenders of such Notice of
Conversion/Continuation.

         SECTION 3.3       Fees.


                                       40

<PAGE>



         (a) Facility Fee. The Borrowers shall pay to the Administrative  Agent,
for the account of the  Lenders,  a  non-refundable  facility  fee at a rate per
annum equal to the applicable  percentage set forth below in this Section 3.3(a)
on the amount of the Aggregate Commitment.  The facility fee shall be payable in
arrears on the last Business Day of each fiscal  quarter during the term of this
Agreement commencing June 30, 1997, and on the Credit Facility Termination Date.
Such  facility  fee  shall be  distributed  by the  Administrative  Agent to the
Lenders  pro  rata  in  accordance  with  the  Lenders'  respective   Commitment
Percentages. The facility fee rate shall:

                  (i) for the period  commencing  on the Closing Date and ending
         on  the  date  immediately  preceding  the  fifth  (5th)  Business  Day
         following  receipt  by the  Administrative  Agent  of the  Consolidated
         financial  statements of BREED for the fiscal  quarter ending March 31,
         1997  and  the  accompanying  Officer's  Compliance   Certificate,   be
         determined  based on the  Leverage  Ratio  set  forth in the  Financial
         Condition  Certificate  delivered  pursuant  to Section  4.2(e)(ii)  in
         accordance with the chart below;

             (ii) for the period  commencing  on the fifth  (5th)  Business  Day
         following  receipt  by the  Administrative  Agent  of the  Consolidated
         financial  statements of BREED for the fiscal  quarter  ending June 30,
         1997  and  the  accompanying   Officer's  Compliance   Certificate  and
         continuing through and including the Credit Facility  Termination Date,
         be  determined  by  reference  to the  Leverage  Ratio of BREED and its
         Subsidiaries as of the end of the fiscal quarter immediately  preceding
         the delivery of the  applicable  Officer's  Compliance  Certificate  in
         accordance with the chart below:

         Leverage Ratio                              Facility Fee Rate

         Greater than 3.25                                     0.200%

         Less than or equal
         to 3.25 and greater
         than 3.00                                             0.200%

         Less than or equal
         to 3.00 and greater

                                       41

<PAGE>



         than 2.50                                             0.150%

         less than or equal
         to 2.50 but greater
         than 2.00                                             0.150%

         less than or equal
         to 2.00                                               0.125%


Adjustments,   if  any,  in  the   facility  fee  rate  shall  be  made  by  the
Administrative  Agent on the tenth (10th) Business Day (the  "Adjustment  Date")
after receipt by the Administrative  Agent of quarterly financial statements for
BREED and its Subsidiaries and the accompanying Officer's Compliance Certificate
setting forth the Leverage  Ratio of BREED and its  Subsidiaries  as of the most
recent  fiscal  quarter  end. In the event the  Borrowers  fail to deliver  such
financial  statements  and  certificate  within the time required by Section 6.2
hereof,  the facility fee rate shall be the highest  facility fee rate set forth
above until the delivery of such financial statements and certificate.

         Notwithstanding anything to the contrary contained herein, in the event
the  Interest  Coverage  Ratio (as  determined  pursuant  to Section 8.3 of this
Agreement) is less than 3.00 to 1.00 during the  applicable  period set forth in
such  Section  8.3, the Facility Fee Rate set forth in this Section 3.3 shall be
deemed to be .300%.

         (b)  Administrative  Agent's and Other Fees. In order to compensate the
Administrative  Agent for  structuring,  syndicating and arranging the Loans and
for its obligations hereunder,  the Borrowers agree to pay to the Administrative
Agent,  for its sole  account,  the fees set forth in the  separate  fee  letter
agreement executed by BREED and the Administrative Agent dated March 18, 1997.

         SECTION 3.4       Manner of Payment.

         (a)      Loans Denominated in Dollars.  Each payment (including
repayments described in Article II) by any Borrower on account of
the principal of or interest on the Loans denominated in Dollars or
of any fee, commission or other amounts payable to the Lenders
under this Agreement or any Note (except as set forth in Section

                                       42

<PAGE>



3.4(b))  shall be made in Dollars not later than 1:00 p.m.  (Charlotte  time) on
the date specified for payment under this Agreement to the Administrative  Agent
at the Administrative  Agent's Office for the account of the Lenders pro rata in
accordance with their respective Commitment Percentages in immediately available
funds  and  shall  be  made  without  any  set-off,  counterclaim  or  deduction
whatsoever. Any payment received after such time but before 2:00 p.m. (Charlotte
time) on such day  shall be deemed a payment  on such date for the  purposes  of
Section 11.1,  but for all other  purposes  shall be deemed to have been made on
the  next  succeeding  Business  Day.  Any  payment  received  after  2:00  p.m.
(Charlotte  time)  shall be  deemed  to have  been  made on the next  succeeding
Business Day for all purposes.

         (b)  Loans   Denominated  in  Alternative   Currencies.   Each  payment
(including repayments described in Article II) by any A/C Borrower on account of
the  principal  of or  interest  on the  Loans  denominated  in any  Alternative
Currency  shall be made in such  Alternative  Currency not later than 12:00 noon
(the time of the Administrative Agent's Correspondent) on the date specified for
payment  under this  Agreement to the  Administrative  Agent's  account with the
Administrative  Agent's Correspondent for the account of the Lenders pro rata in
accordance with their  respective  Commitment  Percentages  (or, with respect to
Finnish  Mark Loans,  for the account of the  Finnish  Mark  Lenders pro rata in
accordance  with  their  respective  Finnish  Mark  Commitment  Percentages)  in
immediately available funds, and shall be made without any set-off, counterclaim
or deduction  whatsoever.  Any payment  received after such time but before 1:00
p.m. (the time of the Administrative Agent's Correspondent) on such day shall be
deemed a payment  on such date for the  purposes  of Section  11.1,  but for all
other purposes shall be deemed to have been made on the next succeeding Business
Day.  Any  payment  received  after  1:00 p.m.  (the time of the  Administrative
Agent's  Correspondent) shall be deemed to have been made on the next succeeding
Business Day for all purposes.

         (c) Pro Rata  Treatment.  Upon receipt by the  Administrative  Agent of
each such payment,  the Administrative  Agent shall distribute to each Lender or
Finnish Mark Lender, as applicable,  at its address for notices set forth herein
its pro rata share of such payment in accordance with the Commitment  Percentage
of such  Lender or Finnish  Mark  Commitment  Percentage  of such  Finnish  Mark
Lender, as applicable, and shall wire advice of the amount of such credit

                                       43

<PAGE>



to each Lender or each Finnish Mark Lender,  as applicable.  Each payment to the
Administrative Agent of the Swingline Lender's fees or commissions shall be made
in like manner, but for the account of the Swingline Lender. Each payment to the
Administrative  Agent of  Administrative  Agent's fees or expenses shall be made
for the account of the Administrative Agent and any amount payable to any Lender
under  Sections  3.10,  3.11,  3.12,  3.13,  12.2, and 13.2 shall be paid to the
Administrative  Agent for the account of the  applicable  Lender or Finnish Mark
Lender.  Subject to Section  3.1(b)(ii),  if any payment under this Agreement or
any Note shall be specified  to be made upon a day which is not a Business  Day,
it shall be made on the next  succeeding  day which is a  Business  Day and such
extension  of time shall in such case be included in  computing  any interest if
payable along with such payment.

         SECTION 3.5 Crediting of Payments and  Proceeds.  In the event that any
Borrower shall fail to pay any of the  Obligations  when due and the Obligations
have been  accelerated  pursuant to Section 11.2,  all payments  received by the
Lenders upon the Notes and the other  Obligations  and all net proceeds from the
enforcement  of the  Obligations  shall be applied to all expenses  then due and
payable by the Borrowers hereunder,  then to all indemnity  obligations then due
and payable by the Borrowers hereunder,  then to all Administrative Agent's fees
then due and payable, then to all commitment and other fees and commissions then
due and payable,  then to accrued and unpaid  interest on the Swingline  Note to
the  Swingline  Lender,  then to the  principal  amount  outstanding  under  the
Swingline Note to the Swingline Lender, then to the principal amount outstanding
and accrued and unpaid  interest on the Finnish Mark Notes,  then to accrued and
unpaid interest on the Revolving Credit Notes, then to any termination  payments
due in respect of a Hedging  Agreement  with any Lender  permitted  pursuant  to
Section 9.1 (pro rata in accordance with all such amounts due), in that order.

         SECTION 3.6       Adjustments.

         (a) If any Lender (a "Benefitted Lender") shall at any time receive any
payment of all or part of its Revolving Credit Loans, or interest thereon, or if
any Lender shall at any time receive any  collateral in respect to its Revolving
Credit Loans (whether voluntarily or involuntarily,  by set-off or otherwise) in
a greater  proportion  than any such payment to and  collateral  received by any
other Lender, if any, in respect of such other Lender's Revolving

                                       44

<PAGE>



Credit Loans, or interest  thereon,  such  Benefitted  Lender shall purchase for
cash from the other Lenders such portion of each such other  Lender's  Revolving
Credit Loans,  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, 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 each Lender so  purchasing  a portion of another  Lender's  Revolving
Credit Loans may exercise all rights of payment (including,  without limitation,
rights of set-off)  with respect to such portion as fully as if such Lender were
the direct holder of such portion.

         (b) If any Finnish Mark Lender (a  "Benefitted  Finnish  Mark  Lender")
shall at any time  receive any payment of all or part of its Finnish Mark Loans,
or interest thereon, or if any Finnish Mark Lender shall at any time receive any
collateral  in  respect  to its  Finnish  Mark  Loans  (whether  voluntarily  or
involuntarily,  by set-off or otherwise) in a greater  proportion  than any such
payment to and collateral  received by any other Finnish Mark Lender, if any, in
respect of such other  Finnish Mark  Lender's  Finnish  Mark Loans,  or interest
thereon,  such  Benefitted  Finnish Mark Lender shall purchase for cash from the
other Finnish Mark Lenders such portion of each such other Finnish Mark Lender's
Finnish Mark Loans,  or shall  provide such other  Finnish Mark Lenders with the
benefits of any such collateral,  or the proceeds thereof, as shall be necessary
to cause such  Benefitted  Finnish  Mark  Lender to share the excess  payment or
benefits of such  collateral  or proceeds  ratably with each of the Finnish Mark
Lenders; provided, that if all or any portion of such excess payment or benefits
is thereafter  recovered from such Benefitted Finnish Mark 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 each Finnish
Mark Lender so  purchasing a portion of another  Finnish Mark  Lender's  Finnish
Mark Loans may exercise all rights of payment  (including,  without  limitation,
rights of set-off)  with respect to such portion as fully as if such Lender were
the direct holder of such portion.


                                       45

<PAGE>



         SECTION  3.7  Nature  of  Obligations  of  Lenders   Regarding   Loans;
Assumption by the  Administrative  Agent.  The  obligations of the Lenders under
this  Agreement  to make the  Loans are  several  and are not joint or joint and
several.  Unless the  Administrative  Agent  shall have  received  notice from a
Lender  prior to a  proposed  borrowing  date  that  such  Lender  will not make
available  to the  Administrative  Agent such  Lender's  ratable  portion of the
amount to be borrowed on such date (which  notice  shall not release such Lender
of its obligations  hereunder),  the  Administrative  Agent may assume that such
Lender  has made  such  portion  available  to the  Administrative  Agent on the
proposed borrowing date in accordance with Section 2.4(b) and the Administrative
Agent may, in reliance upon such  assumption,  make  available to the applicable
Borrower or Borrowers  on such date a  corresponding  amount.  If such amount is
made available to the Administrative  Agent on a date after such borrowing date,
such  Lender  or  Finnish  Mark  Lender,   as  applicable,   shall  pay  to  the
Administrative  Agent on demand an amount, until paid, equal to (a) with respect
to a Loan  denominated  in  Dollars,  the  amount  of such  Lender's  Commitment
Percentage of such  borrowing and interest  thereon at a rate equal to the daily
average   Federal   Funds  Rate  during  such  period  as   determined   by  the
Administrative  Agent,  (b) with respect to an Alternative  Currency Loan (other
than Finnish Mark Loans), such Lender's Commitment  Percentage of such borrowing
at a rate per annum equal to the Administrative  Agent's aggregate marginal cost
(including the cost of maintaining  any required  reserves or deposit  insurance
and of any  fees,  penalties,  overdraft  charges  or other  costs  or  expenses
incurred by the Administrative Agent as a result of the failure to deliver funds
hereunder)  of carrying such amount and (c) with respect to a Finnish Mark Loan,
such Finnish Mark Lender's Finnish Mark Commitment  Percentage of such borrowing
at a rate per annum equal to the Administrative  Agent's aggregate marginal cost
(including the cost of maintaining  any required  reserves or deposit  insurance
and of any  fees,  penalties,  overdraft  charges  or other  costs  or  expenses
incurred by the Administrative Agent as a result of the failure to deliver funds
hereunder) of carrying such amount.  A certificate of the  Administrative  Agent
with respect to any amounts  owing under this  Section 3.7 shall be  conclusive,
absent  manifest  error.  If the  Commitment  Percentage  of such  Lender or the
Finnish Mark Commitment  Percentage of such Finnish Mark Lender,  as applicable,
of such  borrowing  is not made  available to the  Administrative  Agent by such
Lender or Finnish Mark Lender, as applicable,  within three (3) Business Days of
such borrowing date,

                                       46

<PAGE>



the Administrative Agent shall be entitled to recover such amount made available
by the Administrative Agent with interest thereon at the rate then applicable to
such Loan hereunder,  on demand, from the applicable Borrower or Borrowers.  The
failure  of any  Lender or  Finnish  Mark  Lender,  as  applicable,  to make its
Commitment Percentage or Finnish Mark Commitment Percentage,  as applicable,  of
any Loan  available  shall not  relieve it or any other  Lender or Finnish  Mark
Lender,  as  applicable,  of its  obligation,  if any,  hereunder  to  make  its
Commitment Percentage or Finnish Mark Commitment Percentage,  as applicable,  of
such Loan  available  on such  borrowing  date,  but no Lender or  Finnish  Mark
Lender, as applicable,  shall be responsible for the failure of any other Lender
or Finnish Mark Lender,  as  applicable,  to make its  Commitment  Percentage or
Finnish Mark Commitment Percentage, as applicable, of such Loan available on the
borrowing date.

         SECTION 3.8       Mandatory Redenomination of Alternative
Currency Loans.

         (a) If any LIBOR Rate Loan is required to be  converted  to a Base Rate
Loan pursuant to Sections 2.2, 3.1(d),  3.10 or any other  applicable  provision
hereof,  such Loan shall be funded in  Dollars in an amount  equal to the Dollar
Amount of such Loan,  all  subject to the  provisions  of  Section  2.5(b).  The
applicable  Borrower or Borrowers  shall  reimburse  the Lenders or Finnish Mark
Lenders, as applicable,  upon any such conversion for any amounts required to be
paid under Section 3.11.

         (b) If any Alternative  Currency becomes  unavailable to any Lender for
any reason (including,  without limitation,  any conversion,  discontinuation or
replacement  of such  currency  arising out of or in  connection  with any event
associated  with  economic and monetary  union in the  European  community)  all
outstanding   Loans  in  such   Alternative   Currency   shall  be   immediately
redenominated and converted into Dollars in an amount equal to the Dollar Amount
of such Loan, all subject to the provisions of Section 2.5(b).

         SECTION  3.9  Regulatory  Limitation.  In the  event,  as a  result  of
increases in the value of Alternative  Currencies  against the Dollar or for any
other  reason,  the  obligation of any of the Lenders to make Loans (taking into
account the Dollar Amount of the Obligations and all other indebtedness required
to  be  aggregated  under  12  U.S.C.A.   ss.84,  as  amended,  the  regulations
promulgated

                                       47

<PAGE>



thereunder and any other  Applicable Law) is determined by such Lender to exceed
its then applicable legal lending limit under 12 U.S.C.A. ss.84, as amended, and
the regulations promulgated thereunder,  or any other Applicable Law, the amount
of  additional  Loans  such  Lender  shall  be  obligated  to make or  issue  or
participate  in hereunder  shall  immediately  be reduced to the maximum  amount
which such  Lender may legally  advance  (as  determined  by such  Lender),  the
obligation of each of the remaining Lenders  hereunder shall be  proportionately
reduced,  based on their  applicable  Commitment  Percentages  or  Finnish  Mark
Commitment Percentages,  as applicable,  and, to the extent necessary under such
laws and regulations (as determined by each of the Lenders,  with respect to the
applicability  of such laws and  regulations  to itself),  the  Borrowers  shall
reduce,  or cause to be reduced,  complying to the extent  practicable  with the
remaining provisions hereof, the Obligations  outstanding hereunder by an amount
sufficient to comply with such maximum amounts.

         SECTION 3.10      Changed Circumstances.

         (a)  Circumstances   Affecting  LIBOR  Rate  and  Alternative  Currency
Availability. If with respect to any Interest Period the Administrative Agent or
any Lender (after  consultation with the  Administrative  Agent) shall determine
that (i) by reason of circumstances affecting the foreign exchange and interbank
markets  generally,  deposits in eurodollars  or an Alternative  Currency in the
applicable amounts are not being quoted via Telerate Page 3750 or offered to the
Administrative Agent or such Lender for such Interest Period, (ii) a fundamental
change has occurred in the foreign exchange or interbank markets with respect to
any Alternative Currency (including,  without limitation, changes in national or
international  financial,  political or economic conditions or currency exchange
rates  or  exchange  controls)  or  (iii)  it has  become  otherwise  materially
impractical for the Administrative  Agent or the Lenders to make such Loan in an
Alternative Currency,  then the Administrative Agent shall forthwith give notice
thereof to the Borrowers.  Thereafter,  until the Administrative  Agent notifies
the Borrowers  that such  circumstances  no longer exist,  the obligation of the
Lenders to make LIBOR Rate Loans or Alternative  Currency  Loans, as applicable,
and the right of the  Borrowers to convert any Loan to or continue any Loan as a
LIBOR Rate Loan or to convert any Loan to or continue any Loan as an Alternative
Currency Loan, as applicable, shall be suspended,

                                       48

<PAGE>



and the  applicable  Borrower or  Borrowers  shall repay in full (or cause to be
repaid in full) the then  outstanding  principal  amount of each such LIBOR Rate
Loan or Alternative Currency Loan, as applicable, together with accrued interest
thereon,  on the last day of the then current Interest Period applicable to such
LIBOR Rate Loan or Alternative Currency Loan, as applicable, or convert the then
outstanding  principal  amount  of each  such  LIBOR  Rate  Loan or  Alternative
Currency  Loan,  as  applicable,  to a Base Rate Loan as of the last day of such
Interest Period.

         (b) Laws Affecting  LIBOR Rate and Alternative  Currency  Availability.
If, after the date hereof, the introduction of, or any change in, any Applicable
Law 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 any of
their respective  Lending Offices) with any request or directive (whether or not
having the force of law) of any such  Governmental  Authority,  central  bank or
comparable  agency,  shall make it unlawful or impossible for any of the Lenders
(or any of their respective Lending Offices) to honor its obligations  hereunder
to make or maintain any LIBOR Rate Loan or any  Alternative  Currency Loan, such
Lender shall  promptly give notice thereof to the  Administrative  Agent and the
Administrative  Agent shall  promptly give notice to the Borrowers and the other
Lenders.  Thereafter, until the Administrative Agent notifies the Borrowers that
such  circumstances  no longer exist, (i) the obligations of the Lenders to make
LIBOR Rate Loans or Alternative Currency Loans, as applicable,  and the right of
the  Borrowers  to convert any Loan to or continue any Loan as a LIBOR Rate Loan
or convert any Loan to or continue any Loan as an Alternative  Currency Loan, as
applicable, shall be suspended and thereafter the Borrowers may select only Base
Rate Loans denominated in Dollars hereunder,  and (ii) if any of the Lenders may
not lawfully  continue to maintain a LIBOR Rate Loan or an Alternative  Currency
Loan, as applicable,  to the end of the then current Interest Period  applicable
thereto as a LIBOR Rate Loan or as an Alternative  Currency Loan, as applicable,
the applicable LIBOR Rate Loan or Alternative Currency Loan shall immediately be
converted  to a Base  Rate  Loan  for  the  remainder  of such  Interest  Period
(provided  that the  Borrower  and the  Lenders  shall  enter  into  good  faith
negotiations  promptly  upon such  conversion  to determine a new interest  rate
index similar to that applicable to LIBOR Rate Loans).

                                       49

<PAGE>



         (c) Increased Costs. If, after the date hereof, the introduction of, or
any change in, any Applicable Law, or 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 of the
Lenders  (or any of  their  respective  Lending  Offices)  with any  request  or
directive  (whether  or not  having  the  force  of law)  of  such  Governmental
Authority, central bank or comparable agency:

                  (i)  shall  subject  any  of the  Lenders  (or  any  of  their
respective Lending Offices) to any tax, duty or other charge with respect to any
LIBOR Rate Loans,  Alternative  Currency  Loans or any Note or shall  change the
basis of taxation of payments to any of the Lenders (or any of their  respective
Lending  Offices) of the  principal  of or interest on any LIBOR Rate Loan,  any
Alternative  Currency  Loan or any Note or any  other  amounts  due  under  this
Agreement  in  respect  thereof  (except  for  changes in the rate of tax on the
overall  net  income of any of the  Lenders or any of their  respective  Lending
Offices  imposed by the  jurisdiction in which such Lender is organized or is or
should be qualified to do business or such Lending Office is located); or

             (ii)  shall  impose,   modify  or  deem   applicable   any  reserve
(including,  without  limitation,  any imposed by the Board of  Governors of the
Federal  Reserve  System),  special  deposit,  insurance  or  capital or similar
requirement  against  assets of,  deposits with or for the account of, or credit
extended by any of the Lenders (or any of their  respective  Lending Offices) or
shall impose on any of the Lenders (or any of their respective  Lending Offices)
or the foreign exchange and interbank markets any other condition  affecting any
LIBOR Rate Loan, any Alternative Currency Loan or any Note;

and the result of any of the  foregoing  is to increase  the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or any Alternative  Currency Loan, as
applicable,  or to reduce the yield or amount of any sum received or  receivable
by any of the Lenders  under this  Agreement  or under the Notes in respect of a
LIBOR Rate Loan or an Alternative Currency Loan, as applicable, then such Lender
shall, within ninety (90) days thereafter,  notify the Administrative Agent, and
the  Administrative  Agent shall promptly  notify the Borrowers of such fact and
demand compensation  therefor and, within fifteen (15) days after such notice by
the

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<PAGE>



Administrative  Agent,  the applicable  Borrower or Borrowers  shall pay to such
Lender  such  additional  amount or amounts as will  compensate  such  Lender or
Lenders for such  increased  cost or reduction.  The  Administrative  Agent will
promptly  notify the Borrowers of any event of which it has knowledge which will
entitle such Lender to compensation pursuant to this Section 3.10(c);  provided,
that the Administrative Agent shall incur no liability whatsoever to the Lenders
or the Borrowers in the event it fails to do so. The amount of such compensation
shall be determined, in the applicable Lender's sole discretion,  based upon the
assumption  that such Lender funded its Commitment  Percentage of the LIBOR Rate
Loans or Alternative  Currency  Loans,  as applicable,  in the London  interbank
market and using any  reasonable  attribution  or averaging  methods  which such
Lender deems  appropriate  and  practical.  A certificate of such Lender setting
forth the basis for determining  such amount or amounts  necessary to compensate
such Lender shall be forwarded to the Borrowers through the Administrative Agent
and shall be  presumed  to be  correct  save for  manifest  error or  reasonable
evidence to the contrary.

         SECTION 3.11  Indemnity.  The applicable  Borrower or Borrowers  hereby
indemnify each of the Lenders  against any loss or expense  (including,  without
limitation,  any foreign  exchange  costs) which may arise or be attributable to
each  Lender's  obtaining,  liquidating  or  employing  deposits  or other funds
acquired  to  effect,  fund or  maintain  any Loan (a) as a  consequence  of any
failure by such Borrower or Borrowers to make any payment when due of any amount
due  hereunder in connection  with a LIBOR Rate Loan,  (b) due to any failure of
such Borrower or Borrowers to borrow on a date specified therefor in a Notice of
Borrowing  or  Notice  of  Continuation/Conversion  or (c)  due to any  payment,
prepayment  or  conversion  of any LIBOR Rate Loan on a date other than the last
day of the Interest Period therefor. The amount of such loss or expense shall be
determined,  in  the  applicable  Lender's  sole  discretion,   based  upon  the
assumption  that such Lender funded its Commitment  Percentage of the LIBOR Rate
Loans in the London  interbank  market and using any  reasonable  attribution or
averaging  methods  which  such  Lender  deems  appropriate  and  practical.   A
certificate of such Lender setting forth the basis for  determining  such amount
or amounts  necessary  to  compensate  such  Lender  shall be  forwarded  to the
Borrowers through the  Administrative  Agent and shall be presumed to be correct
save for manifest error or reasonable evidence to the contrary.

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<PAGE>



         SECTION 3.12 Capital  Requirements.  If either (a) the introduction of,
or any  change  in,  or in the  interpretation  of,  any  Applicable  Law or (b)
compliance  with any  guideline or request  from any central bank or  comparable
agency or other Governmental Authority (whether or not having the force of law),
has or would have the effect of  reducing  the rate of return on the capital of,
or has affected or would affect the amount of capital  required to be maintained
by, any Lender or any corporation  controlling  such Lender as a consequence of,
or with reference to the Commitments and other  commitments of this type,  below
the rate which the Lender or such other  corporation could have achieved but for
such  introduction,  change or  compliance,  then within five (5) Business  Days
after written demand by any such Lender,  the Borrowers shall pay to such Lender
from time to time as specified by such Lender additional  amounts  sufficient to
compensate such Lender or other corporation for such reduction. A certificate as
to such amounts submitted to the Borrowers and the Administrative  Agent by such
Lender,  shall,  in the absence of manifest error or reasonable  evidence to the
contrary, be presumed to be correct and binding for all purposes.

         SECTION 3.13      Taxes.

         (a)      Payments Free and Clear.

                  (i) Any and all payments by the  Borrowers  hereunder or under
         the Notes shall be made free and clear of and without deduction for any
         and all present or future taxes, levies, imposts,  deductions,  charges
         or withholding,  and all liabilities  with respect thereto  (including,
         without limitation, all claims, penalties, costs and expenses resulting
         from any failure to withhold  or pay,  or any delay in  withholding  or
         paying,  any of the foregoing  amounts)  excluding,  (A) in the case of
         each Lender and the  Administrative  Agent,  income and franchise taxes
         imposed by the jurisdiction  under the laws of which such Lender or the
         Administrative  Agent (as the case may be) is organized or is or should
         be qualified to do business or any  political  subdivision  thereof (it
         being expressly  acknowledged by the Borrowers that each Agent and each
         Lender shall not be required to be or become qualified, for purposes of
         this Section 3.13(a) or for any other Section of this Agreement,  to do
         business in any specific jurisdiction or any political

                                       52

<PAGE>



         subdivision  thereof)  and (B) in the case of each  Lender,  income and
         franchise taxes imposed by the  jurisdiction  of such Lender's  Lending
         Office or any  political  subdivision  thereof  (all such  non-excluded
         taxes,  levies,   imposts,   deductions,   charges,   withholdings  and
         liabilities being hereinafter referred to as "Taxes").

                  (ii) If any  Borrower  shall be  required  by law to deduct or
         withhold (A) any Taxes payable to any Governmental Authority other than
         the United States  Internal  Revenue  Service from or in respect of any
         sum  payable  hereunder  or  under  any  Note  to  any  Lender  or  the
         Administrative  Agent,  or (B) any Taxes  payable to the United  States
         Internal  Revenue  Service  from  or in  respect  of  any  sum  payable
         hereunder or under any Note to any Lender organized under the laws of a
         jurisdiction other than the United States, subject to the United States
         Internal  Revenue Service Form 4224 or Form 1001 (as applicable and the
         Internal  Revenue Service Form W-8 or W- 9 (as  applicable)  previously
         delivered to the Administrative  Agent, then, in either such event, (1)
         the sum payable  shall be  increased  as may be necessary so that after
         making all required deductions or withholdings (including deductions or
         withholdings  applicable to additional  sums payable under this Section
         3.13)  such  Lender  or the  Administrative  Agent (as the case may be)
         receives an amount  equal to the amount such party would have  received
         had no such  deductions or  withholdings  been made,  (2) such Borrower
         shall make such deductions or withholdings, (3) such Borrower shall pay
         the full amount deducted or withheld to the relevant  taxing  authority
         or other  authority in  accordance  with  applicable  law, and (4) such
         Borrower  shall deliver to the  Administrative  Agent  evidence of such
         payment to the  relevant  taxing  authority  or other  authority in the
         manner provided in Section 3.13(d). If, for any reason, any Borrower or
         Borrowers  do not pay or remit  such Taxes or do not for any reason pay
         any  additional  sums  payable  to any  Lender or any Agent  under this
         Section 3.13, the interest  payable by such Borrower or Borrowers under
         this  Agreement  will be  increased  to the rate or rates  necessary to
         yield and remit to such  Lender or Agent  the  principal  sum  advanced
         together with  interest at the  applicable  rate or rates  specified in
         this Agreement after provision for payment of such Taxes. The Borrowers
         shall,  from time to time,  execute  and  deliver  any and all  further
         documents as may be

                                       53

<PAGE>



         necessary or  advisable to give full force and effect to such  increase
         in the rate or rates of interest.

         Each Lender agrees that if it subsequently  recovers, or receives a net
tax benefit with respect to, any amount of Taxes (i)  previously  paid by it and
as to which it has been  indemnified  by or on behalf of the  Borrowers  or (ii)
previously  deducted or withheld by the Borrowers,  such Lender shall  reimburse
the  Borrowers to the extent of the amount of any such recovery or permanent net
tax benefit (but only to the extent of indemnity  payments  made,  or additional
amounts paid, by or on behalf of the Borrowers  under this Section  3.13(a) with
respect to Taxes giving rise to such recovery or tax benefit; provided, however,
that the  Borrowers,  upon the  request of such  Lender,  agree to repay to such
Lender the  amount  paid over to the  Borrowers  (together  with any  penalties,
interest or other  charges),  in the event such Lender is required to repay such
amount to the relevant taxing  authority or other  Governmental  Authority.  The
determination  by any  Lender  of the  amount  of any such  recovery  or net tax
benefit shall,  in the absence of manifest  error or reasonable  evidence to the
contrary, be conclusive and binding.

         (b) Stamp and Other Taxes.  In addition,  the  Borrowers  shall pay any
present or future stamp,  registration,  recordation or documentary taxes or any
other similar fees or charges or excise or property taxes,  levies of the United
States or any state or political  subdivision  thereof or any applicable foreign
jurisdiction  which arise from any payment made hereunder or from the execution,
delivery or registration  of, or otherwise with respect to, this Agreement,  the
Loans,  the other Loan  Documents,  or the  perfection of any rights or security
interest in respect thereto (hereinafter referred to as "Other Taxes").

         (c)  Indemnity.  The  Borrowers  shall  indemnify  each  Lender and the
Administrative  Agent for the full amount of Taxes and Other  Taxes  (including,
without  limitation,  any Taxes and Other Taxes imposed by any  jurisdiction  on
amounts   payable   under  this  Section  3.13)  paid  by  such  Lender  or  the
Administrative  Agent  (as  the  case  may  be)  and  any  liability  (including
penalties,  interest and expenses)  arising  therefrom or with respect  thereto,
whether or not such Taxes or Other  Taxes were  correctly  or legally  asserted.
Such indemnification shall be made within thirty (30) days from the date

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<PAGE>



such Lender or the Administrative Agent (as the case may be) makes
written demand therefor.

         (d) Evidence of Payment.  Within thirty (30) days after the date of any
payment of Taxes or Other Taxes,  the  affected  Borrower  shall  furnish to the
Administrative  Agent, at its address  referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment satisfactory to the Administrative Agent.

         (e) Survival.  Without prejudice to the survival of any other agreement
of the Borrowers  hereunder,  the  agreements  and  obligations of the Borrowers
contained  in  this  Section  3.13  shall  survive  the  payment  in full of the
Obligations and the termination of the Commitments.

         SECTION 3.14      Replacement Lenders.

         (a) Affected Lender. If (i) any Lender requests  compensation  pursuant
to Section 3.10(c), 3.12 or 3.13(a)(ii) or (ii) the obligation of the Lenders to
make LIBOR Rate Loans or to continue,  or to convert Base Rate Loans into, LIBOR
Rate Loans shall be suspended pursuant to Section 3.10(a) or (b) due to an event
affecting any Lender,  then, so long as there does not then exist any Default or
Event of Default,  the  Borrowers  may demand  that such  Lender (the  "Affected
Lender"),  and upon such demand the Affected Lender shall  promptly,  assign its
Commitment (and Finnish Mark Commitment,  if applicable) to an Eligible Assignee
selected by the Borrowers (which Eligible  Assignee shall have consented to such
assignment),  subject to and in accordance with Section 13.10(b), for a purchase
price equal to the Dollar Amount of the aggregate  principal amount of the Loans
then owing to the Affected Lender plus any accrued but unpaid interest  thereon,
accrued  but unpaid  fees and any other  amounts  owing to the  Affected  Lender
hereunder.   The  Administrative  Agent  shall  cooperate  in  effectuating  the
replacement  of an Affected  Lender under this Section  3.14(a),  but at no time
shall the  Administrative  Agent be obligated in any way  whatsoever to initiate
any such  replacement.  The exercise by the Borrowers of their rights under this
Section 3.14(a) shall be at the Borrowers' sole cost and expense, and at no cost
or expense of the Administrative  Agent, the Affected Lender or any of the other
Lenders.


                                       55

<PAGE>



         (b) Failed  Lender.  In the event any Lender  shall fail to meet any of
its  obligations  under Sections 2.1, 2.2, 2.3 or 2.4 (a "Failed  Lender"),  the
Borrowers  may demand  that the Failed  Lender,  and upon such demand the Failed
Lender shall promptly,  assign its Commitment (and Finnish Mark  Commitment,  if
applicable) to an Eligible  Assignee  selected by the Borrowers  (which Eligible
Assignee shall have consented to such assignment),  subject to and in accordance
with Section  13.10(b),  for a purchase  price equal to the Dollar Amount of the
aggregate principal amount of the Loans then owing to the Failed Lender plus any
accrued  but unpaid  interest  thereon,  accrued  but unpaid  fees and any other
amounts owing to the Failed Lender  hereunder.  The  Administrative  Agent shall
cooperate in effectuating  the replacement of a Failed Lender under this Section
3.14(b),  but at no time shall the Administrative  Agent be obligated in any way
whatsoever  to initiate any such  replacement.  The exercise by the Borrowers of
their rights under this Section 3.14(b) shall be at the Borrowers' sole cost and
expense,  and at no cost or expense of the  Administrative  Agent,  the Affected
Lender or any of the other Lenders.

                                   ARTICLE IV

                  CLOSING; CONDITIONS OF CLOSING AND BORROWING

         SECTION 4.1  Closing.  The  closing  shall take place at the offices of
Kennedy Covington Lobdell & Hickman, L.L.P., 100 North Tryon Street, Suite 4200,
Charlotte,  North  Carolina  28202 at 10:00 a.m. on April 30,  1997,  or on such
other date as the parties hereto
shall mutually agree.

         SECTION 4.2 Conditions to Closing and Initial Loans.  The obligation of
the Lenders to close this  Agreement  and to make the initial Loan is subject to
the satisfaction of each of the following conditions:

         (a)      Executed Loan Documents.  The following Loan Documents,
in form and substance satisfactory to the Administrative Agent and
each Lender:

                  (i)      this Agreement;

             (ii) the Five-Year Credit Agreement;


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<PAGE>


            (iii) the Revolving Credit Notes;

             (iv) the Finnish Mark Notes;

              (v) the Swingline Note;

             (vi) the Pledge Agreements; and

            (vii) the Subsidiary Guaranty Agreement;

shall have been duly authorized,  executed and delivered by the parties thereto,
shall be in full force and effect and no default or event of default shall exist
thereunder, and the Borrowers shall have delivered original counterparts thereof
to the  Administrative  Agent.  Notwithstanding  the  foregoing,  in  the  event
Applicable Laws or practices in the foreign  jurisdictions set forth on Schedule
4.2(a) attached hereto preclude or prevent the completion of a Pledge  Agreement
on or prior to the Closing Date,  the Borrower  shall not be required to deliver
the  Pledge  Agreements  set forth on  Schedule  4.2(a)  attached  hereto on the
Closing Date; provided that the Borrower shall deliver the Pledge Agreements set
forth on Schedule  4.2(a)  attached hereto as soon as possible after the Closing
Date and, in any event, within ninety (90) days of the Closing Date.

         (b)      Closing Certificates; etc.

          (i) Officers's Certificate of the Borrowers.  The Administrative Agent
     shall have received a signed  certificate from the chief executive  officer
     or chief financial officer of BREED, in form and substance  satisfactory to
     the Administrative  Agent, to the effect that to the best of such officer's
     knowledge all  representations and warranties of the Borrowers contained in
     this Agreement and the other Loan Documents are true, correct and complete;
     that the Borrowers  are not in violation of any of the covenants  contained
     in this Agreement and the other Loan Documents;  that,  after giving effect
     to the transactions  contemplated by this Agreement, no Default or Event of
     Default  has  occurred  and is  continuing;  and  that the  Borrowers  have
     satisfied each of the closing conditions.

             (ii) Certificate of Secretary of each Loan Party.  The
Administrative Agent shall have received a signed certificate of
the secretary or assistant secretary of each Loan Party certifying that attached
thereto is a true and complete  copy of the articles of  incorporation  or other
charter documents of such Loan Party and all amendments thereto, certified as of
a recent date by the appropriate  Governmental  Authority in its jurisdiction of
incorporation;  that attached  thereto is a true and complete copy of the bylaws
of such Loan Party as in effect on the date of such  certification;  that,  with
respect to each Borrower and each Subsidiary  Guarantor,  attached  thereto is a
true and complete copy of resolutions  duly adopted by the Board of Directors of
such  Borrower  or  such   Subsidiary   Guarantor   authorizing  the  borrowings
contemplated  hereunder  and the  execution,  delivery and  performance  of this
Agreement and the other Loan Documents to which it is a party; and, with respect
to each  Borrower  and  each  Subsidiary  Guarantor,  as to the  incumbency  and
genuineness of the signature of each officer of such Borrower or such Subsidiary
Guarantor  executing Loan Documents to which it is a party.  Notwithstanding the
foregoing,  to the extent any such  organizational  documents  described in this
subsection  (b)(ii)  cannot be provided  due to their  unavailability  under the
Applicable Laws or practices in the foreign  jurisdictions set forth on Schedule
4.2(b) attached hereto, the applicable Borrower shall not be required to deliver
such  organizational  documents  but  shall  deliver  such  evidence  of its due
incorporation  and  valid  existence  as shall  be  required  in the  reasonable
discretion of the Administrative Agent.

            (iii) Certificates of Good Standing.  The Administrative Agent shall
have  received  certificates  as of a recent  date of the good  standing of each
Borrower  and  Subsidiary   Guarantor   under  the  laws  of  their   respective
jurisdictions of organization and each other jurisdiction where such Borrower or
such  Subsidiary  Guarantor is qualified  to do  business.  Notwithstanding  the
foregoing,  to the extent any such  certificates  described  in this  subsection
(b)(iii)  cannot be provided due to their  unavailability  under the  Applicable
Laws or  practices  in the foreign  jurisdictions  set forth on Schedule  4.2(b)
attached hereto,  the applicable  Borrower shall not be required to deliver such
certificates but shall deliver such evidence of its qualification to do business
in such  jurisdiction  as shall be required in the reasonable  discretion of the
Administrative Agent.

             (iv)  Opinions  of  Counsel.  The  Administrative  Agent shall have
received favorable opinions of United States, United Kingdom,  Italian,  German,
Finnish,   and  Canadian   counsel  to  the  Loan   Parties   addressed  to  the
Administrative  Agent and the Lenders with respect to the Loan Parties, the Loan
Documents and such other matters as the Lenders shall request,  each in form and
substance satisfactory to the Administrative Agent and the Lenders.

         (c)      Collateral.

                  (i)      Pledged Stock or Equivalent Security.  The
Administrative  Agent  shall  have  received,  as  applicable,   original  stock
certificates or other  equivalent  security  interest (or the equivalent  taking
into  account  the  Applicable  Laws  and  practices  of  any  relevant  foreign
jurisdiction) of each A/C Borrower and each Material  Subsidiary  evidencing the
capital  stock  pledged  pursuant  to  the  Pledge  Agreements  executed  by the
applicable  A/C Borrower or Material  Subsidiary,  together with an  appropriate
undated  stock  power  for  each  certificate  duly  executed  in  blank  by the
registered owner thereof.

             (ii) Filings and  Recordings.  All filings,  recordations,  and any
other  actions  that are  necessary  to perfect the  security  interests  of the
Lenders in the  Collateral  described in the Pledge  Agreements  shall have been
filed in all  appropriate  locations  and the  Administrative  Agent  shall have
received evidence  satisfactory to the  Administrative  Agent that such security
interests constitute valid and perfected first priority Liens therein.

            (iii) Foreign Security  Interests and Filings.  Notwithstanding  the
provisions of the foregoing  subsections (c)(i) and (c)(ii),  with regard to any
Foreign  Subsidiary  whose stock is to be pledged  hereunder,  the Borrowers may
evidence their  compliance with such  subsections by providing a perfected first
priority security interest (or the equivalent thereof pursuant to the Applicable
Laws and practices of any relevant foreign jurisdiction) in the relevant indicia
of ownership of such  Foreign  Subsidiary;  provided  that the  Borrowers  shall
provide  an  opinion  of  counsel  in form  and  substance  satisfactory  to the
Administrative  Agent as to the  perfection,  validity and binding nature of the
security  interest  so  obtained.  Moreover,  in the  event  Applicable  Laws or
practices in the foreign  jurisdictions  set forth on Schedule  4.2(a)  attached
hereto  preclude or prevent  the  completion  of  documentation  evidencing  the
security  interest  referenced in subsection  (c)(i) or the filing and recording
referenced in subsection  (c)(ii) on or prior to the Closing Date,  the Borrower
shall not be required to have  completed  and obtained  the security  interests,
filings and  recordings  set forth on  Schedule  4.2(a)  attached  hereto on the
Closing Date;  provided that the Borrower shall complete and obtain the security
interests,  filings and recordings set forth on Schedule  4.2(a) attached hereto
as soon as possible after the Closing Date and, in any event, within ninety (90)
days of the Closing Date.

             (iv) Insurance.  The  Administrative  Agent shall have received the
schedule of insurance as set forth on Schedule 4.2(c) in the form required under
Section  7.3  and   otherwise  in  form  and  substance   satisfactory   to  the
Administrative Agent.

         (d)      Consents; Defaults.

                  (i)      Governmental and Third Party Approvals.  All
necessary approvals, authorizations and consents, if any are
required,  of any Person and of all  Governmental  Authorities and courts having
jurisdiction with respect to the transactions contemplated by this Agreement and
the other Loan Documents shall have been obtained.

             (ii)  Permits and  Licenses.  All permits and  licenses,  including
permits and licenses  required under Applicable Laws, the absence of which would
have a  Material  Adverse  Effect on the  current  conduct  of  business  by the
Borrowers and their Subsidiaries, shall have been obtained.

            (iii) No  Injunction,  Etc.  No action,  proceeding,  investigation,
regulation or  legislation  shall have been institut ed,  threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial  damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the  consummation  of the  transactions
contemplated  hereby  or  thereby,  or  which,  in  the  Administrative  Agent's
discretion,   would  make  it  inadvisable   to  consummate   the   transactions
contemplated by this Agreement and such other Loan Documents.

             (iv) No Material Adverse Change.  There shall not have occurred any
material adverse change in the condition  (financial or otherwise),  operations,
properties,  business or prospects of the Borrowers and their Subsidiaries taken
as a whole,  or any  event  or  condition  that  has had or could be  reasonably
expected to have a Material Adverse Effect.

              (v) No Event of Default.  No Default or Event of Default
shall have occurred and be continuing.

         (e)      Financial Matters.

                  (i) Financial Statements.  The Administrative Agent shall have
received the most recent audited Consolidated  financial statements of BREED and
its Subsidiaries,  all in form and substance  satisfactory to the Administrative
Agent and prepared in accordance with GAAP.

             (ii) Financial Condition Certificate. BREED shall have delivered to
the Administrative  Agent a certificate,  in form and substance  satisfactory to
the  Administrative  Agent,  and  certified  as accurate by the chief  executive
officer  or chief  financial  officer  of BREED,  that (A) BREED and each of its
Subsidiaries  are  each  Solvent,  (B) the  payables  of  BREED  and each of its
Subsidiaries  are current and not past due, (C) attached  thereto is a pro forma
balance sheet of BREED and its  Subsidiaries  setting forth on a pro forma basis
the financial condition of BREED and its Subsidiaries on a Consolidated basis as
of  March  31,  1997,  reflecting  on a  pro  forma  basis  the  effect  of  the
transactions contemplated herein, including all fees and expenses in connection
therewith;  evidencing  compliance  on a pro  forma  basis  with  the  covenants
contained  in  Articles  VIII and IX  hereof;  and  setting  forth the pro forma
calculation of the Applicable Margin pursuant to Section 3.1(c) and (D) attached
thereto are the financial projections previously delivered to the Administrative
Agent  representing  the good  faith  opinions  of BREED and  senior  management
thereof as to the projected results contained therein.

            (iii)  Payment  at  Closing.  There  shall  have  been  paid  by the
Borrowers  to the  Administrative  Agent and the  Lenders  the fees set forth or
referenced in Section 3.3 and any other  accrued and unpaid fees or  commissions
due hereunder (including,  without limitation,  legal fees and expenses), and to
any other  Person  such  amount as may be due  thereto  in  connection  with the
transactions contemplated hereby, including all taxes, fees and other charges in
connection with the execution,  delivery,  recording, filing and registration of
any of the Loan Documents.

         (f)      Miscellaneous.

              (i)  Notice of  Borrowing.  The  Administrative  Agent  shall have
received a Notice of Borrowing  from the  Borrowers in  accordance  with Section
2.4(a), and a written notice in the form attached hereto as Exhibit G (a "Notice
of  Account  Designation")  specifying  the  account  or  accounts  to which the
proceeds of any Loans made after the Closing Date are to be disbursed.

             (ii)  Proceedings  and  Documents.  Subject  to the  provisions  of
Section  4.2(a) and (c) relating to the effects of Applicable  Laws or practices
in foreign jurisdictions,  all opinions,  certificates and other instruments and
all  proceedings  in  connection  with  the  transactions  contemplated  by this
Agreement shall be  satisfactory in all material  respects in form and substance
to the Lenders.  The Lenders shall have received copies of all other instruments
and other evidence as any Lender may reasonably  request,  in form and substance
satisfactory to the Lenders,  with respect to the  transactions  contemplated by
this Agreement and the taking of all actions in connection therewith.

            (iii) Due Diligence and Other Documents. The Loan Parties shall have
delivered to the  Administrative  Agent such other  documents,  certificates and
opinions as the Administrative Agent reasonably requests.

         (g) Termination of the Existing Credit  Agreement.  On the Closing Date
hereunder, all loans under the Existing Credit Agreement shall be repaid in full
and the commitments and other  obligations and rights of the lenders  thereunder
shall be terminated.

         SECTION 4.3       Conditions to All Loans. The obligation of any
Lender to make any Loan (subject to Section 2.3(b) with respect to
refunding  or  participating  in  Swingline  Loans)  hereunder is subject to the
satisfaction of the following  conditions precedent on the relevant borrowing or
issue date:

         (a) Continuation of Representations and Warranties. The representations
and warranties  contained in the Loan Documents (other than the  representations
and  warranties  made only as of a specific date) shall be true and correct with
the same effect as though such  representations  and warranties had been made on
and as of such borrowing  date,  except to the extent that such  representations
and  warranties  are no longer  true or correct as a result of events,  actions,
transactions or occurrences after the Closing Date which are expressly permitted
under the terms of this Agreement.

         (b) No  Existing  Default.  No Default  or Event of Default  shall have
occurred and be continuing  hereunder on the borrowing date with respect to such
Loan or after giving effect to the Loans to be made on such date.

         (c)  Officer's  Compliance  Certificate;   Additional  Documents.   The
Administrative  Agent  shall have  received  the  current  Officer's  Compliance
Certificate and each  additional  document,  instrument,  legal opinion or other
item of information reasonably requested by it.


                                    ARTICLE V

                 REPRESENTATIONS AND WARRANTIES OF THE BORROWERS

         SECTION   5.1   Representations   and   Warranties.   To   induce   the
Administrative  Agent to enter into this  Agreement  and the Lenders to make the
Loans, the Borrowers hereby  represent and warrant to the  Administrative  Agent
and Lenders that:

         (a)  Organization;   Power;  Qualification.   Each  of  BREED  and  its
Subsidiaries is duly organized,  validly existing and in good standing under the
laws of the jurisdiction of its  incorporation  or formation,  has the power and
authority  to own its  properties  and to carry on its business as now being and
hereafter  proposed to be conducted and is duly  qualified and  authorized to do
business in each  jurisdiction  in which the character of its  properties or the
nature of its business  requires such  qualification and  authorization,  except
where the failure to be so qualified  and  authorized  would not have a Material
Adverse  Effect.  The  jurisdictions  in which  BREED and its  Subsidiaries  are
organized and qualified to do business are described on Schedule 5.1(a).

          (b) Ownership.  The capitalization of BREED and its Subsidiaries as of
     the  Closing  Date  consists  of the  number of  shares or other  ownership
     interests,  authorized, issued and outstanding, of such classes and series,
     with or without par value,  described on Schedule  5.1(b).  All outstanding
     shares have been duly  authorized and validly issued and are fully paid and
     nonassessable.  The shareholders or owners of the Subsidiaries of BREED and
     the number of shares or other  ownership  interests owned by each as of the
     Closing Date are  described  on Schedule  5.1(b).  As of the Closing  Date,
     there are no outstanding stock purchase warrants,  subscriptions,  options,
     securities,  instruments or other rights of any type or nature  whatsoever,
     which are convertible  into,  exchangeable for or otherwise  provide for or
     permit the issuance of capital stock or other ownership  interests of BREED
     or its Subsidiaries, except as described on Schedule 5.1(b).

         (c) Authorization of Agreement,  Loan Documents and Borrowing.  Each of
BREED and its Subsidiaries has the right,  power and authority and has taken all
necessary  corporate and other action to authorize the  execution,  delivery and
performance  of this  Agreement and each of the other Loan Documents to which it
is a party in accordance with their respective terms. This Agreement and each of
the other Loan  Documents  have been duly  executed  and  delivered  by the duly
authorized  officers of BREED and each of its  Subsidiaries  party thereto,  and
each such document  constitutes the legal, valid and binding obligation of BREED
or such  Subsidiary  party thereto,  enforceable  in accordance  with its terms,
except  as  such   enforcement   may  be  limited  by  bankruptcy,   insolvency,
reorganization, moratorium or similar state, provincial or federal debtor relief
laws from time to time in effect  which  affect the  enforcement  of  creditors'
rights in general and the availability of equitable remedies.

         (d)  Compliance of Agreement,  Loan  Documents and Borrowing with Laws,
Etc. The execution,  delivery and  performance by BREED and its  Subsidiaries of
the Loan  Documents  to which each such Person is a party,  in  accordance  with
their  respective   terms,   the  borrowings   hereunder  and  the  transactions
contemplated  hereby do not and will not, by the passage of time,  the giving of
notice or otherwise,  (i) to the best of the Borrowers'  knowledge,  require any
Governmental  Approval or violate any Applicable Law relating to BREED or any of
its  Subsidiaries,  (ii)  conflict  with,  result in a breach of or constitute a
default  under the  articles of  incorporation,  bylaws or other  organizational
documents of BREED or any of its  Subsidiaries  or any  indenture,  agreement or
other  instrument  to  which  such  Person  is a party  or by  which  any of its
properties may be bound or any Governmental Approval relating to such Person, or
(iii) result in or require the creation or  imposition  of any Lien upon or with
respect to any  property  now owned or  hereafter  acquired by such Person other
than Liens arising under the Loan Documents.

         (e)      Compliance with Law; Governmental Approvals.  Each of
BREED and its Subsidiaries (i) has or is actively pursuing all
Governmental Approvals required by any Applicable Law for it to
conduct its  business,  each of which is in full force and effect,  is final and
not subject to review on appeal and is not the subject of any pending or, to the
best of its knowledge, threatened attack by direct or collateral proceeding, and
(ii) is in compliance with each  Governmental  Approval  applicable to it and in
compliance  with  all  other  Applicable  Laws  relating  to it or  any  of  its
respective  properties,  except  where the failure to so comply  would not have,
individually or in the aggregate, a Material Adverse Effect.

         (f) Tax Returns and Payments.  Each of BREED and its  Subsidiaries  has
duly filed or caused to be filed all federal, state, provincial, local and other
tax  returns  required  by  Applicable  Law to be filed,  and has paid,  or made
adequate provision for the payment of, all federal, state, provincial, local and
other  taxes,  assessments  and  governmental  charges or levies upon it and its
property, income, profits and assets which are due and payable, except where the
failure to so file or pay would not have,  individually  or in the aggregate,  a
Material  Adverse  Effect.  No  Governmental  Authority has asserted any Lien or
other claim against BREED or any Subsidiary thereof with respect to unpaid taxes
which has not been discharged or resolved. The charges, accruals and reserves on
the  books  of  BREED  and  its  Subsidiaries  in  respect  of  federal,  state,
provincial,  local and other  taxes for all Fiscal  Years and  portions  thereof
since the  organization  of BREED and its  Subsidiaries  are in the  judgment of
BREED  adequate,   and  BREED  does  not  anticipate  any  additional  taxes  or
assessments for any of such years.

         (g) Intellectual  Property Matters.  Each of BREED and its Subsidiaries
owns or possesses rights to use all franchises,  licenses, copyrights, copyright
applications,   patents,   patent  rights  or  licenses,   patent  applications,
trademarks,  trademark rights,  trade names,  trade name rights,  copyrights and
rights with respect to the foregoing which are required to conduct its business.
No event has occurred  which  permits,  or after notice or lapse of time or both
would permit,  the  revocation or  termination  of any such rights,  and neither
BREED nor any Subsidiary  thereof is liable to any Person for infringement under
Applicable  Law with  respect  to any such  rights as a result  of its  business
operations,  except where any such liability would not have,  individually or in
the aggregate, a Material Adverse Effect.

         (h)      Environmental Matters.  Subject to certain instances of
non-compliance which would not have, individually or in the
aggregate, a Material Adverse Effect on BREED and its Subsidiaries
taken as a whole:

                  (i)  The  properties  of  BREED  and its  Subsidiaries  do not
contain,  and to their  knowledge have not previously  contained,  any Hazardous
Materials in amounts or  concentrations  which (A)  constitute or  constituted a
violation   of,  or  (B)  could  give  rise  to  liability   under,   applicable
Environmental Laws;

             (ii) Such  properties  and all  operations  conducted in connection
therewith are in compliance,  and have been in  compliance,  with all applicable
Environmental  Laws,  and  there is no  contamination  at,  under or about  such
properties or such operations which could interfere with the continued operation
of such properties or impair the fair saleable value thereof;

            (iii)  Neither  BREED nor any  Subsidiary  thereof has  received any
notice of violation,  alleged violation,  noncompliance,  liability or potential
liability regarding  environmental matters or compliance with Environmental Laws
with regard to any of their properties or the operations conducted in connection
therewith,  nor does BREED or any Subsidiary thereof have knowledge or reason to
believe that any such notice will be received or is being threatened;

             (iv) Hazardous  Materials have not been  transported or disposed of
from the  properties  of BREED and its  Subsidiaries  in  violation  of, or in a
manner or to a location which could give rise to liability under,  Environmental
Laws,  nor have any  Hazardous  Materials  been  generated,  treated,  stored or
disposed  of at, on or under any of such  properties  in  violation  of, or in a
manner that could give rise to liability  under,  any  applicable  Environmental
Laws;

              (v) No judicial  proceedings  or  governmental  or  administrative
action is pending, or, to the knowledge of the Borrowers,  threatened, under any
Environmental  Law to which BREED or any Subsidiary  thereof is or will be named
as a party with respect to such properties or operations conducted in connection
therewith,  nor are there any consent decrees or other decrees,  consent orders,
administrative  orders or other  orders,  or other  administrative  or  judicial
requirements  outstanding  under  any  Environmental  Law with  respect  to such
properties or such operations; and

             (vi) There has been no  release,  or to the best  knowledge  of the
Borrowers,  the  threat  of  release,  of  Hazardous  Materials  at or from such
properties, in violation of or in amounts or in a manner that could give rise to
liability under Environmental Laws.

         (i) ERISA.  Subject to certain instances of non-compliance  which would
not have,  individually or in the aggregate,  a Material Adverse Effect on BREED
and its Subsidiaries taken as a whole:

                  (i)      Neither BREED nor any ERISA Affiliate maintains or
contributes to, or has any obligation under, any Employee Benefit
Plans other than those identified on Schedule 5.1(i);

             (ii) BREED and each ERISA Affiliate are in compliance
with all applicable provisions of ERISA 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 by the Internal  Revenue  Service to be so qualified,  and each trust
related to such plan has been  determined to be exempt under  Section  501(a) of
the Code. No 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;

            (iii) No Pension Plan has been  terminated,  nor has any accumulated
funding  deficiency  (as  defined  in  Section  412 of the Code)  been  incurred
(without  regard to any waiver  granted under Section 412 of the Code),  nor has
any funding waiver from the Internal  Revenue Service been received or requested
with respect to any Pension Plan, nor has BREED or any ERISA Affiliate failed to
make any  contributions  or to pay any  amounts  due and  owing as  required  by
Section 412 of the Code,  Section 302 of ERISA or the terms of any Pension  Plan
prior to the due dates of such  contributions  under  Section 412 of the Code or
Section  302 of ERISA,  nor has there been any event  requiring  any  disclosure
under  Section  4041(c)(3)(C)  or 4063(a) of ERISA with  respect to any  Pension
Plan;

             (iv) Neither BREED nor any ERISA Affiliate has:            (A)
engaged in a nonexempt prohibited transaction described in Section
406 of the ERISA or Section 4975 of the Code, (B) incurred any
liability to the PBGC which remains outstanding other than the
payment of premiums and there are no premium payments which are due
and unpaid, (C) failed to make a required contribution or payment
to a Multiemployer Plan, or (D) failed to make a required
installment or other required payment under Section 412 of the
Code;

                  (v)      No Termination Event has occurred or is reasonably
expected to occur; and

             (vi) No proceeding, claim, lawsuit and/or investigation is existing
or, to the best knowledge of BREED,  threatened  concerning or involving any (A)
employee  welfare  benefit plan (as defined in Section 3(1) of ERISA)  currently
maintained or contributed to by BREED or any ERISA  Affiliate,  (B) Pension Plan
or (C) Multiemployer Plan.

         (j)      Margin Stock.  Neither BREED nor any Subsidiary thereof
is engaged principally or as one of its activities in the business
of extending credit for the purpose of "purchasing" or "carrying"
any "margin stock" (as each such term is defined or used in
Regulations G and U of the Board of Governors of the Federal
Reserve System).  No part of the proceeds of any of the Loans will
be used  for  purchasing  or  carrying  margin  stock or for any  purpose  which
violates,  or which would be inconsistent  with, the provisions of Regulation G,
T, U or X of such Board of Governors.

         (k) Government Regulation.  Neither BREED nor any Subsidiary thereof is
an "investment company" or a company "controlled" by an "investment company" (as
each such term is  defined or used in the  Investment  Company  Act of 1940,  as
amended) and neither BREED nor any Subsidiary thereof is, or after giving effect
to any Loan will be,  subject to  regulation  under the Public  Utility  Holding
Company Act of 1935 or the  Interstate  Commerce  Act,  each as amended,  or any
other  Applicable  Law which  limits  its  ability  to incur or  consummate  the
transactions contemplated hereby.

         (l)      Material Contracts.  Each Material Contract is, and after
giving effect to the consummation of the transactions contemplated
by the Loan Documents will be, in full force and effect in
accordance with the terms thereof.

         (m) Employee Relations. Each of BREED and its Subsidiaries has a stable
work force in place and, as of the Closing Date, is not,  except as set forth on
Schedule 5.1(m), party to any collective  bargaining agreement nor has any labor
union been recognized as the representative of its employees.  BREED knows of no
pending,  threatened or contemplated  strikes, work stoppage or other collective
labor  disputes  involving  its employees or those of its  Subsidiaries,  except
those which would not have, individually or in the aggregate, a Material Adverse
Effect.

         (n) Burdensome Provisions.  Neither BREED nor any Subsidiary thereof is
a party to any indenture,  agreement,  lease or other instrument,  or subject to
any corporate or partnership  restriction,  Governmental  Approval or Applicable
Law which is so unusual or  burdensome  as in the  foreseeable  future  could be
reasonably   expected  to  have  a  Material  Adverse  Effect.   BREED  and  its
Subsidiaries do not presently anticipate that future expenditures needed to meet
the provisions of any statutes,  orders,  rules or regulations of a Governmental
Authority will be so burdensome as to have a Material Adverse Effect.

         (o) Financial  Statements.  The (i) audited Consolidated balance sheets
of BREED  and its  Subsidiaries  as of June 30,  1996  and the  related  audited
statements of income,  retained earnings and cash flows for the Fiscal Year then
ended  and  (ii)  unaudited   Consolidated   balance  sheet  of  BREED  and  its
Subsidiaries as of December 31, 1996 and related unaudited statements of income,
retained  earnings  and cash flows,  copies of which have been  furnished to the
Administrative  Agent and each  Lender,  are  complete  and  correct  and fairly
present  the  assets,  liabilities  and  financial  position  of  BREED  and its
Subsidiaries as at such dates,  and the results of the operations and changes of
financial position for the periods then ended. All such financial statements,
including  the  related  schedules  and notes  thereto,  have been  prepared  in
accordance with GAAP.  BREED and its  Subsidiaries  have no Debt,  obligation or
other unusual forward or long-term  commitment  which is not fairly reflected in
the foregoing financial statements or in the notes thereto.

         (p) No Material Adverse Change.  Since June 30, 1996, there has been no
material adverse change in the properties,  business, operations,  prospects, or
condition  (financial or otherwise) of BREED and its  Subsidiaries  and no event
has occurred or  condition  arisen that could  reasonably  be expected to have a
Material Adverse Effect.

         (q)  Solvency.  As of the Closing Date and after giving  effect to each
Loan  made  hereunder,  BREED  and its  Subsidiaries  taken  as a whole  will be
Solvent.

         (r) Titles to Properties.  Each of BREED and its  Subsidiaries has such
title to the real property owned or leased by it as is necessary or desirable to
the conduct of its  business  and valid and legal  title to all of its  personal
property  and assets,  including,  but not limited to,  those  reflected  on the
balance  sheets of BREED and its  Subsidiaries  delivered  pursuant  to  Section
5.1(o),  except those which have been  disposed of by BREED or its  Subsidiaries
subsequent to such date which  dispositions  have been in the ordinary course of
business or as otherwise expressly permitted hereunder.

         (s) Liens. None of the properties and assets of BREED or any Subsidiary
thereof is subject to any Lien, except Liens permitted  pursuant to Section 9.3.
No  financing  statement  or  application  for  registration  under the  Uniform
Commercial  Code of any state or personal  property  security  legislation as to
registration  of security on movable  property of any other  jurisdiction  which
names BREED or any Subsidiary  thereof or any of their respective trade names or
divisions as debtor or grantor and which has not been terminated, has been filed
in any state or other  jurisdiction and neither BREED nor any Subsidiary thereof
has signed any such financing  statement or application for  registration or any
security  agreement  authorizing  any secured party  thereunder to file any such
financing  statement or application  for  registration,  except to perfect those
Liens permitted by Section 9.3 hereof.

         (t) Debt and Contingent Obligations.  Schedule 5.1(t) is a complete and
correct  listing  of all  Debt  and  Contingent  Obligations  of  BREED  and its
Subsidiaries  as of the  Closing  Date in  excess of  $2,500,000.  BREED and its
Subsidiaries  have performed and are in compliance with all of the terms of such
Debt and Contingent  Obligations  and all  instruments  and agreements  relating
thereto,  and no default or event of default,  or event or condition  which with
notice or lapse of time or both would constitute such a
default or event of default on the part of BREED or its Subsidiaries exists with
respect to any such Debt or Contingent Obligation.

         (u) Litigation.  Except as set forth on Schedule  5.1(u),  there are no
actions, suits or proceedings pending nor, to the knowledge of BREED, threatened
against or in any other way  relating  adversely  to or  affecting  BREED or any
Subsidiary thereof or any of their respective  properties in any court or before
any arbitrator of any kind or before or by any Governmental  Authority which, if
adversely determined,  would have,  individually or in the aggregate, a Material
Adverse Effect.

         (v)      Absence of Defaults.  No event has occurred or is
continuing which constitutes a Default or an Event of Default.

         (w) Accuracy and Completeness of Information.  All written information,
reports  and  other  papers  and data  produced  by or on behalf of BREED or any
Subsidiary  thereof and furnished to the Lenders were, at the time the same were
so furnished,  to the best knowledge of the  Borrowers,  complete and correct in
all respects to the extent  necessary to give the  recipient a true and accurate
knowledge of the subject matter. No document furnished or written statement made
to the Administrative Agent or the Lenders by BREED or any Subsidiary thereof in
connection with the  negotiation,  preparation or execution of this Agreement or
any of the  Loan  Documents  contains  or  will  contain  any  knowingly  untrue
statement  of  a  fact  material  to  the   creditworthiness  of  BREED  or  its
Subsidiaries  or knowingly omits or will omit to state a fact necessary in order
to make the statements  contained therein not misleading.  BREED is not aware of
any facts  which it has not  disclosed  in writing to the  Administrative  Agent
having a Material  Adverse Effect,  or insofar as the Borrowers can now foresee,
which could reasonably be expected to have a Material Adverse Effect.

         SECTION 5.2  Survival  of  Representations  and  Warranties,  Etc.  All
representations   and   warranties   set  forth  in  this   Article  V  and  all
representations and warranties contained in any certifi cate, or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this  Agreement.  All  representations  and warranties
made  under this  Agreement  shall be made or deemed to be made at and as of the
Closing  Date,  shall  survive the  Closing  Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders or any borrowing hereunder.


                                   ARTICLE VI

                        FINANCIAL INFORMATION AND NOTICES

         Until all the Obligations have been finally and  indefeasibly  paid and
satisfied  in full  and the  Commitments  terminated,  unless  consent  has been
obtained in the manner set forth in Section  13.11 hereof,  the  Borrowers  will
furnish  or  cause  to  be  furnished  to  the   Administrative   Agent  at  the
Administrative  Agent's  Office at the address set forth in Section  13.1 hereof
and to the  Lenders  at their  respective  addresses  as set  forth on  Schedule
1.1(b),  or such other office as may be designated by the  Administrative  Agent
and Lenders from time to time:

         SECTION 6.1       Financial Statements and Projections.

         (a) Quarterly Financial  Statements.  As soon as practicable and in any
event  within  forty-five  (45) days after the end of each  fiscal  quarter,  an
unaudited  Consolidated  and  consolidating  balance  sheet  of  BREED  and  its
Subsidiaries  as of the close of such fiscal quarter and unaudited  Consolidated
and consolidating statements of income, retained earnings and cash flows for the
fiscal  quarter  then  ended and that  portion of the  Fiscal  Year then  ended,
including  the  notes  thereto,  all  in  reasonable  detail  setting  forth  in
comparative  form the  corresponding  figures for the preceding  Fiscal Year and
prepared  by BREED in  accordance  with  GAAP  and,  if  applicable,  containing
disclosure of the effect on the  financial  position or results of operations of
any change in the application of accounting  principles and practices during the
period,  and certified by the chief financial officer of BREED to present fairly
in all material  respects the financial  condition of BREED and its Subsidiaries
as of their  respective  dates and the  results of  operations  of BREED and its
Subsidiaries for the respective  periods then ended,  subject to normal year end
adjustments.

         (b) Annual  Financial  Statements.  As soon as  practicable  and in any
event  within  ninety  (90) days after the end of each Fiscal  Year,  an audited
Consolidated balance sheet of BREED and its Subsidiaries as of the close of such
Fiscal  Year,  an  unaudited  consolidating  balance  sheet  of  BREED  and  its
Subsidiaries  as of the close of such  Fiscal  Year,  and  audited  Consolidated
statements of income,  retained earnings and cash flows for the Fiscal Year then
ended and unaudited  consolidating  statements of income,  retained earnings and
cash flows for the Fiscal Year then ended,  including the notes thereto,  all in
reasonable  detail setting forth in comparative form the  corresponding  figures
for the preceding  Fiscal Year and prepared by an independent  certified  public
accounting firm acceptable to the  Administrative  Agent in accordance with GAAP
(except  with  regard  to  the  unaudited  consolidating  financial  statements,
retained  earnings  and  cash  flows  which  shall  only  be  reviewed  by  such
independent certified public accounting firm) and,
if applicable,  containing disclosure of the effect on the financial position or
results of operation of any change in the  application of accounting  principles
and  practices  during the year,  and  accompanied  by a report  thereon by such
certified  public  accountants  that is not  qualified  with  respect  to  scope
limitations  imposed  by BREED or any of its  Subsidiaries  or with  respect  to
accounting  principles  followed  by  BREED  or any of its  Subsidiaries  not in
accordance with GAAP.

         (c)  Annual  Business  Plan  and  Financial  Projections.  As  soon  as
practicable and in any event within  forty-five (45) days prior to the beginning
of each  Fiscal  Year,  a business  plan of BREED and its  Subsidiaries  for the
ensuing  four  (4)  fiscal  quarters,  such  plan  to be  prepared  in a  manner
consistent  with GAAP and to include,  on a quarterly  basis,  the following:  a
quarterly operating and capital budget, a projected income statement,  statement
of cash flows and balance sheet and a report containing  management's discussion
and analysis of such  projections,  accompanied by a certificate  from the chief
financial  officer of BREED to the effect  that,  to the best of such  officer's
knowledge,  such projections are good faith estimates of the financial condition
and operations of BREED and its Subsidiaries for such four (4) quarter period.

         SECTION 6.2 Officer's  Compliance  Certificate.  At each time financial
statements  are delivered  pursuant to Sections  6.1(a) or (b) and at such other
times as the Administrative Agent shall reasonably request, a certificate of the
chief  financial  officer  or the  treasurer  of BREED in the form of  Exhibit E
attached hereto (an "Officer's Compliance Certificate"):

         (a) stating that such officer has reviewed  such  financial  statements
and such  statements  fairly  present the  financial  condition of BREED and its
Subsidiaries as of the dates  indicated and the results of their  operations and
cash flows for the periods indicated;

         (b) stating  that to such  officer's  knowledge,  based on a reasonable
examination, no Default or Event of Default exists, or, if such is not the case,
specifying  such  Default or Event of Default and its nature,  when it occurred,
whether it is continuing and the steps being taken by the Borrowers with respect
to such Default or Event of Default; and

         (c) setting forth as at the end of such fiscal  quarter or Fiscal Year,
as the case may be, the calculations  required to establish whether or not BREED
and its Subsidiaries  were in compliance with the financial  covenants set forth
in Article VIII hereof as at the end of each respective  period, the calculation
of the  Applicable  Margin  pursuant  to  Section  3.1(c)  as at the end of each
respective period, and the calculation of the total assets of each Subsidiary of
BREED  for  the  purpose  of  determining   which   Subsidiaries   are  Material
Subsidiaries.

         SECTION 6.3 Accountants' Certificate. At each time financial statements
are  delivered  pursuant to Section  6.1(b),  a certificate  of the  independent
public  accountants  certifying  such  financial  statements  addressed  to  the
Administrative Agent for the benefit of the Lenders:

         (a)  stating  that  in  making  the   examination   necessary  for  the
certification  of such financial  statements,  they obtained no knowledge of any
Default or Event of Default or, if such is not the case, specifying such Default
or Event of Default and its nature and period of existence; and

         (b) including the calculations prepared by such accountants required to
establish  whether or not BREED and its  Subsidiaries are in compliance with the
financial  covenants  set  forth in  Article  VIII  hereof as at the end of each
respective period.

         SECTION 6.4       Other Reports.

         (a) Promptly but in any event within ten (10)  Business  Days after the
filing  thereof,  a copy of (i) each report or other filing made by BREED or any
of its Subsidiaries with the Securities and Exchange  Commission and required by
the SEC to be delivered to the shareholders of BREED or any of its Subsidiaries,
(ii) each report made by BREED or any of its Subsidiaries to the SEC on Form 8-K
and (iii) each final registration  statement of BREED or any of its Subsidiaries
filed with the SEC; and

         (b) Such other information  regarding the operations,  business affairs
and  financial   condition  of  BREED  or  any  of  its   Subsidiaries   as  the
Administrative Agent or any Lender may reasonably request.

         SECTION 6.5 Notice of Litigation and Other  Matters.  Prompt (but in no
event later than ten (10) Business Days after an officer of any Borrower obtains
knowledge thereof) telephonic and written notice of:

         (a) the commencement of all proceedings and investigations by or before
any  Governmental  Authority  and all actions  and proceed  ings in any court or
before any arbitrator  against or involving  BREED or any Subsidiary  thereof or
any of their respective properties, assets or businesses, which could reasonably
be  expected  to result in  liabilities  to BREED or any  Subsidiary  thereof in
excess of $25,000,000 or could reasonably be expected to have a Material Adverse
Effect;

         (b) any notice of any  violation  received  by BREED or any  Subsidiary
thereof from any Governmental  Authority,  including,  without  limitation,  any
notice of violation of  Environmental  Laws,  except such violations which would
not have a Material Adverse Effect;

         (c) any labor  controversy that has resulted in, or threatens to result
in, a strike or other  work  action  against  BREED or any  Subsidiary  thereof,
except such controversies which would not have a Material Adverse Effect;

         (d)      any attachment, judgment, lien, levy or order exceeding
$250,000 that may be assessed against or threatened against BREED
or any Subsidiary thereof;

         (e)      any Default or Event of Default;

         (f) 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) (i) any unfavorable  determination letter from the Internal Revenue
Service  regarding the  qualification  of an Employee Benefit Plan under Section
401(a) of the Code (along  with a copy  thereof),  (ii) all notices  received by
BREED or any ERISA  Affiliate of the PBGC's intent to terminate any Pension Plan
or to have a trustee appointed to administer any Pension Plan, (iii) 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 and (iv) any Borrower  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; and

         (h)      any event which makes any of the representations set
forth in Section 5.1 inaccurate in any respect.

         SECTION 6.6 Accuracy of Information. All written information,  reports,
statements  and other papers and data  furnished by or on behalf of any Borrower
to the  Administrative  Agent or any Lender  (other  than  financial  forecasts)
whether pursuant to this Article VI or any other provision of this Agreement, or
any of the Security  Documents,  shall be, at the time the same is so furnished,
to the best of the  Borrowers'  knowledge,  complete and correct in all material
respects to the extent necessary to give the Administrative  Agent or any Lender
complete,  true  and  accurate  knowledge  of the  subject  matter  based on the
applicable Borrower's knowledge thereof.


                                  ARTICLE VII

                              AFFIRMATIVE COVENANTS

         Until all of the Obligations  have been finally and  indefeasibly  paid
and satisfied in full and the  Commitments  terminated,  unless consent has been
obtained in the manner  provided for in Section  13.11,  each  Borrower will and
will cause each of its Subsidiaries to:

         SECTION 7.1  Preservation of Corporate  Existence and Related  Matters.
Except as permitted by Section 9.5, preserve and maintain its separate corporate
or legal existence and all rights, franchises, licenses and privileges necessary
to the conduct of its  business,  and qualify and remain  qualified as a foreign
corporation  and  authorized  to do business in each  jurisdiction  in which the
failure to so qualify could  reasonably  be expected to have a Material  Adverse
Effect.

         SECTION 7.2 Maintenance of Property.  Except where the failure to do so
would not have,  individually  or in the aggregate,  a Material  Adverse Effect,
protect and preserve  all  properties  useful in and  material to its  business,
including  copyrights,  patents,  trade names and  trademarks;  maintain in good
working order and condition all buildings, equipment and other tangible real and
personal property;  and from time to time make or cause to be made all renewals,
replacements  and  additions to such  property  necessary for the conduct of its
business,  so that  the  business  carried  on in  connection  therewith  may be
properly and advantageously conducted at all times.

         SECTION 7.3 Insurance.  Maintain  insurance with financially  sound and
reputable  insurance  companies  against  such risks and in such  amounts as are
customarily  maintained  by  similar  businesses  and  as  may  be  required  by
Applicable Law, and on the Closing Date and from time to time thereafter deliver
to the  Administrative  Agent upon its request a detailed  list of the insurance
then in effect, stating the names of the insurance companies, the amounts of the
insurance,  the dates of the  expiration  thereof and the  properties  and risks
covered thereby.

         SECTION  7.4  Accounting  Methods  and  Financial  Records . Maintain a
system of accounting,  and keep such books, records and accounts (which shall be
true and  complete  in all  material  respects)  as may be required or as may be
necessary to permit the  preparation of financial  statements in accordance with
GAAP.

         SECTION 7.5 Payment and Performance of Obligations. Pay and perform all
Obligations  under  this  Agreement  and the other  Loan  Documents,  and pay or
perform (a) all taxes,  assessments and other  governmental  charges that may be
levied or  assessed  upon it or any of its  property  to the extent  such taxes,
assessments  or  other  charges  are  then due and  payable,  and (b) all  other
indebtedness,  obligations  and  liabilities in accordance  with customary trade
practices; provided, that such Borrower or such Subsidiary may
contest any item  described  in clauses (a) and (b) of this  Section 7.5 in good
faith so long as  adequate  reserves  are  maintained  with  respect  thereto in
accordance with GAAP.

         SECTION 7.6 Compliance  With Laws and Approvals.  Observe and remain in
compliance  with all  Applicable  Laws and maintain in full force and effect all
Governmental  Approvals, in each case applicable to the conduct of its business,
except  where  the  failure  to do so would  not  have,  individually  or in the
aggregate, a Material Adverse Effect.

         SECTION 7.7 Environmental Laws. In addition to and without limiting the
generality  of Section  7.6,  except  where the failure to do so would not have,
individually or in the aggregate,  a Material  Adverse Effect,  (a) comply with,
and ensure such  compliance by all tenants and  subtenants,  if any,  with,  all
applicable  Environmental  Laws and  obtain and comply  with and  maintain,  and
ensure that all tenants and subtenants obtain and comply with and maintain,  any
and all licenses, approvals, notifications, registrations or permits required by
applicable  Environmental  Laws,  (b) conduct and complete  all  investigations,
studies,  sampling  and testing,  and all  remedial,  removal and other  actions
required under  Environmental  Laws, and promptly  comply with all lawful orders
and directives of any Governmental  Authority regarding  Environmental Laws, and
(c)  defend,  indemnify  and hold  harmless  the  Administrative  Agent  and the
Lenders,  and their respective  parents,  Subsidiaries,  Affiliates,  employees,
agents, officers and directors, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise,  arising out of, or in any way
relating  to the  violation  of,  noncompliance  with  or  liability  under  any
Environmental  Laws  applicable  to the  operations  of  such  Borrower  or such
Subsidiary,  or any orders,  requirements or demands of Governmental Authorities
related  thereto,  including,  without  limitation,  reasonable  attorney's  and
consultant's  fees,  investigation  and laboratory fees,  response costs,  court
costs and  litigation  expenses,  except to the extent that any of the foregoing
directly  result from the gross  negligence  or willful  misconduct of the party
seeking indemnification therefor.

         SECTION 7.8 Compliance with ERISA. In addition to and without  limiting
the generality of Section 7.6, except where the failure to do so would not have,
individually or in the aggregate, a Material Adverse Effect, (a) comply with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Employee  Benefit Plans,  (b) not take any action
or fail to take action the result of which  could be a liability  to the PBGC or
to a Multiemployer Plan, (c) not participate in any prohibited  transaction that
could result in any civil penalty under ERISA or tax under the Code, (d) operate
each  Employee  Benefit  Plan in such a  manner  that  will  not  incur  any tax
liability under Section 4980B of the Code or any liability to
any  qualified  beneficiary  as  defined  in  Section  4980B of the Code and (e)
furnish to the Administrative Agent upon the Administrative Agent's request such
additional  information  about any Employee  Benefit  Plan as may be  reasonably
requested by the Administrative Agent.

         SECTION 7.9  Compliance  With  Agreements.  Comply in all respects with
each  term,  condition  and  provision  of  all  leases,  agreements  and  other
instruments  entered  into in the  conduct of its  business  including,  without
limitation,  any Material Contract,  except where the failure to so comply would
not have, individually or in the aggregate, a Material Adverse Effect; provided,
that such Borrower or such  Subsidiary may contest any such lease,  agreement or
other  instrument  in  good  faith  through  applicable  proceedings  so long as
adequate reserves are maintained in accordance with GAAP.

         SECTION  7.10  Conduct  of  Business.  Engage  only  in  businesses  in
substantially  the same fields as the  businesses  conducted on the Closing Date
(including,  without  limitation,  automotive  safety  products) and in lines of
business reasonably related thereto.

         SECTION  7.11 Visits and  Inspections.  Permit  representatives  of the
Administrative  Agent or any Lender, from time to time, to visit and inspect its
properties;  inspect, audit and make extracts from its books, records and files,
including,  but not  limited to,  management  letters  prepared  by  independent
accountants;  and  discuss  with its  principal  officers,  and its  independent
accountants, its business, assets, liabilities,  financial condition, results of
operations and business prospects.

         SECTION 7.12.     Additional Subsidiary Guarantors and Subsidiary
Pledgors.

         (a)  Upon  the  creation  or  acquisition  of  any  Material   Domestic
Subsidiary of BREED permitted by this Agreement and upon any Domestic Subsidiary
of BREED  becoming a Material  Domestic  Subsidiary of BREED as evidenced by the
information set forth in the Officer's Compliance Certificate delivered pursuant
to Section 6.2, cause to be executed and delivered to the  Administrative  Agent
upon the creation or acquisition of such new Material Domestic Subsidiary or the
determination pursuant to Section 6.2 that any existing Domestic Subsidiary is a
Material  Domestic  Subsidiary  (i) a  supplement  to  the  Subsidiary  Guaranty
Agreement  executed  by such new  Material  Domestic  Subsidiary,  (ii) a Pledge
Agreement or a supplement to Pledge Agreement, as applicable,  executed by BREED
or the  applicable  Subsidiary  pledging the capital  stock of such new Material
Domestic Subsidiary and a consent thereto executed by such new Material Domestic
Subsidiary   (including,   without   limitation,   original  stock  certificates
evidencing the capital stock of such new Material Domestic Subsidiary,  together
with an appropriate  undated stock power for each  certificate  duly executed in
blank by the registered owner thereof), (iii) the closing documents and
certificates  reasonably  required  by the  Required  Lenders  to be  delivered,
including,  without limitation,  officers'  certificates,  financial statements,
opinions of counsel,  board  resolutions,  charter  documents,  certificates  of
existence and authority to do business and any other  closing  certificates  and
documents  described in Section 4.2,  and (iv) such other  documents  reasonably
requested  by the  Required  Lenders  in order that such new  Material  Domestic
Subsidiary  shall become  bound by all of the terms,  covenants  and  agreements
contained in the  Subsidiary  Guaranty  Agreement  and the capital stock thereof
shall be pledged pursuant to the applicable Pledge Agreement.

         (b) Upon the creation or acquisition of any Material Foreign Subsidiary
of BREED  permitted by this  Agreement and upon any Foreign  Subsidiary of BREED
becoming a Material Foreign  Subsidiary of BREED as evidenced by the information
set forth in the Officer's Compliance  Certificate delivered pursuant to Section
6.2,  cause to be executed and  delivered to the  Administrative  Agent upon the
creation  or  acquisition  of  such  new  Material  Foreign  Subsidiary  or  the
determination  pursuant to Section 6.2 that any existing Foreign Subsidiary is a
Material  Foreign  Subsidiary  (i) a Pledge  Agreement or a supplement to Pledge
Agreement,  as  applicable,  executed  by  BREED  or the  applicable  Subsidiary
pledging the entire ownership interest of BREED or the applicable Subsidiary (up
to sixty-six (66%) of the total outstanding ownership interest or capital stock)
of such new Material  Foreign  Subsidiary and a consent thereto executed by such
new Material Foreign Subsidiary (including,  without limitation,  if applicable,
original  stock  certificates  evidencing the capital stock of such new Material
Foreign  Subsidiary,  together with an appropriate  undated stock power for each
certificate  duly executed in blank by the registered  owner thereof),  (ii) the
closing documents and certificates  reasonably  required by the Required Lenders
to  be  delivered,   including,  without  limitation,   officers'  certificates,
financial statements, opinions of counsel, board resolutions, charter documents,
certificates  of existence  and  authority to do business and any other  closing
certificates  and  documents  described  in  Section  4.2,  and (iii) such other
documents reasonably requested by the Required Lenders in order that the capital
stock of such new Material  Foreign  Subsidiary shall be pledged pursuant to the
applicable Pledge Agreement.  Notwithstanding  the provisions of subsections (i)
and (ii) above, with regard to any Material Foreign Subsidiary whose stock is to
be pledged  hereunder,  the provisions  regarding the delivery of original stock
certificates  and undated  stock  powers set forth in  subsections  (i) and (ii)
shall be satisfied upon evidence of (A) a perfected  security  interested in the
relevant indicia of ownership (or the equivalent thereof as determined  pursuant
to the Applicable Laws or practices of the relevant  foreign  jurisdiction)  and
(B)  an  opinion  of  counsel  in  form  and  substance   satisfactory   to  the
Administrative  Agent as to the  validity  and binding  nature of such  security
interest in the applicable  jurisdiction.  Furthermore,  in the event Applicable
Laws
or practices of the relevant foreign  jurisdiction shall preclude or prevent the
delivery of the Pledge  Agreement  and the necessary  filings and  recordings in
connection  therewith  as set  forth in  subsections  (i) and (ii)  above,  such
conditions  shall be  satisfied by the  Borrowers'  good faith effort to satisfy
such  conditions as soon as possible upon the creation of such Material  Foreign
Subsidiary  but, in any event,  within  ninety (90) days of the creation of such
Material Foreign Subsidiary.

         (c)  Notwithstanding  the  foregoing,  a  Subsidiary  formed  to  issue
Convertible  Preferred Stock (and whose sole asset is Intercompany Trust Debt or
amounts received thereon) shall not be required to become a Subsidiary Guarantor
nor shall any securities thereof be required to be pledged.

         SECTION 7.13  Intercompany  Notes.  As soon as  practicable  and in any
event within ninety (90) days after the Closing Date cause all intercompany Debt
existing on or arising  after such date to be evidenced by a written  promissory
note or notes.

         SECTION 7.14  Further  Assurances.  Make,  execute and deliver all such
additional and further acts, things, deeds and instruments as the Administrative
Agent or any Lender  may  reasonably  require to  document  and  consummate  the
transactions  contemplated  hereby  and to vest  completely  in and  insure  the
Administrative  Agent  and  the  Lenders  their  respective  rights  under  this
Agreement, the Notes and the other Loan Documents.


                                  ARTICLE VIII

                               FINANCIAL COVENANTS

         Until all of the Obligations  have been finally and  indefeasibly  paid
and satisfied in full and the  Commitments  terminated,  unless consent has been
obtained  in the  manner  set  forth in  Section  13.11  hereof,  BREED  and its
Subsidiaries on a Consolidated basis will not:

         SECTION  8.1.  Leverage  Ratio.  As of the end of any  fiscal  quarter,
permit the ratio of (a) the  Consolidated  Debt of BREED and its Subsidiaries as
of such date to (b) EBITDA of BREED and its  Subsidiaries for the period of four
(4) consecutive fiscal quarters ending on such date, to exceed 3.50 to 1.00.

         SECTION  8.2 Minimum  Net Worth.  As of the end of any fiscal  quarter,
permit  Net Worth to be less than (a)  $250,000,000  plus (b) 50% of  cumulative
Consolidated Net Income of BREED and its Subsidiaries commencing with the fiscal
quarter  ending  March 31, 1997  (without  deduction  for any  losses)  plus (c)
seventy-five  (75%)  of  the  net  proceeds  received  by  BREED  or  any of its
Subsidiaries  of any  Equity  Issuance  by  BREED  or  any  of its  Subsidiaries
subsequent
to the Closing Date,  plus (d) 75% of the net proceeds  received by BREED or any
of its Subsidiaries upon the issuance of any Convertible Preferred Stock.

         SECTION  8.3.  Interest  Coverage  Ratio.  As of the end of any  fiscal
quarter,  permit  the  ratio of (a) EBIT of BREED and its  Subsidiaries  for the
period  of four (4)  consecutive  fiscal  quarters  ending  on such  date to (b)
Interest Expense of BREED and its Subsidiaries for such period,  to be less than
3.00 to 1.00;  provided that during the period from and including March 31, 1997
through and including December 31, 1997, the ratio set forth in this Section 8.3
shall be  permitted  to be less than 3.00 to 1.00 as of the end of up to two (2)
fiscal  quarters;  provided further that (i) the ratio set forth in this Section
8.3 shall at no time during such period noted in the  preceding  proviso be less
than 2.75 to 1.00 and (ii) in the event the ratio set forth in this  Section 8.3
is less than 3.00 to 1.00, the Applicable Margin shall be adjusted in the manner
set forth in Section  3.1 and the  Facility  Fee Rate shall be  adjusted  in the
manner set forth in Section 3.3.


                                   ARTICLE IX

                               NEGATIVE COVENANTS

         Until all of the Obligations  have been finally and  indefeasibly  paid
and satisfied in full and the  Commitments  terminated,  unless consent has been
obtained in the manner set forth in Section 13.11 hereof, each Borrower will not
and will not permit any of its Subsidiaries to:

         SECTION 9.1  Limitations on Debt.  Create,  incur,  assume or suffer to
exist any Debt except:

         (a)      the Obligations;

         (b)  Debt  incurred  in  connection  with a  Hedging  Agreement  with a
counterparty  and upon  terms  and  conditions  reasonably  satisfactory  to the
Administrative  Agent (unless the  counterparty  to such Hedging  Agreement is a
Lender, in which such case the approval of the Administrative Agent shall not be
required);

         (c) Debt existing on the Closing Date and not otherwise permitted under
this  Section  9.1,  as set  forth  on  Schedule  5.1(t)  and  the  renewal  and
refinancing (but not the increase) thereof;

         (d)  Debt of  BREED  under a  Capitalized  Lease  with  respect  to the
construction  and  equipping of the VTI FAB2 Facility in Finland in an aggregate
amount not to exceed $25,000,000 on any date of determination;

         (e)      Debt of BREED and its Subsidiaries incurred in connection
with Capitalized Leases other than the Capitalized Lease described in clause (d)
above  in an  aggregate  amount  not  to  exceed  $10,000,000  on  any  date  of
determination;

         (f)      purchase money Debt of BREED and its Subsidiaries in an
aggregate amount not to exceed $25,000,000 on any date of
determination;

         (g)      Debt consisting of Contingent Obligations permitted by
Section 9.2;

         (h)      Debt of any Borrower or any Subsidiary Guarantor owing to
any other Borrower or any other Subsidiary Guarantor and
Intercompany Trust Debt;

         (i)      Subordinated Debt in an aggregate amount not to exceed
$100,000,000;

         (j) Senior Debt of any Borrower;  provided that (i) the Borrowers shall
have demonstrated pro forma compliance with each covenant  contained in Articles
VII, VIII and IX hereof prior to and following the incurrence of any such Senior
Debt and (ii) in  conjunction  with any Debt  permitted  by this  clause (j) the
Borrowers  shall  reduce  the  Aggregate  Commitment  in the manner set forth in
Section 2.7(b); and

         (k) unsecured Debt of the Borrower and its Subsidiaries  other than the
Debt  described in clauses (a) through (j) above in an  aggregate  amount not to
exceed $25,000,000 on any date of determination;

provided,  that  (i)  notwithstanding  any  of  the  foregoing  provisions,  BTI
Investments, FLDB Investments, Ltd. and BREED Technologies Finland, Oy shall not
be  permitted  to  incur  any Debt and  (ii)  none of the Debt  permitted  to be
incurred by this Section 9.1 shall  restrict,  limit or  otherwise  encumber (by
covenant or otherwise) the ability of any Subsidiary of any Borrower to make any
payment to any Borrower or any of its  Subsidiaries  (in the form of  dividends,
intercompany advances or otherwise) for the purpose of enabling the Borrowers to
pay the Obligations.

         SECTION 9.2  Limitations  on  Contingent  Obligations.  Create,  incur,
assume or suffer to exist any Contingent Obligations except:

         (a)      Contingent Obligations in favor of the Administrative
Agent for the benefit of the Administrative Agent and the Lenders;

         (b)      Contingent Obligations with respect to Debt permitted
pursuant to Section 9.1 (including any Trust Preferred Guarantee);

         (c)      Contingent Obligations existing on the Closing Date and
not otherwise permitted under this Section 9.2, as set forth on
Schedule 9.2; and
         (d)      Contingent Obligations other than the Contingent
Obligations described in clauses (a) through (c) above in an
aggregate amount not to exceed $15,000,000.

         SECTION 9.3 Limitations on Liens.  Create,  incur,  assume or suffer to
exist,  any  Lien  on or  with  respect  to  any  of its  assets  or  properties
(including,  without  limitation,  shares of  capital  stock or other  ownership
interests), real or personal, whether now owned or hereafter acquired, except:

         (a) Liens for  taxes,  assessments  and other  governmental  charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA or
Environmental  Laws)  not yet due or as to which the  period  of grace,  if any,
related  thereto has not expired or which are being  contested in good faith and
by  appropriate  proceedings  if adequate  reserves are maintained to the extent
required by GAAP;

         (b) the  claims  of  materialmen,  mechanics,  carriers,  warehousemen,
processors or landlords for labor,  materials,  supplies or rentals  incurred in
the ordinary course of business,  (i) which are not overdue for a period of more
than  thirty  (30) days or (ii) which are being  contested  in good faith and by
appropriate proceedings;

         (c) Liens consisting of deposits or pledges made in the ordinary course
of business in  connection  with,  or to secure  payment of,  obligations  under
workers' compensation, unemployment insurance or similar legislation;

         (d)  Liens   constituting   encumbrances   in  the   nature  of  zoning
restrictions,  easements and rights or restrictions of record on the use of real
property, which in the aggregate are not substantial in amount and which do not,
in any case,  detract from the value of such  property or impair the use thereof
in the ordinary conduct of business;

         (e)      Liens of the Administrative Agent for the benefit of the
Administrative Agent and the Lenders;

         (f)      Liens in existence on the Closing Date and not otherwise
permitted by this Section 9.3, as described on Schedule 9.3;

         (g) Liens  securing  Debt  permitted  under  Sections  9.1(e)  and (f);
provided, that (i) such Liens shall be created substantially simultaneously with
the  acquisition  or lease of the related  asset,  (ii) such Liens do not at any
time encumber any property other than the property  financed by such Debt, (iii)
the amount of Debt  secured  thereby  is not  increased  and (iv) the  principal
amount of Debt  secured  by any such Lien shall at no time  exceed  one  hundred
percent  (100%) of the original  purchase  price or lease payment stream of such
property at the time it was acquired or leased; and
         (h) Liens on the fixed  assets of  entities  permitted  to be  acquired
pursuant  to  Section  9.4;  provided  that any  Debt  permitted  in  connection
therewith  (i)  was  not  incurred  as a  part  of or in  anticipation  of  such
acquisition  and  (ii)  contains  terms,   conditions  and  provisions  no  more
restrictive than those provided under this Agreement.

         SECTION  9.4   Limitations   on  Loans,   Advances,   Investments   and
Acquisitions.  Purchase,  own,  invest  in or  otherwise  acquire,  directly  or
indirectly,  any capital  stock,  interests in any  partnership or joint venture
(including,   without   limitation,   the  creation  or  capitalization  of  any
Subsidiary), evidence of Debt or other obligation or security, substantially all
or a  portion  of the  business  or  assets  of any  other  Person  or any other
investment  or interest  whatsoever  in any other  Person,  or make or permit to
exist,  directly or indirectly,  any loans, advances or extensions of credit to,
or any  investment  in cash or by delivery of property in, any Person,  or enter
into,  directly  or  indirectly,  any  commitment  or option in  respect  of the
foregoing except:

         (a)      investments in Subsidiaries existing on the Closing Date
and the other existing loans, advances and investments described on
Schedule 9.4;

         (b)  investments  in  (i)  marketable  direct   obligations  issued  or
unconditionally guaranteed by the United States of America or any agency thereof
maturing  within three hundred and sixty (360) days from the date of acquisition
thereof,  (ii)  commercial  paper  maturing  no more than one hundred and twenty
(120) days from the date of creation  thereof and  currently  having the highest
rating obtainable from either Standard & Poor's Ratings Services,  a division of
The  McGraw-Hill  Companies,  Inc. or Moody's  Investors  Service,  Inc.,  (iii)
certificates of deposit  maturing no more than one hundred and twenty (120) days
from the date of creation  thereof issued by commercial  banks  incorporated  or
licensed  under the laws of the United States of America,  each having  combined
capital,  surplus and undivided profits of not less than $500,000,000 and having
a rating of "A" or better by a nationally  recognized  rating agency;  provided,
that the aggregate amount invested in such  certificates of deposit shall not at
any  time  exceed  $5,000,000  for any  one  such  certificate  of  deposit  and
$10,000,000  for any one such bank, or (iv) time deposits  maturing no more than
thirty  (30) days from the date of creation  thereof  with  commercial  banks or
savings banks or savings and loan  associations each having membership either in
the FDIC or the  deposits  of which are  insured by the FDIC and in amounts  not
exceeding the maximum amounts of insurance thereunder;

          (c)  investments  by BREED or any of its  Subsidiaries  in the form of
     acquisitions  of all or  substantially  all of the  business  or a line  of
     business  (whether  by the  acquisition  of  capital  stock,  assets or any
     combination  thereof) of any other Person if such acquisition  meets all of
     the following  requirements:  (i) the Person whose equity interest is to be
     acquired  shall be or,  as a result of such  acquisition  shall  become,  a
     Wholly-Owned  Subsidiary  of BREED and no Change in Control shall have been
     effected  thereby,  (ii) the Person whose equity interest is to be acquired
     shall engage in a business or the assets being acquired are to be used in a
     business  described  in Section  7.10,  (iii)  evidence  of approval of the
     acquisition  of the board of directors or equivalent  governing body of the
     acquired Person, including, without limitation, resolutions duly adopted by
     the board or directors or equivalent  governing body of the acquired Person
     authorizing the acquisition and the execution,  delivery and performance of
     any  transactions  contemplated  thereby,  shall have been delivered to the
     Administrative  Agent,  (iv) such  documents  reasonably  requested  by the
     Administrative  Agent  pursuant  to  Section  7.12  hereof  shall have been
     delivered  to the  Administrative  Agent,  (v)  the  Borrowers  shall  have
     demonstrated pro forma compliance with each covenant  contained in Articles
     VII,  VIII and IX  hereof  prior to  consummating  the  acquisition  and no
     Default or Event of Default  shall have  occurred  and be  continuing  both
     before and after giving effect to the  acquisition,  (vi) a description  of
     the acquisition and the governing  documentation  shall have been delivered
     to the  Administrative  Agent at least five (5) Business  Days prior to the
     consummation  of  the  acquisition  and  a  copy  of  the  final  governing
     documentation  shall  be  delivered  within a  reasonable  time  after  the
     acquisition,  and (vii) if such  acquisition or  investment,  if completed,
     would cause the aggregate  fair market value of all  consideration  paid in
     respect  of all such  acquisitions  or  investments  to exceed  $25,000,000
     during any Fiscal  Year,  the  Required  Lenders  shall have  consented  in
     writing to such acquisition or investment prior to the proposed acquisition
     or investment;

         (d)      intercompany loans and advances permitted pursuant to
Section 9.1(h);

         (e)      investments in Subsidiaries formed for the purpose of
issuing Convertible Preferred Stock of BREED or any of its
Subsidiaries;

         (f)      loans and advances to employees in the ordinary course of
business in an aggregate amount not to exceed $2,500,000 at any one
time; and

         (g)      investments in joint ventures and minority interest
investments in an aggregate amount not to exceed $25,000,000.

         SECTION 9.5 Limitations on Mergers and Liquidation.  Merge, consolidate
or enter  into any  similar  combination  with any other  Person  or  liquidate,
wind-up or dissolve itself (or suffer any liquidation or dissolution) except:

         (a) any  Wholly-Owned  Subsidiary  of BREED  may  merge  with any other
Wholly-Owned  Subsidiary of BREED;  provided,  that if any such  Subsidiary is a
Borrower or a Subsidiary Guarantor,  such Borrower or Subsidiary Guarantor shall
be the surviving entity;

         (b)      any Wholly-Owned Subsidiary may merge into the Person
such Wholly-Owned Subsidiary was formed to acquire in connection
with an acquisition permitted by Section 9.4(c);

         (c)      any Subsidiary of BREED may wind-up into any Borrower or
Subsidiary Guarantor; and

         (d) any  Subsidiary  formed to issue  Convertible  Preferred  Stock and
whose  sole  asset is  Intercompany  Trust  Debt may be  dissolved,  wound up or
liquidated.

         SECTION 9.6 Limitations on Sale of Assets. Convey, sell, lease, assign,
transfer  or  otherwise  dispose  of any of its  property,  business  or  assets
(including,  without  limitation,  the  sale of any  receivables  and  leasehold
interests and any sale-leaseback or similar  transaction),  whether now owned or
hereafter acquired except:

         (a)      the sale of inventory in the ordinary course of business;

         (b)      the sale of obsolete assets no longer used or usable in
the business of BREED or any of its Subsidiaries;

         (c)      the transfer of assets to any Borrower or Subsidiary
Guarantor pursuant to Section 9.5(c);

         (d)      the sale or discount without recourse of accounts
receivable arising in the ordinary course of business in connection
with the compromise or collection thereof;

         (e) the sale of  Non-Core  Assets  for cash or cash  equivalents  in an
aggregate  amount not to exceed  $100,000,000;  provided  that the Borrowers (i)
shall repay any  outstanding  Revolving  Credit  Loans in an amount equal to one
hundred percent (100%) of the Net Proceeds received from such sale in the manner
set forth in Section  2.5(c) and shall  reduce the  Aggregate  Commitment  by an
amount equal to fifty percent (50%) of the Net Proceeds  received from such sale
in the manner set forth in Section 2.7(b) and (ii) prior to the  consummation of
the sale of any such Non-Core Assets,  shall deliver to the Administrative Agent
and the Lenders written  evidence of pro forma compliance with the provisions of
Articles VII, VIII and IX after giving effect to such sale;

         (f) during any Fiscal Year,  the sale of  property,  business or assets
other than described in clauses (a) through (e) above in an aggregate amount not
to exceed $10,000,000; and

         (g) any  Subsidiary  formed to issue  Convertible  Preferred  Stock and
whose sole asset is Intercompany  Trust Debt may distribute such  obligations to
the holders of the Convertible  Preferred Stock provided that such  distribution
shall be deemed an incurrence of Debt and such incurrence is otherwise permitted
hereunder.

         SECTION 9.7 Limitations on Dividends and Distributions.  Declare or pay
any  dividends  upon any of its  capital  stock;  purchase,  redeem,  retire  or
otherwise acquire,  directly or indirectly,  any shares of its capital stock, or
make any distribution of cash, property or assets among the holders of shares of
its  capital  stock,  or make any  change in its  capital  structure  that could
reasonably be expected to have a Material Adverse Effect; provided, that:

         (a) BREED or any  Subsidiary  may declare and pay  dividends in cash or
shares of its own capital  stock;  provided  that (i) the  Borrowers  shall have
demonstrated  pro forma  compliance  with the covenant  contained in Section 8.2
prior to and following the declaration of any such dividends;

         (b)      any Subsidiary of a Borrower may pay cash dividends or
make contributions to such Borrower; and

         (c) any Subsidiary of BREED formed pursuant to Section 9.4(f) may issue
and  pay  dividends  on the  Convertible  Preferred  Stock;  provided  that  the
Convertible  Preferred  Stock shall not be redeemed  until at least one (1) year
after the Credit Facility Termination Date.

         SECTION 9.8 Transactions with Affiliates.  Except as permitted pursuant
to Section  9.4,  directly  or  indirectly:  (a) make any loan or advance to, or
purchase or assume any note or other obligation to or from, any of its officers,
directors,  shareholders  or other  Affiliates,  or to or from any member of the
immediate  family  of any of its  officers,  directors,  shareholders  or  other
Affiliates, or subcontract any operations to any of its Affiliates, or (b) enter
into,  or be a party to,  any  transaction  with any of its  Affiliates,  except
pursuant  to the  reasonable  requirements  of its  business  and upon  fair and
reasonable  terms that are fully  disclosed  to and  approved  in writing by the
Required  Lenders  and are no less  favorable  to it than it would  obtain  in a
comparable arm's length transaction with a Person not its Affiliate.

         SECTION 9.9       Certain Accounting Changes.  Change its Fiscal
Year end, or make any change in its accounting treatment and
reporting practices except as required by GAAP.

         SECTION 9.10      Restrictive Agreements.

         (a) On and after the Closing Date,  enter into any Debt which  contains
any  negative  pledge on  assets  or any  covenants  more  restrictive  than the
provisions of Articles VII, VIII and IX hereof,  or which  restricts,  limits or
otherwise  encumbers its ability to incur Liens on or with respect to any of its
assets or properties other than the assets or properties securing such Debt; or

         (b)      Enter into or permit to exist any agreement which impairs
or limits the ability of any Subsidiary of a Borrower to pay
dividends to such Borrower.

         SECTION  9.11  Payments  under  Convertible  Preferred  Stock.  Pay any
interest or principal due under the  Convertible  Preferred Stock so long as any
Default or Event of Default has occurred and is then continuing.


                                    ARTICLE X

                             UNCONDITIONAL GUARANTY

         SECTION   10.1   Guaranty  of   Obligations.   The   Guarantor   hereby
unconditionally  guarantees to the Administrative  Agent for the ratable benefit
of the Administrative  Agent and the Lenders,  and their respective  successors,
endorsees,  transferees  and assigns,  the prompt payment and performance of all
Obligations of the Borrowers,  whether  primary or secondary  (whether by way of
endorsement or otherwise), whether now existing or hereafter arising, whether or
not from time to time  reduced or  extinguished  (except by payment  thereof) or
hereafter  increased  or  incurred,  whether or not recovery may be or hereafter
become  barred  by  the  statute  of   limitations,   whether   enforceable   or
unenforceable as against any such Borrower, whether or not discharged, stayed or
otherwise  affected  by any  bankruptcy,  insolvency  or  other  similar  law or
proceeding, whether created directly with any Agent or Lender or acquired by any
Agent or Lender through assignment, endorsement or otherwise, whether matured or
unmatured, whether joint or several, as and when the same become due and payable
(whether at maturity or earlier, by reason of acceleration,  mandatory repayment
or otherwise),  in accordance with the terms of any such instruments  evidencing
any such  obligations,  including  all  renewals,  extensions  or  modifications
thereof (all Obligations of each such Borrower to any Agent or Lender, including
all  of  the  foregoing,  being  hereinafter  collectively  referred  to as  the
"Guaranteed Obligations").

         SECTION 10.2      Nature of Guaranty.  The Guarantor agrees that
this Guaranty is a continuing, unconditional guaranty of payment
and  performance  and not of  collection,  and that its  obligations  under this
Guaranty  shall be primary,  absolute and  unconditional,  irrespective  of, and
unaffected by (a) the genuineness,  validity, regularity,  enforceability or any
future  amendment of, or change in, this Agreement or any other Loan Document or
any other agreement, document or instrument to which any such Borrower is or may
become a party,  (b) the absence of any action to enforce  this  Guaranty,  this
Agreement  or  any  other  Loan  Document  or  the  waiver  or  consent  by  the
Administrative Agent or any Lender with respect to any of the provisions of this
Guaranty, this Agreement or any other Loan Document, (c) the existence, value or
condition of, or failure to perfect its Lien against,  any security for or other
guaranty of the  Guaranteed  Obligations  or any action,  or the ab sence of any
action, by the Administrative Agent or any Lender in respect of such security or
guaranty  (including,  without  limitation,  the release of any such security or
guaranty)  or (d) any  other  action  or  circumstances  which  might  otherwise
constitute a legal or equitable  discharge or defense of a surety or  guarantor;
it being agreed by the Guarantor that its obligations  under this Guaranty shall
not be discharged until the final and indefeasible  payment and performance,  in
full, of the Guaranteed Obligations and the termination of the Commitments.  The
Guarantor expressly waives all rights it may now or in the future have under any
statute (including,  without limitation, North Carolina General Statutes Section
26-7, et seq. or similar law), or at law or in equity,  or otherwise,  to compel
the  Administrative  Agent or any Lender to proceed in respect of the Guaranteed
Obligations  against any Borrower or any other party or against any security for
or other guaranty of the payment and  performance of the Guaranteed  Obligations
before  proceeding  against,  or  as a  condition  to  proceeding  against,  the
Guarantor.  The Guarantor  further  expressly waives and agrees not to assert or
take advantage of any defense based upon the failure of the Administrative Agent
or any Lender to  commence  an action in respect of the  Guaranteed  Obligations
against any such Borrower or any other party or any security for the payment and
performance of the Guaranteed Obligations.  The Guarantor agrees that any notice
or directive given at any time to the  Administrative  Agent or any Lender which
is  inconsistent  with the waivers in the preceding two sentences  shall be null
and void and may be  ignored by the  Administrative  Agent or  Lender,  and,  in
addition,  may not be  pleaded  or  introduced  as  evidence  in any  litigation
relating  to this  Guaranty  for the reason that such  pleading or  introduction
would  be at  variance  with the  written  terms of this  Guaranty,  unless  the
Administrative Agent and the Required Lenders have specifically agreed otherwise
in  writing.  The  foregoing  waivers  are of  the  essence  of the  transaction
contemplated  by the Loan Documents and, but for this Guaranty and such waivers,
the Administrative Agent and Lenders would decline to enter into this Agreement.

         SECTION 10.3      Demand by the Administrative Agent.  In
addition to the terms set forth in Section 10.2, and in no manner
imposing  any  limitation  on such  terms,  if all or any  portion  of the  then
outstanding  Guaranteed  Obligations  under this  Agreement  are  declared to be
immediately due and payable,  then the Guarantor  shall,  upon demand in writing
therefor by the Administrative  Agent to the Guarantor,  pay all or such portion
of the outstanding Guaranteed Obligations then declared due and payable. Payment
by the Guarantor shall be made to the  Administrative  Agent, to be credited and
applied upon the Guaranteed Obligations,  in immedi ately available funds in the
Permitted Currency in which the relevant Guaranteed  Obligations are denominated
to an account  designated by the  Administrative  Agent or at the Administrative
Agent's  office or at any other  address  that may be  specified in writing from
time to time by the Administrative Agent.

         SECTION 10.4 Waivers.  In addition to the waivers  contained in Section
10.2,  the  Guarantor  waives,  and agrees  that it shall not at any time insist
upon, plead or in any manner whatever claim or take the benefit or advantage of,
any appraisal,  valuation, stay, extension,  marshalling of assets or redemption
laws, or  exemption,  whether now or at any time  hereafter in force,  which may
delay,  prevent or  otherwise  affect the  performance  by the  Guarantor of its
obligations under, or the enforcement by the Administrative Agent or the Lenders
of, this Guaranty.  The Guarantor further hereby waives diligence,  presentment,
demand, protest and notice of whatever kind or nature with respect to any of the
Guaranteed Obligations and waives the benefit of all provisions of law which are
or  might  be in  conflict  with  the  terms  of this  Guaranty.  The  Guarantor
represents, warrants and agrees that its obligations under this Guaranty are not
and shall not be subject to any  counterclaims,  offsets or defenses of any kind
against the  Administrative  Agent, the Lenders or any such Borrower whether now
existing or which may arise in the future.

         SECTION 10.5 Modification of Loan Documents etc. If the  Administrative
Agent or the Lenders shall at any time or from time to time, with or without the
consent of, or notice to, the Guarant or (a) change or extend the manner,  place
or terms of payment of, or renew or alter all or any portion of, the  Guaranteed
Obliga tions,  (b) take any action under or in respect of the Loan Docu ments in
the exercise of any remedy, power or privilege contained therein or available to
it at law, in equity or otherwise,  or waive or refrain from exercising any such
remedies,  powers or privileges,  (c) amend or modify, in any manner whatsoever,
the Loan  Documents,  (d)  extend  or waive  the  time  for  performance  by the
Guarantor,  any such  Borrower or any other Person of, or compliance  with,  any
term, covenant or agreement on its part to be performed or observed under a Loan
Document (other than this Guaranty),  or waive such performance or compliance or
consent to a failure of, or departure from, such performance or compliance,  (e)
take  and  hold  security  or  collateral  for  the  payment  of the  Guaranteed
Obligations or sell, exchange,  release, dispose of, or otherwise deal with, any
property pledged, mortgaged or conveyed, or in which the Administrative
Agent or the  Lenders  have  been  granted  a Lien,  to  secure  any Debt of the
Guarantor or any such Borrower to any Agent or the Lenders,  (f) release  anyone
who may be liable in any  manner  for the  payment  of any  amounts  owed by the
Guarantor or any such  Borrower to any Agent or Lender,  (g) modify or terminate
the terms of any  intercreditor  or  subordination  agreement  pursuant to which
claims of other creditors of the Guarantor or any such Borrower are subordinated
to the claims of any Agent or Lender or (h) apply any sums by  whomever  paid or
however  realized to any amounts  owing by the Guarantor or any such Borrower to
any  Agent or  Lender  on  account  of the  Obligations  in such  manner  as the
Administrative Agent or any Lender shall determine in its reasonable discretion;
then neither the  Administrative  Agent nor any Lender shall incur any liability
to the Guarantor as a result thereof, and no such action shall impair or release
the obligations of the Guarantor under this Guaranty.

         SECTION 10.6  Reinstatement.  The Guarantor agrees that, if any payment
made by any such Borrower or any other Person  applied to the  Obligations is at
any time annulled, set aside, rescinded,  invalidated, declared to be fraudulent
or preferential or otherwise  required to be refunded or repaid, or the proceeds
of  Collateral  are required to be returned by the  Administrative  Agent or any
Lender to any such Borrower, its estate,  trustee,  receiver or any other party,
including,  without  limitation,  the  Guarantor,  under any  Applicable  Law or
equitable  cause,  then,  to the  extent  of  such  payment  or  repayment,  the
Guarantor's  liability  hereunder  (and any  Lien or  Collateral  securing  such
liability)  shall be and  remain in full force and  effect,  as fully as if such
payment had never been made,  and, if prior  thereto,  this Guaranty  shall have
been  canceled  or  surrendered  (and if any  Lien or  Collateral  securing  the
Guarantor's liability hereunder shall have been released or terminated by virtue
of such cancellation or surrender),  this Guaranty (and such Lien or Collateral)
shall be reinstated  in full force and effect,  and such prior  cancellation  or
surrender shall not diminish, release, discharge, impair or otherwise affect the
obligations  of the  Guarantor  in respect of the amount of such payment (or any
Lien or Collateral securing such obligation).

         SECTION  10.7  No   Subrogation.   Until  all  amounts   owing  to  the
Administrative  Agent and the Lenders on account of the  Obligations are paid in
full and the Commitments are terminated,  the Guarantor hereby waives any claims
or other rights which it may now or hereafter  acquire against any such Borrower
that arise from the  existence or  performance  of the  Guarantor's  obligations
under this Guaranty,  including,  without limitation,  any right of subrogation,
reimbursement,  exoneration,  indemnification,  any right to  participate in any
claim or remedy of the  Administrative  Agent or the  Lenders  against  any such
Borrower or any  Collateral  which the  Administrative  Agent or the Lenders now
have or may hereafter acquire, whether or not such claim, remedy or right arises
in equity or under contract, statute or common law, by any payment
made hereunder or otherwise,  including without limitation, the right to take or
receive  from  any  such  Borrower,  directly  or  indirectly,  in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other  rights.  If any amount  shall be paid to the  Guarantor  on
account of such  rights at any time when all of the  Obligations  shall not have
been paid in full,  such amount shall be held by the  Guarantor in trust for the
Administrative Agent,  segregated from other funds of the Guarantor,  and shall,
forthwith  upon receipt by the Guarantor,  be turned over to the  Administrative
Agent  in the  exact  form  received  by the  Guarantor  (duly  indorsed  by the
Guarantor to the  Administrative  Agent,  if required) to be applied against the
Obligations, whether matured or unmatured, in such order as set forth herein.


                                   ARTICLE XI

                              DEFAULT AND REMEDIES

         SECTION 11.1 Events of Default.  Each of the following shall constitute
an Event of Default,  whatever the reason for such event and whether it shall be
voluntary or  involuntary  or be effected by operation of law or pursuant to any
judgment  or  order  of any  court  or any  order,  rule  or  regulation  of any
Governmental Authority or otherwise:

         (a)  Default in Payment  of  Principal  of Loans.  Any  Borrower  shall
default in any payment of principal of any Loan or Note when and as due (whether
at maturity, by reason of acceleration or otherwise).

         (b) Other Payment  Default.  Any Borrower  shall default in the payment
when and as due (whether at maturity, by reason of acceleration or otherwise) of
interest  on any Loan or Note or the payment of any other  Obligation,  and such
default shall continue unremedied for three (3) Business Days.

         (c) Misrepresentation. Any representation or warranty made or deemed to
be made by any Borrower or any of its  Subsidiaries  under this  Agreement,  any
Loan  Document or any  amendment  hereto or thereto,  shall at any time prove to
have been  incorrect or misleading  in any material  respect when made or deemed
made.

         (d)      Default in Performance of Certain Covenants.  Any
Borrower shall default in the performance or observance of any
covenant or agreement contained in Sections 6.2, 6.5(e) or 7.12 or
Articles VIII or IX of this Agreement.

         (e)      Default in Performance of Other Covenants and Conditions.
Any Borrower or any Subsidiary thereof shall default in the
performance or observance of any term, covenant, condition or
agreement  contained in this Agreement (other than as specifically  provided for
otherwise  in this  Section  11.1) or any other Loan  Document  and such default
shall continue for a period of thirty (30) days after written notice thereof has
been given to such Borrower by the Administrative Agent.

         (f)      Hedging Agreement.  Any termination payment shall be due
by a Borrower under any Hedging Agreement and such amount is not
paid within ten (10) Business Days of the due date thereof.

         (g) Debt  Cross-Default.  Any Borrower or any of its Subsidiaries shall
(i)  default in the  payment of any Debt  (other  than the Notes) the  aggregate
outstanding amount of which Debt is in excess of $2,500,000 beyond the period of
grace if any,  provided in the instrument or agreement under which such Debt was
created, or (ii) default in the observance or performance of any other agreement
or  condition  relating  to any  Debt  (other  than  the  Notes)  the  aggregate
outstanding  amount of which Debt is in excess of $2,500,000 or contained in any
instrument or agreement  evidencing,  securing or relating  thereto or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause,  or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause,  with the giving
of notice if required,  any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).

         (h) Other Cross-Defaults. Any Borrower or any of its Subsidiaries shall
default in the payment when due, or in the  performance  or  observance,  of any
obligation or condition of any Material  Contract  unless,  but only as long as,
the  existence of any such default is being  contested by such  Borrower or such
Subsidiary in good faith by  appropriate  proceedings  and adequate  reserves in
respect  thereof  have been  established  on the books of such  Borrower or such
Subsidiary to the extent required by GAAP.

         (i)  Change in  Control.  Any person or group of  persons  (within  the
meaning of Section  13(d) of the  Securities  Exchange Act of 1934, as amended),
shall obtain  ownership or control in one or more series of transactions of more
than thirty  percent  (30%) of the common stock or thirty  percent  (30%) of the
voting  power of BREED  entitled to vote in the election of members of the board
of directors of BREED or there shall have occurred  under any indenture or other
instrument evidencing any Debt in excess of $500,000 any "change in control" (as
defined in such indenture or other evidence of Debt)  obligating any Borrower to
repurchase,  redeem  or  repay  all or any  part of the  Debt or  capital  stock
provided for therein (any such event, a "Change in Control").

         (j)      Voluntary Bankruptcy Proceeding.  Any Borrower or any
Material Subsidiary thereof shall (i) commence a voluntary case
under the federal bankruptcy laws (as now or hereafter in effect),
(ii) file a petition, proposal or notice of intent to file a proposal seeking to
take advantage of any other laws,  domestic or foreign,  relating to bankruptcy,
insolvency,  reorganization,  winding up or composition for adjustment of debts,
(iii)  consent  to or fail to contest  in a timely  and  appropriate  manner any
petition or other  proceeding filed against it in an involuntary case under such
bankruptcy  laws or other laws, (iv) apply for or consent to, or fail to contest
in a timely  and  appropriate  manner,  the  appointment  of,  or the  taking of
possession by, a receiver, custodian, trustee,  administrator,  or liquidator of
itself or of a substantial part of its property,  domestic or foreign, (v) admit
in  writing  its  inability  to pay its debts as they  become  due,  (vi) make a
general  assignment  for the benefit of  creditors,  or (vii) take any corporate
action for the purpose of authorizing any of the foregoing.

         (k) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be  commenced  against any Borrower or any  Material  Subsidiary  thereof in any
court of competent  jurisdiction seeking (i) relief under the federal bankruptcy
laws (as now or  hereafter  in  effect)  or under any other  laws,  domestic  or
foreign,  relating  to  bankruptcy,  insolvency,  reorganization,  winding up or
adjustment of debts, or (ii) the appointment of a trustee, receiver,  custodian,
liquidator  or the like for any Borrower or any Material  Subsidiary  thereof or
for all or any substantial part of their respective assets, domestic or foreign,
and such case or  proceeding  shall  continue  without  dismissal  or stay for a
period of sixty (60) consecutive days, or an order granting the relief requested
in such case or proceeding  (including,  but not limited to, an order for relief
under such federal bankruptcy laws) shall be entered.

         (l) Failure of Agreements. Any provision of Article X of this Agreement
or any  provision  of any other Loan  Document  shall for any reason cease to be
valid and binding on any Borrower or Subsidiary party thereto or any such Person
shall so state in writing,  or any Loan  Document  shall for any reason cease to
create a valid and perfected  first  priority Lien on, or security  interest in,
any of the collateral  purported to be covered thereby,  in each case other than
in accordance with the express terms hereof or thereof.

         (m) Termination  Event. The occurrence of any of the following  events:
(i) BREED or any ERISA  Affiliate  fails to make  full  payment  when due of all
amounts  which,  under the  provisions of any Pension Plan or Section 412 of the
Code, BREED or any ERISA Affiliate is required to pay as contributions  thereto,
(ii) an accumulated funding deficiency in excess of $1,000,000 occurs or exists,
whether or not waived,  with respect to any Pension  Plan,  (iii) a  Termination
Event or (iv)  BREED or any  ERISA  Affiliate  as  employers  under  one or more
Multiemployer  Plan  makes a  complete  or  partial  withdrawal  from  any  such
Multiemployer Plan and the plan
sponsor of such Multiemployer Plans notifies such withdrawing employer that such
employer  has incurred a withdrawal  liability  requiring  payments in an amount
exceeding $2,500,000.

         (n) Judgment.  An uninsured  judgment or order for the payment of money
which  causes the  aggregate  amount of all such  uninsured  judgments to exceed
$1,000,000  in any Fiscal Year shall be entered  against any  Borrower or any of
its  Subsidiaries by any court and such judgment or order shall continue without
discharge or stay for a period of thirty (30) days.

         (o)      Five-Year Credit Agreement.  An Event of Default shall
have occurred and be continuing under the Five-Year Credit
Agreement.

         SECTION 11.2 Remedies.  Upon the occurrence and during the  continuance
of an  Event  of  Default,  with  the  consent  of  the  Required  Lenders,  the
Administrative  Agent may,  or upon the  request of the  Required  Lenders,  the
Administrative Agent shall, by notice to the Borrowers:

         (a) Acceleration;  Termination of Facilities.  Declare the principal of
and interest on the Loans and the Notes at the time  outstanding,  and all other
amounts owed to the Lenders and to the Administrative Agent under this Agreement
or any of the other Loan  Documents and all other  Obligations,  to be forthwith
due and payable,  whereupon  the same shall  immediately  become due and payable
without presentment,  demand,  protest or other notice of any kind, all of which
are expressly waived,  anything in this Agreement or the other Loan Documents to
the contrary notwithstanding, and terminate the Credit Facility and any right of
the  Borrowers  to  request  borrowings  thereunder;  provided,  that  upon  the
occurrence  of an Event of  Default  specified  in Section  11.1(j) or (k),  the
Credit  Facility shall be  automatically  terminated and all  Obligations  shall
automatically become due and payable.

         (b) Rights of Collection.  Exercise on behalf of the Lenders all of its
other rights and remedies  under this  Agreement,  the other Loan  Documents and
Applicable Law, in order to satisfy all of the Borrowers' Obligations.

         SECTION  11.3 Rights and  Remedies  Cumulative;  Non-Waiver;  Etc.  The
enumeration  of the  rights and  remedies  of the  Administrative  Agent and the
Lenders set forth in this  Agreement  is not intended to be  exhaustive  and the
exercise  by the  Administrative  Agent and the  Lenders  of any right or remedy
shall not preclude  the  exercise of any other rights or remedies,  all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter  exist in law
or in equity or by suit or otherwise.  No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power
or privilege shall operate as a waiver thereof,  nor shall any single or partial
exercise  of any  such  right,  power or  privilege  preclude  other or  further
exercise thereof or the exercise of any other right, power or privilege or shall
be  construed  to be a waiver of any  Event of  Default.  No  course of  dealing
between  any  Borrower,  the  Administrative  Agent  and the  Lenders  or  their
respective agents or employees shall be effective to change, modify or discharge
any  provision  of this  Agreement  or any of the  other  Loan  Documents  or to
constitute a waiver of any Event of Default.

         SECTION 11.4 Judgment Currency. The obligation of the Borrowers to make
payments of the principal of and interest on the Notes and the obligation of the
Guarantor to make payments on the Guaranteed  Obligations  and the obligation of
any such  Person to make  payments of any other  amounts  payable  hereunder  or
pursuant to any other Loan  Document in the currency  specified for such payment
shall not be discharged or satisfied by any tender,  or any recovery pursuant to
any judgment, which is expressed in or converted into any other currency, except
to the extent that such tender or recovery shall result in the actual receipt by
each  of the  Administrative  Agent  and  Lenders  of  the  full  amount  of the
particular Permitted Currency expressed to be payable pursuant to the applicable
Loan Document.  The  Administrative  Agent shall,  using all amounts obtained or
received from the  Borrowers  pursuant to any such tender or recovery in payment
of  principal  of  and  interest  on  the  Obligations,  promptly  purchase  the
applicable   Permitted  Currency  at  the  most  favorable  spot  exchange  rate
determined by the Administrative  Agent to be available to it. The obligation of
the Borrowers to make payments in the  applicable  Permitted  Currency  shall be
enforceable  as an  alternative  or  additional  cause of action  solely for the
purpose of recovering in the applicable  Permitted  Currency the amount, if any,
by which  such  actual  receipt  shall  fall  short of the  full  amount  of the
Permitted  Currency  expressed  to be payable  pursuant to the  applicable  Loan
Document.


                                   ARTICLE XII

                            THE ADMINISTRATIVE AGENT

         SECTION  12.1  Appointment.  Each  of the  Lenders  hereby  irrevocably
designates and appoints First Union as Administrative Agent of such Lender under
this  Agreement and the other Loan  Documents  and each such Lender  irrevocably
authorizes  First Union as  Administrative  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 and perform such duties as are expressly
delegated to the  Administrative  Agent by the terms of this  Agreement and such
other  Loan  Documents,  together  with  such  other  powers  as are  reasonably
incidental  thereto.  Notwithstanding any provision to the contrary elsewhere in
this Agreement or such
other Loan  Documents,  the  Administrative  Agent  shall not have any duties or
responsibilities,  except those  expressly set forth herein and therein,  or any
fiduciary  relationship  with any Lender (nor shall any Lender be deemed to have
any  fiduciary  relationship  with  any  Borrower),  and no  implied  covenants,
functions,  responsibilities,  duties,  obligations or liabilities shall be read
into this Agreement or the other Loan  Documents or otherwise  exist against the
Administrative  Agent.  To the extent any  provision of this  Agreement  permits
action by the Administrative  Agent, such Administrative Agent shall, subject to
the provisions of Section 13.11 hereof and of this Article XII, take such action
if directed in writing to do so by the Required Lenders.

         SECTION 12.2 Delegation of Duties. The Administrative Agent may execute
any of its  respective  duties under this Agreement and the other Loan Documents
by or through  agents or  attorneys-in-fact  and shall be  entitled to advice of
counsel  concerning all matters  pertaining to such duties.  The  Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by the Administrative Agent with reasonable care.

         SECTION 12.3 Exculpatory  Provisions.  Neither the Administrative Agent
nor  any of  its  officers,  directors,  employees,  agents,  attorneys-in-fact,
Subsidiaries or Affiliates  shall be (a) liable for any action lawfully taken or
omitted  to be  taken by it or such  Person  under or in  connection  with  this
Agreement or the other Loan Documents (except for actions occasioned directly by
its or such  Person's  own  gross  negligence  or  willful  misconduct),  or (b)
responsible  in any manner to any of the Lenders for any  recitals,  statements,
representations or warranties made by the Borrowers or any of their Subsidiaries
or any officer  thereof  contained in this Agreement or the other Loan Documents
or in any  certificate,  report,  statement  or other  document  referred  to or
provided for in, or received by the Administrative  Agent under or in connection
with,  this  Agreement or the other Loan  Documents or for the value,  validity,
effectiveness,  genuineness,  enforceability or sufficiency of this Agreement or
the other Loan  Documents  or for any failure of the  Borrowers  or any of their
Subsidiaries   to  perform  its   obligations   hereunder  or  thereunder.   The
Administrative  Agent  shall  not be  under  any  obligation  to any  Lender  to
ascertain  or to  inquire  as to the  observance  or  performance  of any of the
agreements  contained in, or conditions  of, this  Agreement,  or to inspect the
properties, books or records of the Borrowers or any of their Subsidiaries.

         SECTION 12.4 Reliance by the  Administrative  Agent. The Administrative
Agent shall be entitled to rely, and shall be fully  protected in relying,  upon
any note, writing, resolution, notice, consent, certificate,  affidavit, letter,
cablegram,  telegram,  telecopy, telex or teletype message,  statement, order or
other document or conversation believed by it to be genuine and correct
and to have been signed,  sent or made by the proper  Person or Persons and upon
advice and statements of legal counsel (including,  without limitation,  counsel
to the Borrowers),  independent  accountants  and other experts  selected by the
Administrative  Agent. The Administrative  Agent may deem and treat the payee of
any Note as the owner thereof for all purposes  unless such Note shall have been
transferred in accordance with Section 13.10 hereof.  The  Administrative  Agent
shall be fully  justified  in failing or refusing to take any action  under this
Agreement and the other Loan Documents unless it shall first receive such advice
or concurrence of the Required Lenders (or, when expressly required hereby or by
the relevant other Loan Document, all the Lenders) as it deems appropriate or 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 or
continuing  to take any such  action  except  for its own  gross  negligence  or
willful  misconduct.  The  Administrative  Agent  shall  in all  cases  be fully
protected in acting, or in refraining from acting,  under this Agreement and the
Notes in accordance  with a request of the Required  Lenders (or, when expressly
required  hereby,  all the  Lenders),  and such  request and any action taken or
failure to act  pursuant  thereto  shall be binding upon all the Lenders and all
future holders of the Notes.

         SECTION 12.5 Notice of Default.  The Administrative  Agent shall not be
deemed to have  knowledge or notice of the occurrence of any Default or Event of
Default  hereunder  unless it has  received  notice  from a Lender or a Borrower
referring  to this  Agreement,  describing  such Default or Event of Default and
stating  that such  notice  is a  "notice  of  default".  In the event  that the
Administrative  Agent  receives  such a notice,  it shall  promptly  give notice
thereof to the  Lenders.  The  Administrative  Agent shall take such action with
respect to such Default or Event of Default as shall be  reasonably  directed by
the Required Lenders;  provided,  that unless and until the Administrative Agent
shall have received such directions, the Administrative 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 interests of the Lenders.

         SECTION  12.6  Non-Reliance  on  the  Administrative  Agent  and  Other
Lenders.  Each Lender  expressly  acknowledges  that neither the  Administrative
Agent  nor  any  of  its  respective  officers,  directors,  employees,  agents,
attorneys-in-fact,  Subsidiaries or Affiliates has made any  representations  or
warranties to it and that no act by the Administrative  Agent hereinafter taken,
including  any  review  of  the  affairs  of  the  Borrowers  or  any  of  their
Subsidiaries,  shall be deemed to constitute any  representation  or warranty by
the  Administrative   Agent  to  any  Lender.  Each  Lender  represents  to  the
Administrative  Agent that it has,  independently  and without reliance upon the
Administrative  Agent or any  other  Lender,  and  based on such  documents  and
information  as it  has  deemed  appropriate,  made  its  own  appraisal  of and
investigation into the
business,   operations,    property,   financial   and   other   condition   and
creditworthiness  of the  Borrowers  and  their  Subsidiaries  and  made its own
decision to make its Loans hereunder and enter into this Agreement.  Each Lender
also  represents  that it will,  independently  and  without  reliance  upon the
Administrative  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
credit  analysis,  appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents,  and to make such  investigation as
it deems  necessary to inform itself as to the business,  operations,  property,
financial and other  condition and  creditworthiness  of the Borrowers and their
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the  Administrative  Agent hereunder or by the
other  Loan  Documents,  the  Administrative  Agent  shall  not have any duty or
responsibility  to  provide  any  Lender  with any  credit or other  information
concerning the business, operations,  property, financial and other condition or
creditworthiness  of the Borrowers or any of their  Subsidiaries  which may come
into  the  possession  of the  Administrative  Agent  or  any of its  respective
officers,  directors,  employees,  agents,  attorneys-in-fact,  Subsidiaries  or
Affiliates.

         SECTION  12.7  Indemnification.  The  Lenders  agree to  indemnify  the
Administrative  Agent in its capacity as such and (to the extent not  reimbursed
by the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably  according to the respective  amounts of their  Commitment  Percentages,
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits, costs, expenses or disbursements of any
kind whatsoever which may at any time  (including,  without  limitation,  at any
time following the payment of the Notes) be imposed on,  incurred by or asserted
against the  Administrative  Agent in any way relating to or arising out of this
Agreement  or the other Loan  Documents,  or any  documents  contemplated  by or
referred to herein or therein or the transactions contemplated hereby or thereby
or  any  action  taken  or  omitted  by the  Administrative  Agent  under  or in
connection with any of the foregoing;  provided,  that no Lender shall be liable
for the  payment  of any  portion  of  such  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting directly from the  Administrative  Agent's bad faith, gross negligence
or willful  misconduct.  The  agreements  in this Section 12.7 shall survive the
payment of the Notes and all other amounts payable hereunder and the termination
of this Agreement.

         SECTION 12.8 The Administrative Agent in Its Individual  Capacity.  The
Administrative  Agent and its  respective  Subsidiaries  and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
any Borrower as though the Administrative Agent were not an Administrative Agent
hereunder.  With  respect to any Loans made or renewed by it and any Note issued
to it, the Administrative Agent shall have the same rights and powers under this
Agreement  and the other Loan  Documents as any Lender and may exercise the same
as though  it were not an  Administrative  Agent,  and the  terms  "Lender"  and
"Lenders" shall include the Administrative Agent in its individual capacity.

         SECTION 12.9      Resignation of the Administrative Agent;
Successor Administrative Agent.

         (a)  Subject  to the  appointment  and  acceptance  of a  successor  as
provided below, the Administrative 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  Administrative
Agent,  which  successor  shall have  minimum  capital  and  surplus of at least
$500,000,000.  If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such  appointment  within thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the  Administrative  Agent may,  on behalf of the  Lenders,  appoint a successor
Administrative  Agent, which successor shall have minimum capital and surplus of
at least $500,000,000.  Upon the acceptance of any appointment as Administrative
Agent   hereunder  by  a  successor   Administrative   Agent,   such   successor
Administrative  Agent  shall  thereupon  succeed to and become  vested  with all
rights, powers,  privileges and duties of the retiring Administrative Agent, and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations  hereunder.  After any retiring  Administrative  Agent's resignation
hereunder as  Administrative  Agent,  the  provisions of this Section 12.9 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 Administrative Agent.

         (b) Each reference in subsection (a) above to the Administrative  Agent
shall also be deemed a reference to the Swingline  Lender.  Therefore,  upon the
acceptance of any  appointment as  Administrative  Agent (and Swingline  Lender)
hereunder  by a successor  Administrative  Agent (and  Swingline  Lender),  such
successor Administrative Agent (and Swingline Lender) shall thereupon succeed to
and become vested with all rights, powers, privileges and duties of the retiring
Swingline Lender, and the retiring Swingline Lender shall be discharged from its
duties and obligations hereunder.

         SECTION 12.10  Documentation  Agent.  The  Documentation  Agent, in its
capacity  as a  documentation  agent,  shall have no duties or  responsibilities
under this Agreement or any other Loan Document.


                                  ARTICLE XIII

                                  MISCELLANEOUS

         SECTION 13.1      Notices.

         (a)  Method of  Communication.  Except as  otherwise  provided  in this
Agreement,  all notices and communications  hereunder shall be in writing, or by
telephone  subsequently  confirmed in writing.  Any notice shall be effective if
delivered by hand delivery or sent via telecopy,  recognized  overnight  courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party  hereto (i) on the date of delivery if  delivered by hand or
sent by telecopy,  (ii) on the next Business Day if sent by recognized overnight
courier  service and (iii) on the third  Business Day following the date sent by
certified  mail,   return  receipt   requested.   A  telephonic  notice  to  the
Administrative Agent as understood by the Administrative Agent will be deemed to
be the  controlling  and  proper  notice in the event of a  discrepancy  with or
failure to receive a confirming written notice.

         (b)      Addresses for Notices.  Notices to any party shall be
sent to it at the following addresses, or any other address as to
which all the other parties are notified in writing.

If to BREED:                                BREED Technologies, Inc.
                                            5300 Old Tampa Highway
                                            Lakeland, Florida 33811
                                            Attention:  Chief Financial Officer
                                            Telephone No.: (941) 668-6000
                                            Telecopy No.:  (941) 668-6036

With copies to:                             BREED Technologies, Inc.
                                            5300 Old Tampa Highway
                                            Lakeland, Florida 33811
                                            Attention:  Treasurer
                                            General Counsel
                                            Telephone No.: (941) 668-6389
                                            Telecopy No.:  (941) 668-6039


If to First Union as
Administrative Agent:                      First Union National Bank of Florida
                                           100 South Ashley Drive, Suite 940
                                           Tampa, Florida 33602
                                           Attention: Gilbert Reese
                                           Telephone No.: (813) 276-6434
                                           Telecopy No.: (813) 276-6454

                                           and

                                           First Union National Bank of
                                           North Carolina
                                           One First Union Center, TW-10
                                           301 South College Street
                                           Charlotte, North Carolina
                                           28288-0608
                                           Attention:  Syndication Agency
                                           Services
                                           Telephone No.: (704) 383-0281
                                           Telecopy No.: (704) 383-0288

If to any Lender:                          To the Address set forth on
                                           Schedule 1.1(b) hereto

         (c)  Administrative  Agent's Office.  The  Administrative  Agent hereby
designates its office located at the address set forth above,  or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrowers and the Lenders,  as the  Administrative  Agent's  Office  referred to
herein, to which payments due are to be made and at which Revolving Credit Loans
and Finnish Mark Loans will be disbursed.

         SECTION  13.2  Expenses;  Indemnity.  The  Borrowers  will  (a) pay all
reasonable  out-of-pocket  expenses of the  Administrative  Agent in  connection
with:  (i) the  preparation,  execution and delivery of this  Agreement and each
other  Loan  Document,  whenever  the same  shall  be  executed  and  delivered,
including,  without limitation,  all out-of-pocket syndication and due diligence
expenses and reasonable fees and disbursements of counsel for the Administrative
Agent and (ii) the preparation,  execution and delivery of any waiver, amendment
or consent by the Administrative Agent or the Lenders relating to this Agreement
or any other Loan Document,  including, without limitation,  reasonable fees and
disbursements  of counsel for the  Administrative  Agent, (b) pay all reasonable
out-of-pocket expenses of the Administrative Agent and the Lenders in connection
with the  administration  and  enforcement  of any  rights and  remedies  of the
Administrative Agent and Lenders under the Credit Facility, including consulting
with appraisers,  accountants, engineers, attorneys and other Persons concerning
the nature, scope or value of any right or remedy of the Administrative Agent or
any Lender  hereunder or under any other Loan Document or any factual matters in
connection  therewith,  which expenses shall include,  without  limitation,  the
reasonable fees and disbursements of such Persons and (c) defend,  indemnify and
hold harmless the  Administrative  Agent and the Lenders,  and their  respective
parents,  Subsidiaries,  Affiliates,  employees, agents, officers and directors,
from  and  against  any  losses,  penalties,  fines,  liabilities,  settlements,
damages, costs and expenses,  suffered by any such Person in connection with any
claim,  investigation,  litigation  or  other  proceeding  (whether  or not  the
Administrative Agent or any Lender is a party thereto) and the prosecution and
defense thereof,  arising out of or in any way connected with the Agreement, any
other Loan  Document or the Loans,  including,  without  limitation,  reasonable
attorney's and consultant's fees, except to the extent that any of the foregoing
directly  result from the gross  negligence  or willful  misconduct of the party
seeking indemnification therefor.

         SECTION  13.3  Set-off.  In  addition  to any rights  now or  hereafter
granted  under  Applicable  Law and not by way of limitation of any such rights,
upon and after the occurrence of any Event of Default and during the continuance
thereof,  the Lenders and any assignee or  participant of a Lender in accordance
with Section  13.10 are hereby  authorized  by the Borrowers at any time or from
time to time,  without notice to the Borrowers or to any other Person,  any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all deposits  (general or special,  time or demand,  including,  but not
limited to, indebtedness  evidenced by certificates of deposit,  whether matured
or  unmatured)  and any  other  indebtedness  at any  time  held or owing by the
Lenders, or any such assignee or participant to or for the credit or the account
of a Borrower against and on account of the Obligations  irrespective of whether
or not (a) the Lenders shall have made any demand under this Agreement or any of
the other Loan Documents or (b) the Administrative Agent shall have declared any
or all of the Obligations to be due and payable as permitted by Section 11.2 and
although such Obligations shall be contingent or unmatured.

         SECTION 13.4  Governing  Law. This  Agreement,  the Notes and the other
Loan Documents,  unless otherwise expressly set forth therein, shall be governed
by,  construed  and enforced in  accordance  with the laws of the State of North
Carolina,  without  reference  to the  conflicts  or  choice  of law  principles
thereof.

         SECTION 13.5 Consent to Jurisdiction.  The Borrowers hereby irrevocably
consent to the personal  jurisdiction of the state and federal courts located in
Mecklenburg  County,  North Carolina,  in any action,  claim or other proceeding
arising out of any dispute in connection with this Agreement,  the Notes and the
other Loan Documents, any rights or obligations hereunder or thereunder,  or the
performance of such rights and  obligations.  The Borrowers  hereby  irrevocably
consent  to the  service of a summons  and  complaint  and other  process in any
action, claim or proceeding brought by the Administrative Agent or any Lender in
connection  with this  Agreement,  the Notes or the other  Loan  Documents,  any
rights or obligations hereunder or thereunder, or the performance of such rights
and obligations, on behalf of itself or its property, in the manner specified in
Section  13.1.  Nothing  in this  Section  13.5  shall  affect  the right of the
Administrative  Agent or any Lender to serve legal  process in any other  manner
permitted by Applicable Law or affect the right of the  Administrative  Agent or
any  Lender to bring any  action  or  proceeding  against  any  Borrower  or its
properties in the courts of any other jurisdictions.
         SECTION 13.6      Binding Arbitration; Waiver of Jury Trial.

         (a) Binding Arbitration.  Upon demand of the Borrower, any Agent or the
Required  Lenders,  whether made before or within one hundred  twenty days (120)
after institution of any judicial proceeding,  any dispute, claim or controversy
arising  out of,  connected  with or  relating  to the Notes or any  other  Loan
Documents ("Disputes"),  between or among parties to the Notes or any other Loan
Document  shall  be  resolved  by  binding   arbitration  as  provided   herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
Loan Documents  executed in the future,  or claims  concerning any aspect of the
past, present or future relationships  arising out of or connected with the Loan
Documents.  Arbitration  shall be conducted under and governed by the Commercial
Financial Disputes  Arbitration Rules (the "Arbitration  Rules") of the American
Arbitration  Association and Title 9 of the U.S. Code. All arbitration  hearings
shall be conducted in Charlotte,  North Carolina.  The expedited  procedures set
forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims
of less than  $1,000,000.  All applicable  statutes of limitation shall apply to
any  Dispute.  A  judgment  upon the award may be  entered  in any court  having
jurisdiction.  The  panel  from  which all  arbitrators  are  selected  shall be
comprised of licensed  attorneys.  The single arbitrator  selected for expedited
procedure   shall  be  a  retired  judge  from  the  highest  court  of  general
jurisdiction,  state  or  federal,  of the  state  where  the  hearing  will  be
conducted.  Notwithstanding the foregoing, this paragraph shall not apply to any
Hedging Agreement that is a Loan Document.

         (b)  Jury  Trial.  TO THE  EXTENT  PERMITTED  BY  APPLICABLE  LAW,  THE
ADMINISTRATIVE  AGENT,  EACH LENDER AND EACH BORROWER HEREBY  IRREVOCABLY  WAIVE
THEIR  RESPECTIVE  RIGHTS TO A JURY TRIAL WITH  RESPECT TO ANY ACTION,  CLAIM OR
OTHER  PROCEEDING  ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT,
THE NOTES OR THE OTHER LOAN  DOCUMENTS,  ANY RIGHTS OR OBLIGATIONS  HEREUNDER OR
THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

         (c)  Preservation of Certain  Remedies.  Notwithstanding  the preceding
binding arbitration provisions, the parties hereto preserve, without diminution,
certain remedies that such Persons may employ or exercise freely,  either alone,
in conjunction with or during a Dispute.  Each such Person shall have and hereby
reserves  the right to  proceed in any court of proper  jurisdiction  or by self
help to  exercise  or  prosecute  the  following  remedies:  (i) all  rights  to
foreclose  against  or  otherwise  become  owner or sell  any  real or  personal
property or other  security by  exercising  a power of sale  granted in the Loan
Documents or under applicable law or by judicial  foreclosure and sale, (ii) all
rights of self help
including peaceful  occupation of property and collection of rents, set off, and
peaceful  possession  of  property,  (iii)  obtaining  provisional  or ancillary
remedies including injunctive relief,  sequestration,  garnishment,  attachment,
appointment of receiver and in filing an involuntary bankruptcy proceeding,  and
(iv) when  applicable,  a judgment by  confession of judgment.  Preservation  of
these  remedies  does not  limit  the power of an  arbitrator  to grant  similar
remedies that may be requested by a party in a Dispute.

         SECTION 13.7 Reversal of Payments.  To the extent any Borrower  makes a
payment or payments to the  Administrative  Agent for the ratable benefit of the
Lenders or the  Administrative  Agent  receives  any  payment or proceeds of the
collateral  which  payments  or proceeds  or any part  thereof are  subsequently
invalidated,  declared  to be  fraudulent  or  preferential,  set  aside  and/or
required  to be repaid to a  trustee,  receiver  or any  other  party  under any
bankruptcy  law, state or federal law, common law or equitable  cause,  then, to
the extent of such payment or proceeds  repaid,  the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such  payment or  proceeds  had not been  received  by the  Administrative
Agent.

         SECTION 13.8      Injunctive Relief; Punitive Damages.

         (a) The Borrowers  recognize  that, in the event the Borrowers  fail to
perform, observe or discharge any of their obligations or liabilities under this
Agreement,  any remedy of law may prove to be inadequate  relief to the Lenders.
Therefore,  the Borrowers agree that the Lenders, at the Lenders' option,  shall
be  entitled  to  temporary  and  permanent  injunctive  relief in any such case
without the necessity of proving actual damages.

         (b) The Administrative  Agent, the Lenders and the Borrowers (on behalf
of  themselves  and their  Subsidiaries)  hereby agree that no such Person shall
have a remedy of punitive or exemplary damages against any other party to a Loan
Document  and each such Person  hereby  waives any right or claim to punitive or
exemplary  damages  that  they  may  now  have or may  arise  in the  future  in
connection  with  any  Dispute,   whether  such  Dispute  is  resolved   through
arbitration or judicially.

         SECTION  13.9   Accounting   Matters.   All  financial  and  accounting
calculations,  measurements  and  computations  made for any purpose relating to
this Agreement,  including,  without  limitation,  all computations  utilized by
BREED or any  Subsidiary  thereof  to  determine  compliance  with any  covenant
contained herein,  shall, except as otherwise  expressly  contemplated hereby or
unless there is an express written direction by the Administrative  Agent to the
contrary agreed to by the Borrowers,  be performed in accordance with GAAP as in
effect on the Closing  Date. In the event that changes in GAAP shall be mandated
by the Financial Accounting
Standards Board, or any similar accounting body of comparable standing, or shall
be recommended by BREED's certified public accountants,  to the extent that such
changes would modify such accounting terms or the  interpretation or computation
thereof,  such changes shall be followed in defining such accounting  terms only
from and after the date the  Borrowers  and the Lenders  shall have amended this
Agreement to the extent  necessary to reflect any such changes in the  financial
covenants and other terms and conditions of this Agreement.

         SECTION 13.10              Successors and Assigns; Participations.

         (a) Benefit of  Agreement.  This  Agreement  shall be binding  upon and
inure to the benefit of the Borrowers, the Administrative Agent and the Lenders,
all future holders of the Notes,  and their  respective  successors and assigns,
except  that  no  Borrower  shall  assign  or  transfer  any  of its  rights  or
obligations  under this  Agreement  without  the prior  written  consent of each
Lender.

         (b)  Assignment  by Lenders.  Each Lender may,  with the consent of the
Administrative  Agent  and  (unless  an Event of  Default  has  occurred  and is
continuing) the Borrowers,  which consents shall not be unreasonably withheld or
delayed,  assign  to one or more  Eligible  Assignees  all or a  portion  of its
interests,  rights and  obligations  under this  Agreement  (including,  without
limitation,  all or a portion of the Loans at the time owing to it and the Notes
held by it); provided, that:

                        (i) each such assignment shall be of a constant, and not
         a  varying,  percentage  of  all  the  assigning  Lender's  rights  and
         obligations  under this Agreement and its rights and obligations  under
         the Five-Year Credit Agreement;

                       (ii)  if  less  than  all  of  the   assigning   Lender's
         Commitment is to be assigned,  the Commitment  under this Agreement and
         the commitment  under the Five-Year  Credit Agreement so assigned shall
         not be less than $10,000,000 in the aggregate;

                      (iii) the parties to each such  assignment  shall  execute
         and  deliver  to the  Administrative  Agent,  for  its  acceptance  and
         recording in the Register,  an Assignment and Acceptance in the form of
         Exhibit F attached hereto (an "Assignment  and  Acceptance"),  together
         with any Note or Notes subject to such assignment;

                       (iv) such  assignment  shall not,  without the consent of
         any applicable  Borrower,  require such Borrower to file a registration
         statement with the  Securities  and Exchange  Commission or apply to or
         qualify the Loans or the Notes under the blue sky laws of any state;

                        (v) the assigning Lender shall pay to the Administrative
         Agent an assignment  fee of $3,000 upon the execution by such Lender of
         the Assignment and Acceptance;  provided, that (A) no such fee shall be
         payable upon any assignment by a Lender to an Affiliate thereof and (B)
         if such  Assignment  is executed in connection  with an Assignment  and
         Acceptance   under  the  Five-Year   Credit   Agreement  the  aggregate
         assignment fee for both such assignments shall be $3,000; and

               (vithe assignee of each such assignment shall execute and deliver
         to the  Administrative  Agent  any  such  supplements  to the  Security
         Documents and/or additional  Security  Documents that may be reasonably
         required by the  Administrative  Agent in order that the  assignee  may
         become a secured party thereunder.

Upon such  execution,  delivery,  acceptance and  recording,  from and after the
effective date specified in each  Assignment  and Accep tance,  which  effective
date shall be at least five (5) Business Days after the execution  thereof,  (A)
the assignee  thereunder  shall be a party hereto and, to the extent provided in
such  Assignment  and  Acceptance,  have the rights and  obligations of a Lender
hereby and (B) the Lender  thereunder  shall,  to the  extent  provided  in such
assignment, be released from its obligations under this Agreement.

         (c) Rights and Duties Upon  Assignment.  By executing and delivering an
Assignment  and  Acceptance,  the assigning  Lender  thereunder and the assignee
thereunder  confirm to and agree with each other and the other parties hereto as
set forth in such Assignment and Acceptance.

         (d) Register.  The  Administrative  Agent shall maintain a copy of each
Assignment and Acceptance  delivered to it and a register for the recordation of
the names and  addresses of the Lenders and the amount of the Loans with respect
to each Lender from time to time (the  "Register").  The entries in the Register
shall be conclusive,  in the absence of manifest error,  and the Borrowers,  the
Administrative  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.

         (e)  Issuance  of New  Notes.  Upon its  receipt of an  Assignment  and
Acceptance  executed by an assigning  Lender and an Eligible  Assignee  together
with any Note or Notes  subject to such  assignment  and the written  consent to
such  assignment,  the  Administrative  Agent  shall,  if  such  Assignment  and
Acceptance has been completed and is substantially in the form of Exhibit F:

                        (i)         accept such Assignment and Acceptance;

                       (ii)      record the information contained therein in the
         Register;

                      (iii)        give prompt notice thereof to the Lenders and
         the Borrowers; and

                       (iv)       promptly deliver a copy of such Assignment and
         Acceptance to the Borrowers.

Within five (5) Business Days after receipt of notice,  the applicable  Borrower
or Borrowers shall execute and deliver to the Administrative  Agent, in exchange
for the  surrendered  Note or  Notes,  a new Note or Notes to the  order of such
Eligible  Assignee in amounts equal to the Commitment  assumed by it pursuant to
such  Assignment  and  Acceptance  and a new Note or  Notes to the  order of the
assigning Lender in an amount equal to the Commitment  retained by it hereunder.
Such new Note or Notes shall be in an  aggregate  principal  amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated the
effective  date of such  Assignment  and  Acceptance  and shall  otherwise be in
substantially  the form of the assigned Notes delivered to the assigning Lender.
Each surrendered Note or Notes shall be canceled and returned to the Borrowers.

         (f) Participations.  Each Lender may sell participations to one or more
banks or other entities in all or a portion of its rights and obligations  under
this Agreement (including, without limitation, all or a portion of its Loans and
the Notes held by it); provided, that:

                        (i) each such participation shall be of a constant,  and
         not varying  percentage  of all the  Assigning  Lender's  Commitment or
         Loans under this  Agreement  and the  commitment or the loans under the
         Five-Year Credit Agreement;

                       (ii) each such  participation  of the  Commitment  or the
         Loans under this  Agreement  and the  commitment or the loans under the
         Five-Year  Credit  Agreement  shall  be  in an  amount  not  less  than
         $5,000,000 in the aggregate;

                      (iii)       such Lender's obligations under this Agreement
         (including, without limitation, its Commitment) shall remain
         unchanged;

                       (iv)       such Lender shall remain solely responsible to
         the other parties hereto for the performance of such
         obligations;

                        (v)         such Lender shall remain the holder of the
         Notes held by it for all purposes of this Agreement;

                       (vi) the  Borrowers,  the  Administrative  Agent  and the
         other  Lenders  shall  continue to deal solely and  directly  with such
         Lender in connection with such Lender's  rights and  obligations  under
         this Agreement;

                      (vii) such Lender  shall not permit such  participant  the
         right to approve any waivers, amendments or other modifications to this
         Agreement or any other Loan Document other than waivers,  amendments or
         modifications  which would reduce the principal of or the interest rate
         on any Loan,  extend the term or increase the amount of the Commitment,
         reduce the amount of any fees to which such  participant  is  entitled,
         extend any scheduled  payment date for principal of any Loan or, except
         as  expressly  contemplated  hereby or thereby,  release  any  material
         portion of the Collateral or release the Guaranty; and

                     (viii) any such disposition  shall not, without the consent
         of  the   applicable   Borrower,   require  such  Borrower  to  file  a
         registration  statement with the Securities and Exchange  Commission to
         apply to qualify  the Loans or the Notes  under the blue sky law of any
         state.

         (g)  Disclosure of  Information;  Confidentiality.  The  Administrative
Agent and the Lenders shall hold all non-public  information with respect to the
Borrowers  obtained  pursuant to the Loan  Documents  in  accordance  with their
customary procedures for handling confidential  information.  Any Lender may, in
connection with any assignment,  proposed assignment,  participation or proposed
participation  pursuant  to  this  Section  13.10,  disclose  to  the  assignee,
participant, proposed assignee or proposed participant, any information relating
to the  Borrowers  furnished  to such  Lender by or on behalf of the  Borrowers;
provided,  that  prior to any such  disclosure,  each  such  assignee,  proposed
assignee,  participant or proposed participant shall agree with the Borrowers or
such Lender to preserve  the  confidentiality  of any  confidential  information
relating to the Borrowers received from such Lender.

         (h)      Certain Pledges or Assignments.  Nothing herein shall
prohibit any Lender from pledging or assigning any Note to any
Federal Reserve Bank in accordance with Applicable Law.

         SECTION 13.11              Amendments, Waivers and Consents.  Except as
set forth below, any term, covenant, agreement or condition of this

Agreement  or any of the other  Loan  Documents  may be amended or waived by the
Lenders,  and any consent given by the Lenders, if, but only if, such amendment,
waiver or  consent  is in  writing  signed by the  Required  Lenders  (or by the
Administrative  Agent with the consent of the Required Lenders) and delivered to
the  Administrative  Agent  and,  in the  case of an  amendment,  signed  by the
Borrowers; provided, that no amendment, waiver or consent
shall,  without  the prior  written  consent of each  Lender,  (a)  release  any
Borrower from its Obligations  hereunder,  (b) increase the amount or extend the
time  of the  obligation  of the  Lenders  to  make  Loans  (including,  without
limitation,  pursuant to Section 2.8), (c) extend the originally  scheduled time
or times of payment of the principal of any Loan or the time or times of payment
of  interest  on any  Loan or the  time or  times  of any  payment  of any  fees
hereunder,  (d) reduce the rate of interest payable on any Loan or the amount of
any fees hereunder, (e) permit any subordination of the principal or interest on
any Loan,  (f) release any  material  portion of the  Collateral  or release any
Security Document (other than as specifically permitted in this Agreement or the
applicable  Security  Document),  (g) reduce  the  "Guaranteed  Obligations"  as
defined in Section  10.1 or release the  Guarantor  from its  Obligations  under
Article  X,  (h)  release  or  discharge  any  Subsidiary   Guarantor  from  its
obligations under any Subsidiary Guaranty Agreement or amend Section 7.12 or (i)
amend  the  provisions  of  Sections  13.10(a)  or  this  Section  13.11  or the
definition of Required Lenders. In addition, no amendment,  waiver or consent to
the  provisions of Article XII shall be made without the written  consent of the
Administrative Agent.

         SECTION 13.12 Performance of Duties.  The Borrowers'  obligations under
this  Agreement  and  each of the  Loan  Documents  shall  be  performed  by the
applicable Borrower at its sole cost and expense.

         SECTION 13.13             All Powers Coupled with Interest.  All powers
of attorney and other authorizations granted to the Lenders, the
Administrative Agent and any Persons designated by the
Administrative Agent or any Lender pursuant to any provisions of
this Agreement or any of the other Loan Documents shall be deemed
coupled with an interest and shall be irrevocable so long as any of
the Obligations remain unpaid or unsatisfied or the Credit Facility
has not been terminated.

         SECTION 13.14 Survival of Indemnities.  Notwithstanding any termination
of this  Agreement,  the indemnities to which the  Administrative  Agent and the
Lenders are  entitled  under the  provisions  of this Article XIII and any other
provision of this Agreement and the Loan Documents  shall continue in full force
and effect and shall protect the  Administrative  Agent and the Lenders  against
events arising after such termination as well as before.

         SECTION 13.15 Releases. Any security interest arising under or pursuant
to this  Agreement in the assets of the  Borrowers or any of their  Subsidiaries
shall be released  upon a sale of the subject  assets as permitted  hereunder in
accordance with the terms hereof.

         SECTION  13.16  Titles and  Captions.  Titles and captions of Articles,
Sections and  subsections  in this  Agreement  are for conve  nience  only,  and
neither limit nor amplify the provisions of this Agreement.
         SECTION  13.17  Severability  of  Provisions.  Any  provision  of  this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction  shall, as to such jurisdiction,  be ineffective only to the extent
of such prohibition or unen forceability  without  invalidating the remainder of
such  provision or the remaining  provisions  hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdic tion.

         SECTION  13.18  Counterparts.  This  Agreement  may be  executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed  shall be deemed to be an  original  and shall be
binding upon all parties,  their successors and assigns,  and all of which taken
together shall constitute one and the same agreement.

         SECTION 13.19 Term of Agreement.  This Agreement shall remain in effect
from the Closing Date through and including the date upon which all  Obligations
shall have been  indefeasibly  and  irrevocably  paid and  satisfied in full. No
termination  of this  Agreement  shall affect the rights and  obligations of the
parties hereto arising prior to such termination.


                            [SIGNATURE PAGES FOLLOW]

                                       57

<PAGE>



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


                                                     BORROWERS:


[CORPORATE SEAL]                            BREED TECHNOLOGIES, INC.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            UNITED STEERING SYSTEMS, INC.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            AUTO TRIM, INC.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            CUSTOM TRIM, LTD.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________



[364-Day Credit Agreement]
                                       58

<PAGE>




[CORPORATE SEAL]                            BREED ITALIA, S.r.l.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            BREED ITALIAN HOLDINGS, S.r.l.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            MOMO, S.p.A.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            GALLINO PLASTURGIA, S.r.l.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            ITALTEST, S.r.l.


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            BREED EUROPEAN HOLDINGS LIMITED


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[364-Day Credit Agreement]
                                       59

<PAGE>




[CORPORATE SEAL]                            HAMLIN ELECTRONICS EUROPE LIMITED


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            UNITED STEERING SYSTEMS CLIFFORD
                                            LIMITED


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            HAMLIN ELECTRONICS, GmbH


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________


[CORPORATE SEAL]                            VTI HAMLIN Oy


                       By:________________________________
                       Name:______________________________
                       Title:_____________________________

[364-Day Credit Agreement]
                                       60

<PAGE>



                                                     ADMINISTRATIVE AGENT:

[CORPORATE SEAL]                            FIRST UNION NATIONAL BANK OF
                                            FLORIDA, as Administrative Agent


                                                     By:
                                                     Name:
                                                     Title:




[364-Day Credit Agreement]
                                       61

<PAGE>



                                                     LENDERS:

[CORPORATE SEAL]                            FIRST UNION NATIONAL BANK OF
                                            FLORIDA, as Lender


                                                     By:
                                                     Name:
                                                     Title:





[364-Day Credit Agreement]
                                       62

<PAGE>



                                                   THE CHASE MANHATTAN BANK, as
                                                  Documentation Agent and Lender


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       63

<PAGE>



                       THE FIRST NATIONAL BANK OF CHICAGO


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       64

<PAGE>



                                                     BANK OF AMERICA ILLINOIS


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       65

<PAGE>



                                                     BHF-BANK AKTIENGESELLSCHAFT


                                                     By:
                                                     Name:
                                                     Title:


                                                     By:
                                                     Name:
                                                     Title:



[364-Day Credit Agreement]
                                       66

<PAGE>



                                                     COMERICA BANK


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       67

<PAGE>



                                                FLEET BANK, NATIONAL ASSOCIATION


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       68

<PAGE>



                                                     NATIONSBANK, N.A.


                                                    By:
                                                    Name:  Andrew M. Airheart
                                                    Title: Senior Vice President


[364-Day Credit Agreement]
                                       69

<PAGE>



                                                     ABN AMRO BANK N.V.


                                                     By:
                                                     Name:
                                                     Title:


                                                     By:
                                                     Name:
                                                     Title:



[364-Day Credit Agreement]
                                       70

<PAGE>



                                                     THE BANK OF NOVA SCOTIA


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       71

<PAGE>



                                                 THE FUJI BANK AND TRUST COMPANY


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       72

<PAGE>



                                                     PNC BANK, KENTUCKY, INC.


                                                     By:
                                                     Name:  James D. Neil
                                                     Title: Vice President


[364-Day Credit Agreement]
                                       73

<PAGE>



                                                  TORONTO DOMINION (TEXAS), INC.


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       74

<PAGE>



                                                BANCA COMMERCIALE ITALIANA - NEW
                                                YORK BRANCH


                                                     By:
                                                     Name:
                                                     Title:


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       75

<PAGE>



                                                     THE BANK OF NEW YORK


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       76

<PAGE>



                                                  COMMERZBANK AG, ATLANTA AGENCY


                                                  By:
                                                  Name:
                                                  Title:


[364-Day Credit Agreement]
                                       77

<PAGE>



                                                     CREDITO ITALIANO SpA


                                                     By:
                                                     Name:
                                                     Title:


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       78

<PAGE>



                                                  CREDIT LYONNAIS ATLANTA AGENCY


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       79

<PAGE>



                                                   DRESDNER BANK AG NEW YORK AND
                                                   GRAND CAYMAN BRANCHES


                                                     By:
                                                     Name:
                                                     Title:


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       80

<PAGE>



                                                   HARRIS TRUST AND SAVINGS BANK


                                                     By:
                                                     Name:
                                                     Title:




[364-Day Credit Agreement]
                                       81

<PAGE>



                                            THE MITSUI TRUST AND BANKING COMPANY
                                            LIMITED, NEW YORK BRANCH


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       82

<PAGE>



                                                THE SANWA BANK, LIMITED, ATLANTA
                                                AGENCY


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       83

<PAGE>



                                                     THE SUMITOMO BANK, LIMITED


                                                     By:
                                                     Name:
                                                     Title:

                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       84

<PAGE>



                                                MERITA BANK LTD. NEW YORK BRANCH


                                                     By:
                                                     Name:
                                                     Title:



[364-Day Credit Agreement]
                                       85

<PAGE>



                                                  ISTITUTO BANCARIO SAN PAOLO DI
                                                  TORINO SPA


                                                     By:
                                                     Name:
                                                     Title:


                                                     By:
                                                     Name:
                                                     Title:


[364-Day Credit Agreement]
                                       86

<PAGE>



                                                    BANQUE FRANCAISE DU COMMERCE
                                                    EXTERIEUR


                                                     By:
                                                     Name:
                                                     Title:


                                                     By:
                                                     Name:
                                                     Title:



[364-Day Credit Agreement]
                                       87

<PAGE>



                                 SCHEDULE 1.1(a)

                                  A/C BORROWERS

         Name of A/C Borrower                             Place of Incorporation

1.       BREED Technologies, Inc.                             United States (DE)

2.       United Steering Systems, Inc.                        United States (DE)

3.       Auto Trim, Inc.                                      United States (TX)

4.       Custom Trim, Ltd.                                    Canada (ONT)

5.       BREED Italia, S.r.l.                                 Italy

6.       BREED Italian Holdings, S.r.l.                       Italy

7.       Momo, S.p.A.                                         Italy

8.       Gallino Plasturgia, S.r.l.                           Italy

9.       Italtest, S.r.l.                                     Italy

10.      BREED European Holdings Limited                      United Kingdom

11.      Hamlin Electronics Europe Limited                    United Kingdom

12.      United Steering Systems Clifford                     United Kingdom
           Limited

13.      Hamlin Electronics, GmbH                             Germany

14.      VTI Hamlin Oy                                        Finland



[364-Day Credit Agreement]
                                       88

<PAGE>



                                  SCHEDULE 9.2

                             CONTINGENT OBLIGATIONS


                                      None.

[364-Day Credit Agreement]

<PAGE>


                                 SCHEDULE 1.1(b)

                             LENDERS AND COMMITMENTS


                                          COMMITMENT
LENDER                                    PERCENTAGE             COMMITMENT

First Union National Bank                   7.1111111111%     $17,777,777.74
  of Florida
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina
  28288-0608
Attention: Syndication Agency
  Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 382-0288

The Chase Manhattan Bank                    6.6666666667%     $16,666,666.67
1 CMP 8th Floor
New York, New York  10081
Attention:  Thomas M. Brennan
         Associate
Telephone No.:  (212) 552-7406
Telecopy No.:   (212) 552-5662

The First National Bank                     5.5555555556%     $13,888,888.89
  of Chicago
One First National Plaza
Suite 0634, 1-10
Chicago, Illinois  60670
Attention:  Gloria Steinbrenner
         Client Services Associate
Telephone No.:  (312) 732-5714
Telecopy No.:   (312) 732-4840

Bank of America Illinois                    5.5555555556%     $13,888,888.89
231 South LaSalle Street
Chicago, Illinois  60697
         Account Administrator
Attention:  Shelia Johnson
Telephone No.:  (312) 828-6568
Telecopy No.:   (312) 974-9626

BHF-Bank Aktiengesellschaft                 4.8888888889%     $12,222,222.22
590 Madison Avenue
New York, New York  10022
Attention:  Renate Boston
Telephone No.:  (212) 756-5543
Telecopy No.:   (212) 756-5536

Comerica Bank                               4.8888888889%     $12,222,222.22
500 Woodward Avenue
Mail Code 3265, 9th Floor
Detroit, Michigan  48226-3265
Attention:  Susan M. Boyd
         Customer Assistant,
         Automotive Group
Telephone No.:  (313) 222-5548
Telecopy No.:   (313) 222-3776

Fleet Bank, National Association            4.8888888889%     $12,222,222.22
208 Harristown Road
Glen Rock, New Jersey  07452
Attention:  Ceil Christie
         Assistant Vice President
Telephone No.:  (201) 251-5323
Telecopy No.:   (201) 251-5739

NationsBank, N.A.                           4.8888888889%     $12,222,222.22
101 N. Tryon Street
NC1-001-15-06
Charlotte, North Carolina  28255
Attention:  Barbara Pollock
         Credit Services Rep.
Telephone No.:  (704) 388-1112
Telecopy No.:   (704) 386-8694

ABN AMRO Bank N.V.                          4.4444444444%     $11,111,111.11
One Ravinia Drive, Suite 1200
Atlanta, Georgia  30346
Attention:  Reenie Williamson
Telephone No.:  (770) 395-7990
Telecopy No.:   (770) 395-9188

The Bank of Nova Scotia                     4.4444444444%     $11,111,111.11
600 Peachtree Street, NE
Suite 2700
Atlanta, Georgia  30308
Attention:  Dorothy Legista
Telephone No.:  (404) 877-1535
Telecopy No.:   (404) 888-8998

The Fuji Bank and Trust Company             4.4444444444%     $11,111,111.11
Two World Trade Center
79th Floor
New York, New York  10048
Attention:  Kathleen Barsotti
         Vice President
Telephone No.:  (212) 898-2065
Telecopy No.:   (212) 488-8216


PNC Bank, Kentucky, Inc.                    4.4444444444%     $11,111,111.11
500 W. Jefferson Street
Louisville, Kentucky  40202
Attention:  Jamie Argenbright
         Lending Assistant
Telephone No.:  (502) 581-2086
Telecopy No.:   (502) 581-2302

Toronto Dominion (Texas), Inc.              4.4444444444%     $11,111,111.11
909 Fannin, Suite 1700
Houston, Texas  77010
Attention:  Lisa Allison
Telephone No.:  (713) 653-8244
Telecopy No.:   (713) 951-9921

Banca Commerciale Italiana -                2.6666666667%     $ 6,666,666.67
  New York Branch
One William Street
New York, New York  10004
Attention:  Jonathan Sahr
         Loan Supervisor
Telephone No.:  (212) 607-3814
Telecopy No.:   (212) 607-3537

The Bank of New York                        2.6666666667%     $ 6,666,666.67
One Wall Street - 22N
New York, New York  10286
Attention:  Annette Megargel
         Administrator
Telephone No.:  (212) 635-6780
Telecopy No.:   (212) 635-6877

Commerzbank AG, Atlanta Agency              2.6666666667%     $ 6,666,666.67
2 World Financial Center
New York, New York  10281
Attention:  Gabriela Schmidtchen
Telephone No.:  (212) 266-7345
Telecopy No.:   (212) 266-7593

Credito Italiano SpA                        2.6666666667%     $ 6,666,666.67
375 Park Avenue, 2nd Floor
New York, New York  10152
Attention:  Luz David
         Money Desk
Telephone No.:  (212) 546-9615
Telecopy No.:   (212) 546-9675






Credit Lyonnais Atlanta Agency              2.6666666667%     $ 6,666,666.67
303 Peachtree Street, N.E.
Suite 4400
Atlanta, Georgia  30308
Attention:  Pascal Seris
Telephone No.:  (404) 524-3700
Telecopy No.:   (404) 584-5249

Dresdner Bank AG New York                   2.6666666667%     $ 6,666,666.67
  and Grand Cayman Branches
75 Wall Street
New York, New York  10005-2889
Attention:  Gary Jermanski
         Credit Services
Telephone No.:  (212) 429-2674
Telecopy No.:   (212) 444-2130

Harris Trust and Savings Bank               2.6666666667%     $ 6,666,666.67
111 W. Monroe Street
Floor 2W
Chicago, Illinois  60603
Attention:  Arlett Hall
         Sr. Banking Services
         Representative
Telephone No.:  (312) 461-2786
Telecopy No.:   (312) 461-2591

The Mitsui Trust and Banking                2.6666666667%     $ 6,666,666.67
  Company Limited, New York Branch
1251 Avenue of the Americas
39th Floor
New York, New York  10020-1104
Attention:  Ed Simnor
Telephone No.:  (212) 790-5352
Telecopy No.:   (212) 768-9044

The Sanwa Bank, Limited,                    2.6666666667%     $ 6,666,666.67
  Atlanta Agency
Park Avenue Plaza
55 E. 52nd Street
New York, New York  10055
Attention:  Renko Hara
Telephone No.:  (212) 339-6390

Telecopy No.:   (212) 754-2368

The Sumitomo Bank, Limited                  2.6666666667%     $ 6,666,666.67
100 S. Ashley Drive, Suite 1780
Tampa, Florida  33602
Attention:  M. Phillip Freeman
Telephone No.:  (813) 229-6002
Telecopy No.:   (813) 229-6372

Merita Bank Ltd., New York Branch           2.2222222222%     $ 5,555,555.56
437 Madison Avenue
New York, New York  10022
Attention:  Revella Perna
Telephone No.:  (212) 318-9345
Telecopy No.:   (212) 421-4420

Istituto Bancario San Paolo                 2.2222222222%     $ 5,555,555.56
  Di Torino SPA
245 Park Avenue
New York, New York  10167
Attention:  Giovanni Lugato
         Account Officer
Telephone No.:  (212) 692-3195
Telecopy No.:   (212) 599-5303

Banque Francaise du Commerce                2.2222222222%     $ 5,555,555.56
  Exterieur
333 Clay Street, Suite 4340
Houston, Texas  77002
Attention:  Tim Polvado
Telephone No.:  (713) 759-9401
Telecopy No.:   (713) 759-9908



[364-Day Credit Agreement]

<PAGE>



                                 SCHEDULE 1.1(c)

                FINNISH MARK LENDERS AND FINNISH MARK COMMITMENTS


                                            COMMITMENT
LENDER                                      PERCENTAGE        COMMITMENT

First Union National Bank                      50%               $5,000,000.00
  of Florida
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina
  28288-0608
Attention: Syndication Agency
  Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 382-0288

Merita Bank Ltd., New York Branch              50%                $5,000,000.00
437 Madison Avenue
New York, New York  10022
Attention:  Revella Perna
Telephone No.:  (212) 318-9345
Telecopy No.:   (212) 421-4420


[364-Day Credit Agreement]

<PAGE>



                                 SCHEDULE 1.1(d)

                          PLEDGE AGREEMENTS AND ISSUERS

         Pledge Agreement                            Applicable Issuers

1.       BREED Pledge Agreement

2.       [Subsidiary Pledge
          Agreements]




[364-Day Credit Agreement]

<PAGE>



                                 SCHEDULE 1.1(e)

                              SUBSIDIARY GUARANTORS

1.       BREED Automotive Florida, Inc.

2.       BREED Automotive West, Inc.

3.       Hamlin, Incorporated

4.       United Steering Systems, Inc.


[364-Day Credit Agreement]


<PAGE>



                                   EXHIBIT A-1
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                              REVOLVING CREDIT NOTE


$___________ April __, 1997
(or the equivalent
thereof described
below)

         FOR VALUE RECEIVED, each of the undersigned, BREED Technologies,  Inc.,
United Steering Systems, Inc., Auto Trim, Inc., Custom Trim, Ltd., BREED Italia,
S.r.l.,  BREED Italian  Holdings,  S.r.l.,  Momo,  S.p.A.,  Gallino  Plasturgia,
S.r.l.,  Italtest,  S.r.l., BREED European Holdings Limited,  Hamlin Electronics
Europe Limited,  United Steering Systems Clifford Limited,  Hamlin, GmbH and VTI
Hamlin Oy (collectively,  the  "Borrowers"),  hereby severally promise to pay to
the order of __________________________ (the "Bank"), at the times, at the place
and in the  manner  provided  in  the  Credit  Agreement  described  below,  the
principal sum of up to  ______________________  Dollars  ($___________),  or the
aggregate  unpaid  principal  Dollar Amount of all Loans  disbursed to each such
Borrower by the Bank under such Credit Agreement,  together with interest at the
rates as in  effect  from  time to time  with  respect  to each  portion  of the
principal  amount  hereof,  determined and payable as provided in Article III of
such Credit Agreement.

         This Revolving  Credit Note is a Revolving  Credit Note referred to in,
and is entitled to the benefits  of, the 364-Day  Credit  Agreement  dated as of
April __, 1997 (as further amended, restated, supplemented or otherwise modified
from time to time, the "Credit  Agreement")  by and among the  Borrowers,  Breed
Technologies,  Inc.,  as  Guarantor,  the  Lenders  party  thereto,  First Union
National Bank of Florida, as Administrative Agent, and The Chase Manhattan Bank,
as  Documentation  Agent.  The Credit  Agreement  contains,  among other things,
provisions for the time,  place and manner of payment of this  Revolving  Credit
Note, the determination of the interest rate
borne by and fees payable in respect of this Revolving Credit Note, acceleration
of the  payment of this  Revolving  Credit  Note upon the  happening  of certain
stated events and the mandatory  repayment of this  Revolving  Credit Note under
certain  circumstances.  All  capitalized  terms used  herein and not  otherwise
defined herein shall have the meaning assigned thereto in the Credit Agreement.

         The  Borrowers  hereby  severally  agree to pay on demand  all costs of
collection,  including reasonable attorneys' fees, if any part of this Revolving
Credit Note, principal or interest,  is collected after maturity with the aid of
an attorney.

         Diligence,  presentment  for payment,  notice of dishonor,  protest and
notice of any kind (other than as explicitly  required by the Credit  Agreement)
are hereby waived.

         THIS REVOLVING  CREDIT NOTE IS MADE AND DELIVERED IN THE STATE OF NORTH
CAROLINA AND SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NORTH CAROLINA.

         The Debt evidenced by this Revolving  Credit Note is senior in right of
payment to all Subordinated Debt referred to in the Credit Agreement.

                            [Signature pages follow]


[364-Day Credit Agreement]

<PAGE>



         IN WITNESS  WHEREOF,  each of the Borrowers  has caused this  Revolving
Credit Note to be executed under seal by a duly authorized officer as of the day
and year first above written.


[CORPORATE SEAL]                            BREED TECHNOLOGIES, INC.

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            UNITED STEERING SYSTEMS, INC.

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            AUTO TRIM, INC.

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            CUSTOM TRIM, LTD.

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            BREED ITALIA, S.R.L.

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            BREED ITALIAN HOLDINGS, S.R.L.

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            MOMO, S.P.A.

                                                     By:
                                                        Name:
                                                        Title:
[CORPORATE SEAL]                            GALLINO PLASTURGIA, S.R.L.

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            ITALTEST, S.R.L.

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            BREED EUROPEAN HOLDINGS LIMITED

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            HAMLIN ELECTRONICS EUROPE LIMITED

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            UNITED STEERING SYSTEMS CLIFFORD
                                            LIMITED

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            HAMLIN ELECTRONICS, GMBH

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]                            VTI HAMLIN OY

                                                     By:
                                                        Name:
                                                        Title:



[364-Day Credit Agreement]

<PAGE>



                                   EXHIBIT A-2
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                                  FINNISH MARK
                              REVOLVING CREDIT NOTE


$___________ April __, 1997
(or the equivalent
thereof described
below)

         FOR VALUE RECEIVED, each of the undersigned,  BREED Technologies,  Inc.
and VTI Hamlin Oy (collectively,  the "Borrowers"),  hereby severally promise to
pay to the order of  __________________________  (the "Bank"),  at the times, at
the place and in the manner provided in the Credit  Agreement  described  below,
the principal sum of up to ______________________ Dollars ($___________), or the
aggregate  unpaid  principal  Dollar Amount of all Loans  disbursed to each such
Borrower by the Bank under such Credit Agreement,  together with interest at the
rates as in  effect  from  time to time  with  respect  to each  portion  of the
principal  amount  hereof,  determined and payable as provided in Article III of
such Credit Agreement.

         This Finnish  Mark  Revolving  Credit Note is a Finnish Mark  Revolving
Credit Note  referred to in, and is  entitled  to the  benefits  of, the 364-Day
Credit  Agreement  dated as of April __,  1997 (as  further  amended,  restated,
supplemented or otherwise modified from time to time, the "Credit Agreement") by
and among the Borrowers,  Breed  Technologies,  Inc., as Guarantor,  the Lenders
party thereto and First Union National Bank of Florida, as Administrative Agent,
and The Chase  Manhattan  Bank, as  Documentation  Agent.  The Credit  Agreement
contains,  among  other  things,  provisions  for the time,  place and manner of
payment of this Finnish Mark  Revolving  Credit Note, the  determination  of the
interest  rate  borne  by and fees  payable  in  respect  of this  Finnish  Mark
Revolving Credit Note, acceleration of the payment of this
Finnish Mark  Revolving  Credit Note upon the happening of certain stated events
and the  mandatory  repayment of this Finnish Mark  Revolving  Credit Note under
certain  circumstances.  All  capitalized  terms used  herein and not  otherwise
defined herein shall have the meaning assigned thereto in the Credit Agreement.

         The  Borrowers  hereby  severally  agree to pay on demand  all costs of
collection,  including  reasonable  attorneys' fees, if any part of this Finnish
Mark Revolving Credit Note,  principal or interest,  is collected after maturity
with the aid of an attorney.

         Diligence,  presentment  for payment,  notice of dishonor,  protest and
notice of any kind (other than as explicitly  required by the Credit  Agreement)
are hereby waived.

         THIS FINNISH MARK  REVOLVING  CREDIT NOTE IS MADE AND  DELIVERED IN THE
STATE OF NORTH  CAROLINA AND SHALL BE CONSTRUED IN ACCORDANCE  WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NORTH CAROLINA.

         The Debt evidenced by this Finnish Mark Revolving Credit Note is senior
in  right  of  payment  to all  Subordinated  Debt  referred  to in  the  Credit
Agreement.


                                             [Signature pages follow]

[364-Day Credit Agreement]


<PAGE>



         IN WITNESS WHEREOF,  each of the Borrowers has caused this Finnish Mark
Revolving Credit Note to be executed under seal by a duly authorized  officer as
of the day and year first above written.


[CORPORATE SEAL]                            BREED TECHNOLOGIES, INC.

                                                     By:
                                                        Name:
                                                        Title:

[CORPORATE SEAL]                            VTI HAMLIN OY

                                                     By:
                                                        Name:
                                                        Title:



[364-Day Credit Agreement]

<PAGE>



                                  EXHIBIT A-3
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                                 SWINGLINE NOTE


$15,000,000.00                                                    April __, 1997

         FOR VALUE  RECEIVED,  the  undersigned,  BREED  TECHNOLOGIES,  INC.,  a
corporation  organized under the laws of Delaware ("BREED"),  hereby promises to
pay to the order of FIRST UNION  NATIONAL BANK OF FLORIDA (the  "Bank"),  at the
times, at the place and in the manner provided in the Credit Agreement described
below,   the  principal  sum  of  up  to  Fifteen  Million  and  No/100  Dollars
($15,000,000.00),  or, if less,  the aggregate  unpaid  principal  amount of all
Swingline Loans disbursed by the Bank under such Credit Agreement, together with
interest  at the rates as in  effect  from  time to time  with  respect  to each
portion of the principal  amount  hereof,  determined and payable as provided in
Article III of such Credit Agreement.

         This  Swingline  Note is the  Swingline  Note  referred  to in,  and is
entitled to the benefits of, the 364-Day Credit  Agreement dated as of April __,
1997 (as amended,  restated,  supplemented  or otherwise  modified,  the "Credit
Agreement") by and among BREED and certain  Subsidiaries  thereof, as Borrowers,
BREED, as Guarantor,  the Lenders party thereto and First Union National Bank of
Florida, as Administrative Agent, and The Chase Manhattan Bank, as Documentation
Agent. The Credit  Agreement  contains,  among other things,  provisions for the
time,  place and manner of payment of this Swingline Note, the  determination of
the interest rate borne by and fees payable in respect of this  Swingline  Note,
acceleration of the payment of this Swingline Note upon the happening of certain
stated events and the mandatory  repayment of this  Swingline Note under certain
circumstances.  All  capitalized  terms used  herein and not  otherwise  defined
herein shall have the meaning assigned thereto in the Credit Agreement.

         BREED agrees to pay on demand all costs of collection,
including  reasonable  attorneys'  fees,  if any  part of this  Swingline  Note,
principal or interest, is collected after maturity with the aid of an attorney.

         Diligence,  presentment  for payment,  notice of dishonor,  protest and
notice of any kind (other than as explicitly  required by the Credit  Agreement)
are hereby waived.

         THIS  SWINGLINE  NOTE IS MADE  AND  DELIVERED  IN THE  STATE  OF  NORTH
CAROLINA AND SHALL BE CONSTRUED IN  ACCORDANCE  WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NORTH CAROLINA.

         The Debt evidenced by this Swingline Note is senior in right of payment
to all Subordinated Debt referred to in the Credit Agreement.



[364-Day Credit Agreement]

<PAGE>



         IN WITNESS WHEREOF, BREED has caused this Swingline Note to be executed
under  seal by a duly  authorized  officer  as of the day and year  first  above
written.

                                                     BREED TECHNOLOGIES, INC.

[CORPORATE SEAL]

                                                     By:
                                                        Name:
                                                        Title:





[364-Day Credit Agreement]

<PAGE>



                                    EXHIBIT B
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                               NOTICE OF BORROWING


First Union National Bank
 of Florida, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

         This irrevocable  Notice of Borrowing is delivered to you under Section
2.4(a) of the 364-Day Credit  Agreement dated as of April ___, 1997 (as amended,
restated,  supplemented or otherwise modified,  the "Credit Agreement"),  by and
among BREED  Technologies,  Inc. and certain of its  Subsidiaries  party thereto
(collectively,  the "Borrowers"),  BREED Technologies,  Inc., as Guarantor,  the
lenders party thereto (the "Lenders"),  First Union National Bank of Florida, as
Administrative Agent, and The Chase Manhattan Bank, as Documentation Agent.

         1. The undersigned  Borrower(s) hereby request(s) that the Lenders make
a  Loan  denominated  in  [Dollars]  [Finnish  Marks]  [applicable   Alternative
Currency] in the aggregate principal amount of $________________ (the "Loan").

         2.       The undersigned Borrower(s) hereby request(s) that the
Loan be made on the following Business Day: _______________.
         3.       This Loan shall be a _______________ Loan.

         4. The undersigned  Borrower(s)  hereby  request(s) that the [Revolving
Credit]  [Finnish Mark] Loan bear interest at the following  interest rate, plus
the Applicable Margin, as set forth below:

Termination
Date for
Principal Interest
Component of      Interest   Interest Period                  Period (if
Loan              Rate       (if applicable)                  applicable)

                           [Base Rate    [One, Two, or
                           or LIBOR             Three, Six or, if
                           Rate]        permitted by Lenders,
                                                Twelve Months]

         5. The principal amount of all Loans  outstanding as of the date hereof
(including the requested  Loan) does not exceed the maximum amount  permitted to
be outstanding pursuant to the terms of the Credit Agreement.

         6. All of the conditions applicable to the Loan requested herein as set
forth in the Credit Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Loan.

         7.       No Default or Event of Default exists, and none will
exist upon making the Loan requested herein.

         8.       All capitalized undefined terms used herein have the
meanings assigned thereto in the Credit Agreement.


     Complete with a Permitted Currency and an amount in accordance with Section
     2.4 of the Credit  Agreement.  Complete  with a Business Day in  accordance
     with Section 2.4 of the Credit  Agreement.  Complete with either "Revolving
     Credit",  "Finnish  Mark" or  "Swingline"  in accordance  with Section 2.3.
     Revolving Credit Loans denominated in Dollars may bear interest at the Base
     Rate  or  the  LIBOR  Rate;   Revolving  Credit  Loans  denominated  in  an
     Alternative  Currency  shall bear interest at the LIBOR Rate; and Swingline
     Loans  shall bear  interest at the Base Rate.  In each case the  Applicable
     Margin shall be set forth in accordance with Section 3.1.

[364-Day Credit Agreement]

<PAGE>



         IN WITNESS  WHEREOF,  the  undersigned  have  executed  this  Notice of
Borrowing this ____ day of _______, ____.





                                            By:
                                               Name:
                                               Title:


[364-Day Credit Agreement]

<PAGE>



                                    EXHIBIT C
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                              NOTICE OF PREPAYMENT


First Union National Bank
 of Florida, as Administrative Agent
One First Union Center
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services

Ladies and Gentlemen:

         This   irrevocable   Notice  of  Prepayment  is  delivered  to  you  by
__________________,  a corporation organized under the laws of _________________
(the "Borrower"),  under Section 2.5(d) of the 364-Day Credit Agreement dated as
of April ___, 1997 (as amended,  restated,  supplemented or otherwise  modified,
the "Credit  Agreement"),  by and among BREED Technologies,  Inc. and certain of
its Subsidiaries,  as Borrowers,  BREED  Technologies,  Inc., as Guarantor,  the
Lenders party thereto,  First Union National Bank of Florida,  as Administrative
Agent, and The Chase Manhattan Bank, as Documentation Agent.

         1.       The undersigned Borrower(s) hereby provides notice to the
Administrative Agent that the undersigned Borrower(s) shall repay
the following Base Rate Loans and/or LIBOR Rate Loans and/or
Swingline Loans: ____________________.

         2.       The undersigned Borrower(s) shall repay the above
referenced Loans on the following Business Day: _______________.

         3.       All capitalized undefined terms used herein have the
meanings assigned thereto in the Credit Agreement.


         IN  WITNESS  WHEREOF,  the  undersigned  has  executed  this  Notice of
Prepayment this ____ day of _______, 19__.


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

[CORPORATE SEAL]

                        By:______________________________
                         Name:_________________________
                         Title:________________________



         Complete with an amount in accordance with Section 2.5(d) of the Credit
         Agreement.  If the Loan to be  repaid  is a LIBOR  Rate  Loan,  specify
         whether such Loan (i) is a Revolving Credit Loan or a Finnish Mark Loan
         and  (ii)  is  denominated  in  Dollars  or  an  Alternative   Currency
         (including, without limitation, Finnish Marks).

         Complete with a Business Day in accordance  with Section  2.5(d) of the
         Credit Agreement.


[364-Day Credit Agreement]
<PAGE>



                                    EXHIBIT D
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent

                        NOTICE OF CONVERSION/CONTINUATION


First Union National Bank
 of Florida, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

         This irrevocable  Notice of  Conversion/Continuation  (the "Notice") is
delivered to you under Section 3.2 of the 364-Day Credit  Agreement  dated as of
April __, 1997 (as amended,  restated,  supplemented or otherwise modified,  the
"Credit  Agreement"),  by  and  among  BREED  Technologies,   Inc.  and  certain
Subsidiaries, as Borrowers, BREED Technologies,  Inc., as Guarantor, the lenders
party  thereto  (the  "Lenders"),  First  Union  National  Bank of  Florida,  as
Administrative Agent, and The Chase Manhattan Bank, as Documentation Agent.

         1.       This Notice of Conversion/Continuation is submitted for
the purpose of:  (Complete applicable information.)

         (a)      [Converting] [continuing] a               Loan [into]
                  [as] a               Loan.

         (b)      Such Loan is  denominated in [Insert  Permitted  Currency] and
                  the  Dollar  Amount  of the  aggregate  outstanding  principal
                  balance of such Loan is $__________.

         (c)      The last day of the current Interest Period for such Loan
                  is               .

         (d)      The principal amount of such Loan to be [converted]
                  [continued] is $_______________.
         (e)      The requested effective date of the [conversion]
                  [continuation] of such Loan is _______________.

         (f)      The requested Interest Period applicable to the
                  [converted] [continued] Loan is _______________.

         2. The principal amount of all Loans  outstanding as of the date hereof
does not exceed the maximum amount  permitted to be outstanding  pursuant to the
terms of the Credit Agreement.

         3. All of the conditions applicable to the Loan requested herein as set
forth in the Credit Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Loan.

         4.       No Default or Event of Default exists, and none will
exist upon the conversion or continuation of the Loan requested
herein.

         5.       All capitalized undefined terms used herein have the
meanings assigned thereto in the Credit Agreement.

         IN WITNESS  WHEREOF,  the  undersigned  have  executed  this  Notice of
Conversion/Continuation this ____ day of __________, 19__.





                                            By:
                                                     Name:
                                                     Title:




[364-Day Credit Agreement]

<PAGE>



                                    EXHIBIT E
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                        OFFICER'S COMPLIANCE CERTIFICATE


         The undersigned,  on behalf of BREED Technologies,  Inc., a corporation
organized  under the laws of  Delaware  ("Breed"),  on  behalf of the  Borrowers
described below,  hereby  certifies to First Union National Bank of Florida,  as
Administrative Agent (the "Administrative Agent"), as follows:

         1. This  Certificate is delivered to you pursuant to Section 6.2 of the
364-Day  Credit  Agreement  dated as of April __,  1997 (as  amended,  restated,
supplemented or otherwise modified, the "Credit Agreement"),  by and among BREED
and certain Subsidiaries thereof, as Borrowers, BREED, as Guarantor, the lenders
party thereto (the "Lenders"),  the Administrative Agent and The Chase Manhattan
Bank,  as  Documentation  Agent.  Capitalized  terms used herein and not defined
herein shall have the meanings assigned thereto in the Credit Agreement.

         2.  I  have  reviewed  the  financial   statements  of  Breed  and  its
Subsidiaries dated as of _______________ and for the  _______________  period[s]
then ended and such statements  fairly present the financial  condition of BREED
and its  Subsidiaries  as of the  dates  indicated  and  the  results  of  their
operations and cash flows for the period[s] indicated.

         3. I have reviewed the terms of the Credit Agreement, the Notes and the
related Loan Documents and have made, or caused to be made under my supervision,
a review in reasonable detail of the transactions and the condition of BREED and
its  Subsidiaries   during  the  accounting  period  covered  by  the  financial
statements  referred to in Paragraph 2 above.  Such review has not disclosed the
existence  during or at the end of such  accounting  period of any  condition or
event  that  constitutes  a Default  or an Event of  Default,  nor do I have any
knowledge of the existence of any such
condition  or  event  as at the  date  of this  Certificate  [except,  [if  such
condition  or event  existed  or  exists,  describe  the  nature  and  period of
existence  thereof and what  action the  Borrowers  have  taken,  are taking and
propose to take with respect thereto]].

         4.       The Applicable Margin and calculations determining such
figure are set forth on the attached Schedule 1.

         5. BREED and its  Subsidiaries  are in  compliance  with the  covenants
contained  in Article VIII of the Credit  Agreement as shown on such  Schedule 1
and BREED and its  Subsidiaries  are in compliance  with the other covenants and
restrictions contained in Articles VII and IX of the Credit Agreement.

         6. The calculations of the total assets of each Subsidiary of BREED for
the purpose of determining which Subsidiaries are Material  Subsidiaries are set
forth on the attached Schedule 1.


         WITNESS the following signatures as of the _____ day of
---------, ----.


                                                     BREED TECHNOLOGIES, INC.


                                                     By:
                                                        Name:
                                                        Title:



[364-Day Credit Agreement]


<PAGE>



                                                    Schedule 1
                                                        to
                                         Officer's Compliance Certificate

I.       Applicable Margin.

         [To Be Completed Pursuant to the Credit Agreement]













[364-Day Credit Agreement]

<PAGE>



                                   Schedule 1
                                       to
                        Officer's Compliance Certificate

II.      Compliance with the Financial Covenants.


A.       Leverage Ratio.

         [To Be Completed Pursuant to the Credit Agreement]


B.       Minimum Net Worth.

         [To Be Completed Pursuant to the Credit Agreement]


C.       Interest Coverage Ratio.

         [To Be Completed Pursuant to the Credit Agreement]



[364-Day Credit Agreement]

<PAGE>



                                   Schedule 1
                                       to
                        Officer's Compliance Certificate

III.     Total Assets of each Subsidiary.


A.       Material Subsidiaries.

Percentage of
                  Subsidiary                Total Assets            Total Assets

         1.

         2.

         3.


         Note:    Breed and the  Subsidiaries of Breed which comprise  "Material
                  Subsidiaries"  (as defined in the Credit  Agreement)  shall at
                  all times have total  assets  equal to or greater  than ninety
                  percent  (90%) of the  Consolidated  total assets of Breed and
                  its Subsidiaries.


B.       Non-Material Subsidiaries.

Percentage of
                  Subsidiary                Total Assets           Total Assets
        1.

         2.

         3.




[364-Day Credit Agreement]

<PAGE>



                                    EXHIBIT F
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                            ASSIGNMENT AND ACCEPTANCE

                                                                 Dated _________

         Reference is made to the 364-Day Credit Agreement dated as of April __,
1997 (as amended,  restated,  supplemented  or otherwise  modified,  the "Credit
Agreement"),  by and among BREED  Technologies,  Inc.  and certain  Subsidiaries
thereof, as Borrowers, BREED Technologies, Inc., as Guarantor, the lenders party
thereto (the "Lenders"), First Union National Bank of Florida, as Administrative
Agent  (the   "Administrative   Agent")  and  The  Chase   Manhattan   Bank,  as
Documentation Agent. Capitalized terms which are defined in the Credit Agreement
and which are used herein without definition shall have the same meanings herein
as in the Credit Agreement.

         _____________________________________ (the "Assignor") and
____________________________ (the "Assignee") agree as follows:

         1. The  Assignor  hereby  sells and  assigns to the  Assignee,  and the
Assignee  hereby  purchases and assumes from the  Assignor,  as of the Effective
Date (as defined  below),  a ____% interest (the "Assigned  Interest") in and to
all of the  Assignor's  interests,  rights  and  obligations  under  the  Credit
Agreement  and the other Loan  Documents  and all  Collateral  and the  Assignor
thereby retains ____% of its interest  therein (the "Retained  Interest").  This
Assignment  and  Acceptance is entered  pursuant to, and  authorized by, Section
13.10 of the Credit Agreement.

         2. The Assignor (a)  represents  that,  as of the date hereof,  (i) its
Commitment  Percentage  (without giving effect to assignments thereof which have
not yet become  effective)  under the  Credit  Agreement,  (ii) the  outstanding
balance of its  Revolving  Credit Loans  (unreduced by any  assignments  thereof
which have not yet become  effective)  under the Credit  Agreement  [, (iii) the
outstanding balance of its Finnish Mark Loans (unreduced by any assignments
thereof which have not yet become effective) under the Credit Agreement and (iv)
the  outstanding  balance of its Swingline  Loans  (unreduced by any assignments
thereof which have not yet become effective)] are each set forth in Section 2 of
Schedule  I hereto;  (b) makes no  representation  or  warranty  and  assumes no
responsibility  with respect to any  statements,  warranties or  representations
made in or in connection with the Credit Agreement or any other Loan Document or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of the Credit  Agreement  or any other  instrument  or document  furnished
pursuant thereto, other than that the Assignor 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;  (c) makes no  representation  or warranty  and
assumes  no  responsibility  with  respect  to the  financial  condition  of the
Borrowers or the  performance  or  observance  by the  Borrowers of any of their
obligations  under the  Credit  Agreement  or any other Loan  Document;  and (d)
attaches the  Revolving  Credit Note [, the Finnish Mark Note and the  Swingline
Note,  as  applicable]  delivered to it under the Credit  Agreement and requests
that the Borrowers exchange such [Note] [Notes] for new Notes payable to each of
the Assignor and the Assignee as follows:

         Revolving Credit Note
         Payable to the Order of:                    Principal Amount of Note:

                                                     $_________


                                                     $_________


         Finnish Mark Note
         Payable to the Order of:                    Principal Amount of Note:

                                                     $_________


                                                     $_________


         Swingline Note
         Payable to the Order of:                    Principal Amount of Note:

                                                     $_________

         3.  The  Assignee  (a)  represents  and  warrants  that  it is  legally
authorized to enter into this  Assignment and  Acceptance;  (b) confirms that it
has received a copy of the Credit  Agreement,  together  with copies of the most
recent financial  statements  delivered pursuant to Section 6.1 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;  (c)
agrees that it
will,  independently  and without reliance upon the Assignor or any other Lender
or the  Administrative  Agent 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;  (d) confirms that it is
an Eligible Assignee;  (e) appoints and authorizes the  Administrative  Agent to
take such  action as agent on its behalf and to exercise  such powers  under the
Credit  Agreement and the other Loan  Documents as are delegated to the agent by
the terms  thereof,  together  with such  powers  as are  reasonably  incidental
thereto;  (f) agrees that it will perform in accordance with their terms all the
obligations  which by the  terms of the  Credit  Agreement  and the  other  Loan
Documents are required to be performed by it as a Lender; and (g) agrees that it
will keep confidential all non-public  information with respect to the Borrowers
obtained  pursuant to the Loan Documents in accordance with Section  13.10(g) of
the Credit Agreement.

         4. The effective date for this  Assignment  and Acceptance  shall be as
set forth in Section 1 of Schedule I hereto (the  "Effective  Date").  Following
the execution of this  Assignment  and  Acceptance,  it will be delivered to the
Administrative Agent for consent thereby and by the Borrowers and acceptance and
recording in the Register.

         5. Upon such consents,  acceptance  and  recording,  from and after the
Effective  Date, (i) the Assignee  shall be a party to the Credit  Agreement and
the other  Loan  Documents  to which  Lenders  are  parties  and,  to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender under each such  agreement,  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  and the other Loan
Documents.

         6. Upon such consents,  acceptance  and  recording,  from and after the
Effective Date, the  Administrative  Agent shall make all payments in respect of
the interest assigned hereby (including  payments of principal,  interest,  fees
and other  amounts) to the  Assignee.  The Assignor and Assignee  shall make all
appropriate  adjustments  in payments for periods prior to the Effective Date or
with respect to the making of this assignment directly between themselves.

         7.       THIS ASSIGNMENT AND ACCEPTANCE SHALL BE DEEMED TO BE A
CONTRACT UNDER SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE  WITH THE LAWS OF THE  STATE Of NORTH  CAROLINA,  WITHOUT  REGARD  TO
CONFLICT OF LAW PRINCIPLES.


[364-Day Credit Agreement]

<PAGE>




                                                     ASSIGNOR:


                                                     Commitment Percentage ____%

                                                     By:
                                                        Name:
                                                        Title:


                                                     ASSIGNEE:


                                    Commitment Percentage ____%

                                                     By:
                                                        Name:
                                                        Title:




[364-Day Credit Agreement]
<PAGE>



Acknowledged and Consented to by:

BREED TECHNOLOGIES, INC., on behalf of
  itself and the other Borrowers


By:____________________________________
   Name:  _____________________________
   Title: _____________________________



Consented to and Accepted by:

FIRST UNION NATIONAL BANK OF FLORIDA,
  as Administrative Agent


By:____________________________________
   Name:______________________________
   Title:______________________________



[364-Day Credit Agreement]

<PAGE>



                                                    Schedule I
                                                        to
                                             Assignment and Acceptance

1. Effective Date ,

2.       Assignor's Interest
         Prior to Assignment

         (a)      Commitment Percentage
                  of Assignor                                   

         (b)      Outstanding balance
                  of Assignor's Revolving
                  Credit Loans

         [(c)     Outstanding balance of
                  Assignor's Finnish Mark Loans                           

         (d)      Outstanding balance of
                  Assignor's Swingline
                  Loans                                                   
3.       Assigned Interest
         (from Section 1)                                             

4.       Assignee's Extensions of Credit
         After Effective Date

         (a)      Outstanding balance of
                  Assignee's Revolving
                  Credit Loans
                  (line 2(b) times line 3)   
                             -----

         [(b)     Outstanding balance of
                  Assignee's Finnish Mark Loans
                  (line 2(b) times 3)       
                             -----

         (c)      Outstanding balance of
                  Assignee's Swingline Loans
                  (line 2(d))             

5.       Retained Interest of Assignor after
         Effective Date

         (a)      Retained Interest (from
                  Section 1)   

         (b)      Outstanding balance of
                  Assignor's Revolving Credit
                  Loans (line 2(b) times
                  line 5(a))     

         [(c)     Outstanding balance of
                  Assignor's Finnish Mark Loans
                  (line 2(c) times line 5(a))  
         (d)      Outstanding balance of
                  Assignor's Swingline Loans
                  (line 2(d) times line 5(a))

6.       Payment Amount  

7.       Payment Instructions

         (a)      If payable to Assignor,
                  to the account of Assignor to:




                  Routing No.:
                  Account No.:
                  Attn:
                  Reference:

         (b)      If payable to Assignee,
                  to the account    of Assignee to:




                  Routing No.:
                  Account No.:
                  Attn:
                  Reference:



[364-Day Credit Agreement]

<PAGE>



                                    EXHIBIT G
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                          NOTICE OF ACCOUNT DESIGNATION


                                                                 Dated _________


First Union National Bank
 of Florida, as Administrative Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina  28288-0608
Attn:  Syndication Agency Services

Ladies and Gentlemen:

         This  Notice  of  Account  Designation  is  delivered  to you by  BREED
Technologies,   Inc.,  a  corporation  organized  under  the  laws  of  Delaware
("BREED"),  on behalf of the Borrowers  described below, under Section 4.2(f)(i)
of the  364-Day  Credit  Agreement  dated as of  April  __,  1997  (as  amended,
restated,  supplemented or otherwise  modified,  the "Credit  Agreement") by and
among BREED and certain Subsidiaries thereof, as Borrowers, BREED, as Guarantor,
the  Lenders  party  thereto,   First  Union   National  Bank  of  Florida,   as
Administrative Agent (the "Administrative Agent"), and The Chase Manhattan Bank,
as Documentation Agent.

         The  Administrative  Agent is hereby  authorized  to disburse  all Loan
proceeds into the following account(s):

                                               [Insert name of bank/
                                                ABA Routing Number/
                                                and Account Number]



[364-Day Credit Agreement]

<PAGE>



         IN WITNESS WHEREOF, the undersigned has executed this Notice of Account
Designation this _____ day of _______, 19__.


[CORPORATE SEAL]                            BREED TECHNOLOGIES, INC.


                                                     By:
                                                              Name:
                                                              Title:


[364-Day Credit Agreement]

<PAGE>



                                    EXHIBIT H
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                            FORM OF PLEDGE AGREEMENT


         THIS PLEDGE AGREEMENT (the "Pledge  Agreement"),  dated as of April __,
1997, is made by  __________________________,  a corporation organized under the
laws of ____________  (the "Pled gor"), in favor of FIRST UNION NATIONAL BANK OF
FLORIDA,  a  national  banking   association,   as  Administrative   Agent  (the
"Administrative  Agent"),  for the ratable  benefit of itself and the  financial
institutions (the "Lenders") that are, or may from time to time become,  parties
to the Credit Agreements (as hereinafter defined).

                              STATEMENT OF PURPOSE

         Pursuant to the terms of the Five-Year Credit Agreement of even date by
and among BREED Technologies, Inc. ("BREED") and certain of its subsidiaries, as
Borrowers,  BREED, as Guarantor,  the Lenders party thereto,  the Administrative
Agent  and The  Chase  Manhattan  Bank,  as  Documentation  Agent  (as  amended,
restated,  supplemented or otherwise modified from time to time, the "Five- Year
Credit  Agreement")  and the 364-Day Credit  Agreement of even date by and among
BREED and certain of its subsidiaries,  as Borrow ers, BREED, as Guarantor,  the
Lenders party thereto, the Administrative Agent and The Chase Manhattan Bank, as
Documentation  Agent (as amended,  restated,  supplemented or otherwise modified
from  time to time,  the  "364-Day  Credit  Agreement"  and,  together  with the
Five-Year  Credit  Agreement,  the "Credit  Agreements"),  the Lenders  extended
certain  credit  facilities  to the  Borrowers  as more  particularly  described
therein.

         The  Pledgor  is the legal and  beneficial  owner of (a) the  shares of
Pledged  Stock (as  hereinafter  defined)  issued  by  certain  corporations  as
specified on Schedule I attached  hereto and incor  porated  herein by reference
(collectively,  the "Issuers") and (b) the Partnership Interests (as hereinafter
defined) in the partner

     [364-Day Credit Agreement] 

<PAGE>


ships and limited liability companies listed on Schedule I hereto (collectively,
the "Partnerships").

         In  connection  with  the  transactions   contemplated  by  the  Credit
Agreements and as a condition precedent thereto, the Lenders have requested, and
the Pledgor has agreed to execute and deliver,  this Pledge  Agreement  with the
Pledged Stock to the Administrative Agent, for the ratable benefit of itself and
the Lenders.

         NOW,  THEREFORE,  in  consideration  of the  foregoing  premises and to
induce the Administrative Agent and the Lenders to enter into and make available
Loans  pursuant to the Credit  Agreements,  the Pledgor  hereby  agrees with the
Administrative Agent, for the ratable benefit of itself and the Lenders.

         1.       Defined Terms.  Unless otherwise defined herein, terms
which are defined in the Credit Agreements and used herein are so
used as so defined, and the following terms shall have the
following meanings:

                  "Code" means the Uniform  Commercial Code from time to time in
         effect in the State of North Carolina.

                  "Collateral" means the Stock Collateral and the
         Partnership Collateral.

                  "Obligations" means the collective  reference to the Pledgor's
         obligations under each Credit Agreement and each Loan Document to which
         such Pledgor is a party.

                  "Partnership Collateral" means all of the Partner
         ship Interests of the Pledgor in the Partnerships and all
         Proceeds therefrom.

                  "Partnership   Interests"  means  the  entire  partnership  or
         membership  interest  of the  Pledgor  in each  Partnership  listed  on
         Schedule  I hereto,  including,  without  limita  tion,  the  Pledgor's
         capital account,  its or his interest as a partner or member in the net
         cash flow,  net profit and net loss, and items of income,  gain,  loss,
         deduction  and  credit  of  the  Partnerships,   its  interest  in  all
         distributions made or to be made by the Partnerships to the Pledgor and
         all of the other economic  rights,  titles and interests of the Pledgor
         as a partner or member of the  Partnerships,  whether  set forth in the
         partnership  agreement or membership agreement of the Partnerships,  by
         separate agreement or otherwise.

                  "Pledge  Agreement" means this Pledge  Agreement,  as amended,
         restated, supplemented or otherwise modified from time to time.

                  "Pledged  Stock"  means the  shares of  capital  stock of each
         Issuer   listed  on  Schedule  I  hereto,   together   with  all  stock
         certificates,  options or rights of any nature  whatsoever  that may be
         issued or  granted by such  Issuer to the  Pledgor  while  this  Pledge
         Agreement is in effect.

                  "Proceeds"  means all  "proceeds"  as such term is  defined in
         Section  9-306(1)  of the Code on the date  hereof  and,  in any event,
         shall include,  without limi tation, all dividends or other income from
         the  Pledged  Stock and  Partnership  Interests,  collections  thereon,
         proceeds of sale thereof or distributions with respect thereto.

                  "Stock Collateral" means the Pledged Stock and all
         Proceeds therefrom.

         2. Pledge and Grant of Security  Interest.  The Pledgor hereby delivers
to the Administrative  Agent, for the ratable benefit of itself and the Lenders,
all the Pledged Stock and hereby  grants to the  Administrative  Agent,  for the
ratable benefit of itself and the Lenders, a first priority security interest in
the Pledged  Stock and all other  Collateral,  as  collateral  security  for the
prompt and  complete  payment and  performance  when due  (whether at the stated
maturity, by acceleration or otherwise) of the Obligations.

         3.       Stock Powers; Register of Pledge.

         (a) Concurrently with the delivery to the Administrative  Agent of each
certificate  representing one or more shares of Pledged Stock, the Pledgor shall
deliver an undated stock power covering such certificate, duly executed in blank
by the Pledgor with, if the Administrative  Agent so requests,  signature guaran
teed.

         (b)  Concurrently  with the  execution  of this Pledge  Agreement,  the
Pledgor will send to each Partnership written instructions  substantially in the
form of  Exhibit  A  hereto  and  shall  cause  each  Partnership  to,  and each
Partnership shall, deliver to the Administrative Agent the Transaction Statement
in the form of Exhibit B hereto, confirming that each Partnership has registered
the pledge effected by this Pledge Agreement on its books.

         4.       Pledgor Remains Liable.  Anything herein to the contrary
notwithstanding, (a) the Pledgor shall remain liable to perform all
of its duties and obligations as a partner of the Partnerships to
the same extent as if this Pledge Agreement had not been executed,
(b) the exercise by the Administrative Agent or any Lender of any
of its rights hereunder shall not release the Pledgor from any of
its duties or obligations as a partner of the Partnerships, and (c)
neither the  Administrative  Agent nor any Lender shall have any  obligation  or
liability as a partner of the Partnerships by reason of this Pledge Agreement.

         5.       Representations and Warranties.   To induce the
Administrative Agent and the Lenders to execute the Credit
Agreements and make any Loans and to accept the security
contemplated hereby, the Pledgor hereby represents and warrants
that:

                  (a) the Pledgor has the corporate  power,  authority and legal
         right to execute and deliver,  to perform its obligations under, and to
         grant the Lien on the Collateral pursuant to, this Pledge Agreement and
         has taken all necessary  corporate  action to authorize its  execution,
         delivery and  performance  of, and grant of the Lien on the  Collateral
         pursuant to, this Pledge Agreement;

                  (b) this  Pledge  Agreement  constitutes  a legal,  valid  and
         binding  obligation of the Pledgor  enforceable  against the Pledgor in
         accordance with its terms,  except as enforceability  may be limited by
         bankruptcy,  insolvency,  reorganization,  moratorium  or similar  laws
         affecting the  enforcement  of creditors'  rights  generally and by the
         availability of equitable remedies;

                  (c) the  execution,  delivery and  performance  of this Pledge
         Agreement  will not  violate any  provision  of any  Applicable  Law or
         contractual  obligation  of the  Pledgor  and  will not  result  in the
         creation  or  imposition  of any Lien on any of the  properties  or the
         revenues of the Pledgor  pursuant to any  Applicable Law or contractual
         obligation, except as contemplated hereby and by the Credit Agreements;

                  (d) no consent or authorization  of, filing with, or other act
         by or in respect of, any  arbitrator or  Governmental  Authority and no
         consent  of  any  other  Person  (including,  without  limitation,  any
         stockholder  or creditor of the Pledgor or any Issuer or any general or
         limited partner of any Partnership), is required in connection with the
         execution,  delivery,  performance,  validity or enforceability against
         the Pledgor of this Pledge Agreement,  except (i) as may be required in
         connection   with  the   disposition  of  the  Pledged  Stock  and  the
         Partnership  Interests  by laws  affecting  the  offering  and  sale of
         securities  generally,  and (ii) filings  under the Uniform  Commercial
         Code;

                  (e) no  litigation,  investigation  or proceeding of or before
         any  arbitrator  or  Governmental  Authority  is  pending  or,  to  the
         knowledge  of the  Pledgor,  threatened  by or against  the  Pledgor or
         against any of its  properties  or revenues with respect to this Pledge
         Agreement or any of the transactions contemplated hereby;
                  (f)  the  shares  of  Pledged   Stock  listed  on  Schedule  I
         constitute all of the issued and  outstanding  shares of all classes of
         the  capital  stock of each Issuer  that is a Domestic  Subsidiary  and
         constitute  _____% of all of the issued and  outstanding  shares of all
         classes of capital  stock of each Issuer that is a Foreign  Subsidiary,
         and Schedule I accurately reflects such Pledgor's  Partnership Interest
         in each of the  Partnerships and the Partnership  Interests  pledged by
         the Pledgor  constitute all of the outstanding  ownership  interests in
         which the Pledgor has any right,  title or interest in each Partnership
         which  is  a  Domestic   Subsidiary  and  constitutes   _____%  of  the
         outstanding  ownership  interests  in which the  Pledgor has any right,
         title and interest in each Partnership which is a Foreign Subsidiary;

                  (g) all the  shares of the  Pledged  Stock  have been duly and
         validly  issued  and are fully  paid and  nonassessable  and all of the
         Partnership Interests have been duly and validly issued;

                  (h) the Pledgor is the record and beneficial owner of, and has
         good and  marketable  title  to,  the  Pledged  Stock  and  Partnership
         Interests listed on Schedule I, free of any and all Liens or options in
         favor of, or claims of, any other Per son, except the Credit Agreements
         and the Lien created by this Pledge Agreement;

                  (i) upon  delivery  to the  Administrative  Agent of the stock
         certificates evidencing the Pledged Stock, the Lien granted pursuant to
         this Pledge Agreement will constitute a valid, perfected first priority
         Lien on the  Collateral,  enforceable  as such against all creditors of
         the  Pledgor  and  any  Persons  purporting  to  purchase  any  of  the
         Collateral from the Pledgor; and

                  (j) the Pledgor has delivered to the Administrative Agent true
         and  complete  copies  of the  partnership  agreements  for each of the
         Partnerships  which partnership  agreements are currently in full force
         and effect and have not been amended or modified except as disclosed to
         the Administrative Agent in writing.

         6.       Certain Covenants.  The Pledgor covenants and agrees with
the Administrative Agent, for the ratable benefit of itself and the
Lenders, that, from and after the date of this Pledge Agreement
until the Obligations are paid in full and the Commitments are
terminated:

                  (a)  On or  before  the  date  of  execution  of  this  Pledge
         Agreement,  the Pledgor shall cause each of the partners of each of the
         Partnerships to execute a consent in the form
         attached hereto evidencing the consent of the partners to the pledge of
         the Partnership Interests pursuant to this Pledge Agreement.

                  (b) The Pledgor  agrees that as a partner in the Partner ships
         it will abide by,  perform  and  discharge  each and every  obligation,
         covenant and  agreement to be abided by,  performed  or  discharged  by
         Pledgor  under  the  terms  of  the   partnership   agreements  of  the
         Partnerships, at no cost or expense to the Administrative Agent and the
         Lenders.

                  (c) If the Pledgor shall,  as a result of its ownership of the
         Collateral,  become  entitled  to  receive or shall  receive  any stock
         certificate   (including,    without   limitation,    any   certificate
         representing a stock dividend or a distribution  in connection with any
         reclassification,  increase or reduction of capital or any  certificate
         issued  in  connection  with any  reorganization),  option  or  rights,
         whether in addition to, in  substitution  of, as a conversion of, or in
         exchange for any of the  Collateral,  or otherwise in respect  thereof,
         the Pledgor  shall  accept the same as the agent of the  Administrative
         Agent, hold the same in trust for the Administrative  Agent and deliver
         the  same  forthwith  to the  Administrative  Agent in the  exact  form
         received,  duly indorsed by the Pledgor to the Administrative Agent, if
         required,   together  with  an  undated   stock  power   covering  such
         certificate  duly  executed in blank by the  Pledgor  and with,  if the
         Administrative Agent so requests,  signature guaranteed,  to be held by
         the  Administrative  Agent,  subject to the terms hereof, as additional
         collateral  security  for the  Obligations;  provided,  that at no time
         shall the  Pledged  Stock or  Partnership  Interests  of any  Issuer or
         Partnership that is a Foreign  Subsidiary  exceed 66.00% of the Pledged
         Stock or Partnership  Interests of such  Subsidiary.  In addition,  any
         sums paid upon or in respect of the Collateral  upon the liquidation or
         disso  lution  of any  Issuer  or  Partnership  shall  be  held  by the
         Administrative   Agent  as  additional   collateral  security  for  the
         Obligations.

                  (d) Without the prior  written  consent of the  Administrative
         Agent,  the  Pledgor  will not (i) vote to  enable,  or take any  other
         action to  permit,  any  Issuer  or  Partnership  to issue  any  stock,
         partnership  interests,  limited  liability  company interests or other
         equity  securities  of any  nature  or to issue  any  other  securities
         convertible  into or granting the right to purchase or exchange for any
         stock,  partnership  interests,  limited liability company interests or
         other equity  securities  of any nature of such Issuer or  Partnership,
         (ii) except as expressly  provided to the contrary  herein,  consent to
         any  modification,   extension  or  alteration  of  the  terms  of  any
         partnership agreement of the Partnerships,  (iii) accept a surrender of
         any partnership agreement of any of the Partner
         ships or waive any breach of or default under any partnership agreement
         of any of the  Partnerships  by any other  party  there to,  (iv) sell,
         assign,  transfer,  exchange,  or  otherwise  dispose  of, or grant any
         option with respect to, the Collateral,  or (v) create, incur or permit
         to exist any Lien or  option  in favor  of, or any claim of any  Person
         with respect to, any of the Collateral, or any interest therein, except
         for the Lien  provided for by this Pledge  Agreement.  The Pledgor will
         defend the right, title and interest of the Administrative Agent in and
         to the  Collateral  against  the  claims  and  demands  of all  Persons
         whomsoever.

                  (e) At any  time  and from  time to  time,  upon  the  written
         request of the  Administrative  Agent,  and at the sole  expense of the
         Pledgor,  the Pledgor  will  promptly and duly execute and deliver such
         further  instruments and documents and take such further actions as the
         Administrative  Agent  may  reasonably  request  for  the  purposes  of
         obtaining or preserving the full benefits of this Pledge  Agreement and
         of the rights and powers herein granted. If any amount payable under or
         in connection with any of the Collateral  shall be or become  evidenced
         by any promissory note,  other instrument or chattel paper,  such note,
         instrument  or chattel  paper  shall be  immediately  delivered  to the
         Administrative  Agent,  duly endorsed in a manner  satisfac tory to the
         Administrative  Agent, to be held as Collateral pursuant to this Pledge
         Agreement.

                  (f) The Pledgor agrees to pay, and to save the  Administrative
         Agent and the  Lenders  harmless  from,  any and all  liabilities  with
         respect to, or resulting  from any delay in paying,  any and all stamp,
         excise, sales or other similar taxes which may be payable or determined
         to be payable with respect to any of the  Collateral  or in  connection
         with any of the transactions contemplated by this Pledge Agreement.

                  (g)  On or  prior  to  the  formation  or  acquisition  of any
         Subsidiary  of  the  Pledgor,   the  Pledgor  agrees  to  execute  such
         amendments and supplements to this Pledge Agreement, including, without
         limitation,  the Pledge Agreement  Supplement attached hereto, and such
         other documents and instruments as required pursuant to Section 7.12 of
         each Credit Agreement.

         7. Cash Dividends and Distributions;  Voting Rights. Unless an Event of
Default shall have occurred and be continuing and the Administrative Agent shall
have  given  notice  to the  Pledgor  of the  Administrative  Agent's  intent to
exercise  its  rights  pursuant  to  Paragraph  8 below,  the  Pledgor  shall be
permitted  to  receive  all  cash  dividends  and  shareholder  and  partnership
distributions  paid in  accordance  with the terms of each Credit  Agreement  in
respect  of  the  Collateral  and  to  exercise  all  voting  and  corporate  or
partnership  rights,  as applicable,  with respect to the Collateral;  provided,
that no vote shall be cast or corporate or partnership
right  exercised  or other action taken  which,  in the  Administrative  Agent's
reasonable judgment,  would impair the collateral or which would be inconsistent
with or result in any violation of any provision of either Credit Agreement, the
Notes, any other Loan Documents or this Pledge Agreement.

         8.       Rights of the Administrative Agent.

         (a) If an  Event of  Default  shall  occur  and be  continuing  and the
Administrative  Agent shall give notice of its intent to exercise such rights to
the Pledgor,  (i) the  Administrative  Agent shall have the right to receive any
and all cash  dividends  paid in respect of the  Pledged  Stock and  partnership
distributions  in  respect of the  Partnership  Interests  and make  application
thereof to the  Obligations in the order set forth in Section 3.5 of each Credit
Agreement and (ii) all shares of the Pledged Stock and the Partnership Interests
shall be registered in the name of the Administrative  Agent or its nominee, and
the Administrative  Agent or its nominee may thereafter exercise (A) all voting,
corporate, partnership and other rights pertaining to such shares of the Pledged
Stock or  Partnership  Interests at any meeting of sharehold  ers or partners of
the applicable  Issuer or Partnership or otherwise and (B) any and all rights of
conversion,  exchange,  subscription and any other rights, privileges or options
pertaining to such shares of the Pledged Stock or Partnership Interests as if it
were the absolute owner thereof  (including,  without  limitation,  the right to
exchange  at its  discretion  any and all of the  Pledged  Stock or  Partnership
Interests upon the merger,  consolidation,  reorganization,  recapitalization or
other fundamental change in the corporate  structure of the applicable Issuer or
Partnership,  or upon the exercise by the Pledgor or the Administrative Agent of
any right, privilege or option pertaining to such shares of the Pledged Stock or
the Partnership Interests, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock or the  Partnership  Interests with any
committee, depositary, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine),  all without liability except to
account for property actually received by it, but the Administrative Agent shall
have no duty to the Pledgor to exercise any such right,  privilege or option and
shall not be responsible for any failure to do so or delay in so doing.

         (b) The rights of the  Administrative  Agent and the Lenders  hereunder
shall not be  conditioned or contingent  upon the pursuit by the  Administrative
Agent or any Lender of any right or remedy  against  the  Pledgor or against any
other Person which may be or become  liable in respect of all or any part of the
Obligations or against any collateral  security  therefor,  guarantee thereof or
right of offset with respect thereto.  Neither the Administrative  Agent nor any
Lender shall be liable for any failure to demand, collect or realize upon all or
any  part of the  Collateral  or for any  delay  in  doing  so,  nor  shall  the
Administrative Agent be under
any obligation to sell or otherwise  dispose of any Collateral  upon the request
of the Pledgor or any other Person or to take any other action  whatsoever  with
regard to the Collateral or any part thereof.

         9. Remedies. If an Event of Default shall occur and be continuing, with
the consent of the Required Lenders,  the Administrative Agent may, and upon the
request of the Required Lenders,  the  Administrative  Agent shall,  exercise on
behalf of itself and the Lenders, all rights and remedies granted in this Pledge
Agreement  and in any other  instrument  or agreement  securing,  evidencing  or
relating to the Obligations, and in addition thereto, all rights and remedies of
a secured party under the Code. Without limiting the generality of the foregoing
with  regard  to  the  scope  of  the  Administrative   Agent's  remedies,   the
Administrative   Agent,   without   demand  of   performance  or  other  demand,
presentment,  protest,  advertisement  or notice of any kind  (except any notice
required by law  referred  to below) to or upon the  Pledgor,  any  Issuer,  any
Partnership  or any  other  Person  (all and each of  which  demands,  defenses,
advertisements  and  notices  are  hereby  waived),  may in  such  circumstances
forthwith collect, receive,  appropriate and realize upon the Collateral, or any
part  thereof,  and/or may  forthwith  sell,  assign,  give option or options to
purchase or otherwise  dispose of and deliver the Collateral or any part thereof
(or  contract to do any of the  foregoing),  in one or more parcels at public or
private sale or sales, in the over-the-counter market, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere upon such
terms and  conditions as it may deem advisable and at such prices as it may deem
best,  for cash or on credit or for future  delivery  without  assumption of any
credit risk.  The  Administrative  Agent or any Lender shall have the right upon
any such public sale or sales,  and, to the extent  permitted  by law,  upon any
such private sale or sales,  to purchase the whole or any part of the Collateral
so sold,  free of any right or equity of redemption in the Pledgor,  which right
or equity is hereby waived or released. The Administrative Agent shall apply any
Proceeds  from  time  to  time  held by it and  the  net  proceeds  of any  such
collection,  recovery,  receipt,  appropriation,   realization  or  sale,  after
deducting  all  reasonable  costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeep ing of any of the Collateral or in
any way relating to the Collateral or the rights of the Administrative Agent and
the Lenders hereunder, including, without limitation, reasonable attorneys' fees
and disbursements of counsel thereto,  to the payment in whole or in part of the
Obligations, in the order set forth in Section 3.5 of each Credit Agreement, and
only after such application and after the payment by the Administrative Agent of
any  other  amount  required  by  any  provision  of  law,  including,   without
limitation,  Section  9-504(1)(c)  of the Code,  need the  Administrative  Agent
account for the  surplus,  if any, to the  Pledgor.  To the extent  permitted by
applicable  law,  the  Pledgor  waives all  claims,  damages  and demands it may
acquire against the
Administrative  Agent or any Lender  arising out of the  exercise by them of any
rights  hereunder.  If any notice of a  proposed  sale or other  disposition  of
Collateral shall be required by law, such notice shall be deemed  reasonable and
proper if given at least ten (10) days  before  such sale or other  disposition.
The  Pledgor  further  waives and agrees not to assert any rights or  privileges
which it may acquire under Section 9-112 of the Code.

         10.      Registration Rights; Private Sales.

         (a) If the  Administrative  Agent shall determine to exercise its right
to sell any or all of the Pledged Stock  pursuant to Paragraph 9 hereof,  and if
in the opinion of the Administrative  Agent it is necessary or advisable to have
the Pledged  Stock,  or that portion  thereof to be sold,  registered  under the
provisions of the Securities Act of 1933, as amended (the "Securities Act"), the
Pledgor will cause the applicable  Issuer to (i) execute and deliver,  and cause
the directors and officers of the applicable Issuer to execute and deliver,  all
such  instruments and documents,  and do or cause to be done all such other acts
as may be, in the reasonable opinion of the Administrative  Agent,  necessary or
advis able to register the Pledged  Stock,  or that portion  thereof to be sold,
under the  provisions  of the  Securities  Act,  (ii) to use its best efforts to
cause the  registration  statement  relating  thereto to become effective and to
remain  effective  for a period of one year  from the date of the  first  public
offering of the Pledged Stock,  or that portion thereof to be sold, and (iii) to
make all  amendments  thereto  and/or to the related  prospectus  which,  in the
opinion  of  the  Administrative  Agent,  are  necessary  or  advisable,  all in
conformity  with  the  requirements  of the  Securities  Act and the  rules  and
regulations of the Securities and Exchange Commission  applicable  thereto.  The
Pledgor agrees to cause the  applicable  Issuer to comply with the provisions of
the  securities  or  "Blue  Sky"  laws of any and all  jurisdictions  which  the
Administrative  Agent shall  designate  and to make  available  to its  security
holders,  as soon as  practicable,  an  earnings  statement  (which  need not be
audited)  which will satisfy the  provisions of Section 11(a) of the  Securities
Act.

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

         (c) The Pledgor  further  agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales of
all or any portion of the  Collateral  pursuant to this  Paragraph  10 valid and
binding and in compliance  with any and all other  Applicable  Laws. The Pledgor
further agrees that a breach of any of the covenants contained in this Paragraph
10 will cause irreparable injury to the Administrative Agent and the Lenders not
compensable in damages,  that the  Administrative  Agent and the Lenders have no
adequate  remedy at law in respect of such breach and,  as a  consequence,  that
each and every  covenant  contained in this  Paragraph 10 shall be  specifically
enforceable against the Pledgor, and the Pledgor hereby waives and agrees not to
assert any defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred  under either  Credit
Agreement.

          11.  Amendments,  etc.  With Respect to the  Obligations.  The Pledgor
     shall remain obligated  hereunder,  and the Collateral shall remain subject
     to the Lien granted hereby,  notwithstanding  that, without any reservation
     of rights  against the Pledgor,  and without notice to or further assent by
     the Pledgor,  any demand for payment of any of the Obligations  made by the
     Administrative  Agent or any Lender may be rescinded by the  Administrative
     Agent  or  such  Lender,  and  any of the  Obligations  continued,  and the
     Obligations,  or the  liability  of the Pledgor or any other Person upon or
     for any part thereof,  or any collateral  security or guarantee therefor or
     right of offset with respect  thereto,  may, from time to time, in whole or
     in part, be renewed, extended, amended, modified, accelerated, compromised,
     waived, surrendered, or released by the Administrative Agent or any Lender,
     and either Credit  Agreement,  the Notes,  any other Loan Documents and any
     other  documents  executed and  delivered in  connection  therewith  may be
     amended,  modified,  supplemented  or terminated,  in whole or part, as the
     Lenders (or the Required  Lenders,  as the case may be) may deem  advisable
     from time to time, and any guarantee,  right of offset or other  collateral
     security at any time held by the Administrative Agent or any Lender for the
     payment of the Obligations may be sold, exchanged,  waived,  surrendered or
     released.  Neither the  Administrative  Agent nor any Lender shall have any
     obligation to protect, secure, perfect or insure any other Lien at any time
     held by it as security for the Obligations or any property subject thereto.
     The Pledgor waives any and all notice of the creation,  renewal,  extension
     or accrual of any of the  Obligations and notice of or proof of reliance by
     the  Administrative  Agent or any Lender  upon this Pledge  Agreement;  the
     Obligations,  and any of them,  shall  conclusively  be deemed to have been
     created, contracted or incurred in reliance upon this Pledge Agreement; and
     all dealings between the Pledgor,  on the one hand, and the  Administrative
     Agent  and the  Lenders,  on the  other,  shall  likewise  be  conclusively
     presumed  to have been had or  consummated  in  reliance  upon this  Pledge
     Agreement. The Pledgor waives dili gence, presentment,  protest, demand for
     payment and notice of default or  nonpayment  to or upon the  Pledgor  with
     respect to the Obligations.

         12. No Subrogation. Notwithstanding any payment or payments made by the
Pledgor  hereunder,  or any setoff or application of funds of the Pledgor by the
Administrative  Agent, or the receipt of any amounts by the Administrative Agent
with respect to any of the  Collateral,  the Pledgor shall not be entitled to be
subrogated to any of the rights of the Administrative Agent against any Borrower
or  the  Guarantor  or  against  any  other  collateral  security  held  by  the
Administrative  Agent for the payment of the Obligations,  nor shall the Pledgor
seek any reimbursement from any Borrower or the Guarantor in respect of payments
made by the Pledgor in connection  with the Collateral,  or amounts  realized by
the  Administrative  Agent in connection with the Collateral,  until all amounts
owing to the Administrative  Agent and Lenders on account of the Obligations are
paid in full and each Credit  Agreement  is  terminated.  If any amount shall be
paid to the Pledgor on account of such  subrogation  rights at any time when all
of the  Obligations  shall not have been paid in full, such amount shall be held
by the  Pledgor in trust for the  Administrative  Agent,  segregated  from other
funds of the Pledgor,  and shall,  forthwith  upon  receipt by the  Pledgor,  be
turned  over to the  Administrative  Agent in the  exact  form  received  by the
Pledgor (duly indorsed by the  Administrative  Agent, if required) to be applied
against the  Obligations,  whether  matured or  unmatured,  in such order as set
forth in each Credit Agreement.

         13.  Limitation  on Duties  Regarding  Collateral.  The  Administrative
Agent's  sole duty with  respect  to the  custody,  safe  keeping  and  physical
preservation  of the  Collateral in its posses sion,  under Section 9-207 of the
Code  or  otherwise,  shall  be to  deal  with  it in  the  same  manner  as the
Administrative  Agent deals with  similar  securities  and  property for its own
account.  Neither  the  Administrative  Agent,  any  Lender  nor  any  of  their
respective directors,  officers, employees or agents shall be liable for failure
to demand,  collect or realize  upon any of the  Collateral  or for any delay in
doing so or shall be under any  obligation  to sell or otherwise  dispose of any
Collateral upon the request of the Pledgor or otherwise.

         14.      Powers Coupled with an Interest.  All authorizations and
agencies herein contained with respect to the Collateral constitute
irrevocable powers coupled with an interest.

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

         16.      Paragraph Headings.  The paragraph headings used in this
Pledge Agreement are for convenience of reference only and are not
to affect the construction hereof or be taken into consideration in
the interpretation hereof.

         17. No Waiver;  Cumulative  Remedies.  Neither the Administrative Agent
nor any Lender  shall by any act  (except by a written  instrument  pursuant  to
Paragraph  18 hereof) be deemed to have waived any right or remedy  hereunder or
to have acquiesced in any Default or Event of Default or in any breach of any of
the terms and  conditions  hereof.  No  failure  to  exercise,  nor any delay in
exercising,  on the part of the  Administrative  Agent or any Lender, any right,
power or privilege  hereunder  shall operate as a waiver  thereof.  No single or
partial exercise of any right,  power or privilege  hereunder shall preclude any
other or further exercise  thereof or the exercise of any other right,  power or
privilege.  A waiver by the  Administrative  Agent or any Lender of any right or
remedy  hereunder  on any one  occasion  shall not be  construed as a bar to any
right or remedy which the  Administrative  Agent or such Lender would  otherwise
have on any future  occasion.  The  rights  and  remedies  herein  provided  are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.

         18.      Waivers and Amendments; Successors and Assigns; Governing
Law.  None of the terms or provisions of this Pledge Agreement may
be amended, supplemented or otherwise modified except by a written
instrument executed by the Pledgor and the Administrative Agent;
provided that any consent by the Administrative Agent to any
waiver, amendment, supplement or modification hereto shall be

subject to approval thereof by the Lenders or Required  Lenders,  as applicable,
in accordance with Section 13.11 of each Credit Agreement. This Pledge Agreement
shall be binding upon the succes sors and assigns of the Pledgor and shall inure
to the benefit of the  Administrative  Agent,  the Lenders and their  respective
succes  sors and  assigns.  This  Pledge  Agreement  shall be  governed  by, and
construed and  interpreted  in accordance  with,  the laws of the State of North
Carolina.

         19.      Notices.  All notices and communications hereunder shall
be given to the addresses and otherwise in accordance with Section
13.1 of each Credit Agreement.

         20.      Irrevocable Authorization and Instruction to Issuers.
The Pledgor hereby authorizes and instructs each Issuer and
Partnership to comply with any instruction received by it from the
Administrative Agent in writing that (a) states that an Event of
Default has occurred and is continuing  and (b) is otherwise in accordance  with
the terms of this Pledge  Agreement,  without any other or further  instructions
from the Pledgor,  and the Pledgor agrees that such Issuer and Partnership shall
be fully protected in so complying.

         21. Authority of  Administrative  Agent. The Pledgor acknowl edges that
the rights and  responsibilities  of the Administrative  Agent under this Pledge
Agreement  with respect to any action taken by the  Administrative  Agent or the
exercise or  non-exercise  by the  Administrative  Agent of any  option,  voting
right,  request,  judgment  or other  right or  remedy  provided  for  herein or
resulting  or  arising  out of this  Pledge  Agreement  shall,  as  between  the
Administrative  Agent and the Lenders,  be governed by the Credit Agreements and
by such other  agreements  with  respect  thereto as may exist from time to time
among them,  but,  as between  the  Administrative  Agent and the  Pledgor,  the
Administrative  Agent shall be  conclusively  presumed to be acting as agent for
itself and the Lenders  with full and valid  authority so to act or refrain from
acting, and neither the Pledgor nor any Issuer or Partnership shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.

         22. Consent to Jurisdiction. The Pledgor hereby irrevocably consents to
the personal jurisdiction of the state and federal courts located in Mecklenburg
County, North Carolina,  in any action, claim or other proceeding arising out of
or any  dispute  in  connection  with  this  Pledge  Agreement,  any  rights  or
obligations  hereunder,  or the performance of such rights and obligations.  The
Pledgor  hereby  irrevocably  consents to the service of a summons and complaint
and  other  process  in  any  action,   claim  or  proceeding   brought  by  the
Administrative Agent or any Lender in connection with this Pledge Agreement, any
rights  or  obligations  hereunder,  or  the  performance  of  such  rights  and
obligations,  on behalf of itself or its  property,  in the manner  provided  in
Section 13.1 of each Credit Agreement. Nothing in this Paragraph 22 shall affect
the right of the  Administrative  Agent or any Lender to serve legal  process in
any  other  manner  permitted  by  Applicable  Law or  affect  the  right of the
Administrative Agent or any Lender to bring any action or proceeding against the
Pledgor or its properties in the courts of any other jurisdictions.

         23.      Binding Arbitration; Waiver of Jury Trial.

         (a) Binding Arbitration.  Upon demand of any party, whether made before
or  after  institution  of  any  judicial  proceeding,  any  dispute,  claim  or
controversy  arising out of, connected with or relating to this Pledge Agreement
or any other  Loan  Documents  ("Disputes"),  between  or among  parties to this
Pledge  Agreement  or any other  Loan  Document  shall be  resolved  by  binding
arbitration as provided herein.  Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration
hereunder. Disputes may include, without limitation, tort claims, counterclaims,
claims brought as class actions,  claims arising from Loan Documents executed in
the  future,  or claims  concerning  any  aspect of the past,  present or future
relationships  arising out or  connected  with the Loan  Documents.  Arbitration
shall be  conducted  under and  governed by the  Commercial  Financial  Disputes
Arbitration  Rules  (the  "Arbitration   Rules")  of  the  American  Arbitration
Association  and Title 9 of the U.S.  Code.  All  arbitration  hearings shall be
conducted in Charlotte,  North Carolina.  The expedited  procedures set forth in
Rule 51, et seq. of the Arbitration  Rules shall be applicable to claims of less
than  $1,000,000.  All  applicable  statutes  of  limitation  shall apply to any
Dispute.  A  judgment  upon  the  award  may  be  entered  in any  court  having
jurisdiction.  The  panel  from  which all  arbitrators  are  selected  shall be
comprised of licensed  attorneys.  The single arbitrator  selected for expedited
procedure   shall  be  a  retired  judge  from  the  highest  court  of  general
jurisdiction,  state  or  federal,  of the  state  where  the  hearing  will  be
conducted.

         (b)  Jury  Trial.  TO THE  EXTENT  PERMITTED  BY  APPLICABLE  LAW,  THE
ADMINISTRATIVE AGENT, EACH LENDER AND THE PLEDGOR HEREBY IRREVOCABLY WAIVE THEIR
RESPECTIVE  RIGHTS TO A JURY TRIAL WITH  RESPECT TO ANY  ACTION,  CLAIM OR OTHER
PROCEEDING  ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS PLEDGE  AGREEMENT
OR THE OTHER LOAN DOCUMENTS,  ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER,
OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.

         (c)  Preservation of Certain  Remedies.  Notwithstanding  the preceding
binding  arbitration  provisions,  the  parties  hereto  and the Loan  Documents
preserve,  without diminution,  certain remedies that such Persons may employ or
exercise  freely,  either alone, in conjunction  with or during a Dispute.  Each
such Person shall have and hereby  reserves the right to proceed in any court of
proper  jurisdiction  or by self help to exercise  or  prosecute  the  following
remedies:  (i) all rights to foreclose  against any real or personal property or
other  security by  exercising a power of sale granted in the Loan  Documents or
under  applicable law or by judicial  foreclosure  and sale,  (ii) all rights of
self help including peaceful occupation of property and collection of rents, set
off, and  peaceful  possession  of  property,  (iii)  obtaining  provisional  or
ancillary remedies  including  injunctive  relief,  sequestration,  garnishment,
attachment,  appointment  of receiver  and in filing an  involuntary  bankruptcy
proceeding,  and (iv) when  applicable,  a judgment by  confession  of judgment.
Preservation  of these  remedies  does not limit the power of an  arbitrator  to
grant similar remedies that may be requested by a party in a Dispute.

         24.      Entire Agreement; Term of Agreement.  This Agreement,
together with the other Loan Documents, constitutes the entire
agreement with respect to the subject matter hereof and supersedes
all prior agreements with respect to the subject matter hereof.
This Agreement shall remain in effect from the Closing Date through
and including the date upon which all Obligations  shall have been  indefeasibly
and irrevocably paid and satisfied in full and the Commitments terminated.


[364-Day Credit Agreement]

<PAGE>



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

[CORPORATE SEAL]


                                                     By:
                                                        Name:
                                                        Title:




[364-Day Credit Agreement]

<PAGE>



                                           ACKNOWLEDGEMENT AND CONSENT

         Each  Issuer of  Pledged  Stock  referred  to in the  foregoing  Pledge
Agreement hereby  acknowledges  receipt of a copy thereof and agrees to be bound
thereby  and to  comply  with  the  terms  thereof  insofar  as such  terms  are
applicable to it. Each Issuer agrees to notify the Administrative Agent promptly
in writing of the occurrence of any of the events described in Paragraph 6(c) of
the Pledge Agreement.  Each Issuer further agrees that the terms of Paragraph 10
of the Pledge  Agreement  shall apply to it with respect to all actions that may
be required of it under or  pursuant  to or arising out of  Paragraph  10 of the
Pledge Agreement.


                                                     By:
                                                        Name:
                                                        Title:



                                                     By:
                                                        Name:
                                                        Title:




[364-Day Credit Agreement]

<PAGE>



                 ACKNOWLEDGEMENT AND CONSENT BY EACH PARTNERSHIP

         The  undersigned  partners  of  the  Partnership  referred  to  in  the
foregoing Pledge Agreement (a) hereby acknowledge receipt of a copy thereof, (b)
hereby  acknowledge  and consent to the pledge of the Pledgor's  interest in the
Partnership  pursuant thereto and upon exercise by the  Administrative  Agent of
its  remedies  thereunder  and at the option of the  Administrative  Agent,  the
substitution of the  Administrative  Agent as a partner in the Partnership,  and
(c)  agree  that  the  Administrative  Agent  may  freely  assign  its  interest
thereunder without further consent of the partners.


__________ Partner of                       __________ Partner of




[364-Day Credit Agreement]


<PAGE>



                                   SCHEDULE I
                                    To Pledge
                                    Agreement

                          DESCRIPTION OF PLEDGED STOCK

                                  Subsidiaries



                                                                   Percentage of
                                                                 all Outstanding
                                                                          issued
Issuer   Class of Stock       Certificate No.      No. of Shares   Capital Stock






                       DESCRIPTION OF PARTNERSHIP INTEREST

                                  Partnerships

                        

[364-Day Credit Agreement]
<PAGE>



                           PLEDGE AGREEMENT SUPPLEMENT

     PLEDGE  AGREEMENT  SUPPLEMENT,  dated  as of  _______________,  _____  (the
"Supplement"), made by ______________________________,  a corpora tion organized
under  the laws of  ______________________  (the  "Pledgor"),  in favor of FIRST
UNION   NATIONAL  BANK  OF  FLORIDA,   a  national   banking   association,   as
Administrative Agent (in such capacity,  the "Administrative  Agent"), under the
Credit  Agreements (as defined in the Pledge Agreement  referred to below),  for
the benefit of itself and the Lenders.

         1. Reference is hereby made to that Pledge Agreement, dated as of April
__, 1997, made by the Pledgor in favor of the Administrative  Agent (as amended,
restated,  supplemented or otherwise modified as of the date hereof, the "Pledge
Agreement").  This  Supplement  supplements the Pledge  Agreement,  forms a part
thereof  and is  subject  to the terms  thereof.  Terms  defined  in the  Pledge
Agreement are used herein as therein defined.

         [2. The Pledgor hereby confirms and reaffirms the security inter est in
the Collateral granted to the  Administrative  Agent, for the ratable benefit of
itself  and  the  Lenders,  under  the  Pledge  Agreement,  and,  as  additional
collateral  security  for the prompt and  complete  payment when due (whether at
stated  maturity,  by acceleration or otherwise) of the Obligations and in order
to induce the  Lenders  to make their  Loans  under the Credit  Agreements,  the
Pledgor hereby delivers to the Administrative  Agent, for the ratable benefit of
itself and the  Lenders,  all of the issued  and  outstanding  shares of capital
stock of  [INSERT  NAME OF NEW  SUBSIDIARY]  (the "New  Issuer")  listed  below,
together  with  all  stock  certificates,  options,  or  rights  of  any  nature
whatsoever  which may be issued or  granted by the New Issuer in respect of such
stock  which the Pledge  Agreement,  as  supplemented  hereby,  is in force (the
"Additional  Pledged Stock";  as used in the Pledge Agreement as supplemented by
this  Supplement,  "Pledged  Stock"  shall be deemed to include  the  Additional
Pledged Stock) and hereby grants to the  Administrative  Agent,  for the ratable
benefit of itself and the Lenders,  a first  priority  security  interest in the
Additional Pledged Stock and all Proceeds thereof.]

                                       or

         [2. The Pledgor hereby confirms and reaffirms the security  interest in
the Collateral granted to the  Administrative  Agent, for the ratable benefit of
itself  and  the  Lenders,  under  the  Pledge  Agreement,  and,  as  additional
collateral  security  for the prompt and  complete  payment when due (whether at
stated  maturity,  by acceleration or otherwise) of the Obligations and in order
to induce the  Lenders  to make their  Loans  under the Credit  Agreements,  the
Pledgor hereby grants to the  Administrative  Agent,  for the ratable benefit of
itself  and the  Lenders,  a first  priority  security  interest  in the  entire
partnership  interest of Pledgor  (the  "Additional  Partnership  Interest")  in
[INSERT
NAME OF NEW SUBSIDIARY]  (the "New  Partnership")  listed below and all Proceeds
thereof;  as used in the Pledge  Agreement as supplemented  by this  Supplement,
"Partnership  Interests"  shall be deemed to include the Additional  Partnership
Interest.]

         3. The Pledgor hereby represents and warrants that the repre sentations
and  warranties  contained in Paragraph 5 of the Pledge  Agreement  are true and
correct on the date of this Supplement with references  therein to the ["Pledged
Stock" to include the Additional  Pledged Stock] or ["Partnership  Interests" to
include the Additional  Partnership  Interest],  with references  therein to the
["Issuer"  to include  the New  Issuer]  or  ["Partnership"  to include  the New
Partnership],  and with references to the "Pledge  Agreement" to mean the Pledge
Agreement as supplemented by this Supplement.

         4.  The  Pledgor  shall  deliver  to  the   Administrative   Agent  the
Acknowledgement and Consent attached hereto duly executed by the [New Issuer] or
[New  Partnership].  The  Additional  [Pledged  Stock or Partner ship  Interest]
pledged hereby is as follows which [Pledged Stock or Partnership Interest] shall
be deemed part of Schedule I thereto:

                          DESCRIPTION OF PLEDGED STOCK


                                                                   Percentage of
                                                                 all Outstanding
                                                                          issued
Issuer    Class of Stock  Certificate No.  No. of Shares           Capital Stock



                       DESCRIPTION OF PARTNERSHIP INTEREST

                        Partnership Partnership Interest

New Partnership


         5. The Pledgor  hereby  agrees to deliver to the  Administrative  Agent
such  certificates  and other  documents  and take such other action as shall be
reasonably  requested by the  Administrative  Agent in order to  effectuate  the
terms hereof and the Pledge Agreement.



[364-Day Credit Agreement]

<PAGE>



     IN WITNESS  WHEREOF,  the undersigned has caused this Supplement to be duly
executed under seal and delivered as of the date first above written.

[CORPORATE SEAL]


                                                              By:
                                                              Name:
                                                              Title:


[364-Day Credit Agreement]
<PAGE>



                    ACKNOWLEDGEMENT AND CONSENT OF NEW ISSUER

     The  undersigned  hereby  acknowledges  receipt of a copy of the  foregoing
Supplement   and  the  Pledge   Agreement   referred  to  therein  (the  "Pledge
Agreement").  The undersigned agrees for the benefit of the Administrative Agent
and the Lenders as follows:

         1. The undersigned  will be bound by the terms of the Pledge Agree ment
and will  comply  with such terms  insofar as such terms are  applicable  to the
undersigned.

         2.       The undersigned will notify the Administrative Agent promptly
in writing of the occurrence of any of the events described in Paragraph
6(c) of the Pledge Agreement.

         3. The Issuer  further  agrees  that the terms of  Paragraph  10 of the
Pledge  Agreement  shall  apply to it with  respect to all  actions  that may be
required of it under or pursuant to or arising out of Paragraph 10 of the Pledge
Agreement.

                                                     [NAME OF NEW ISSUER]

                                                     By:
                                                     Name:
                                                     Title:




[364-Day Credit Agreement]

<PAGE>



                     ACKNOWLEDGEMENT AND CONSENT OF PARTNERS
                               OF NEW PARTNERSHIP

         The  undersigned  partners  of   _________________________   (the  "New
Partnership")  (a)  hereby  acknowledge  receipt  of a  copy  of  the  foregoing
Supplement   and  the  Pledge   Agreement   referred  to  therein  (the  "Pledge
Agreement"),  (b) hereby  acknowledge and consent to the pledge of the Pledgor's
interest  in the New  Partnership  pursuant  thereto,  and (c)  agree  that  the
Administrative  Agent may freely assign its interest  thereunder without further
consent of the partners.


__________ Partner of                       __________ Partner of




[364-Day Credit Agreement]

<PAGE>



                                                        EXHIBIT A
                                                            TO
                                                     PLEDGE AGREEMENT


                                                  Authorization Statement


                                                                  April __, 1997


To:      [Partnership]


                  You are  hereby  instructed  to  register  the  pledge  of the
following uncertificated security as follows:

         [Describe Partnership Interests]


Pledgor                                             Pledgee
[Pledgor name and address]                          First Union National Bank of
                                                    Florida, as Administrative
                                                    Agent
                                                    100 South Ashley Drive,
                                                    Suite 940
                                                    Tampa, Florida 33602
                                                    Attention: Gilbert Reese

                                                     Very truly yours,

                                                     [PLEDGOR]


                                                     By:
                                                        Name:
                                                        Title:

[364-Day Credit Agreement]


<PAGE>



                                    EXHIBIT B
                                       TO
                                PLEDGE AGREEMENT


                              Transaction Statement


                                                                  April __, 1997


To:      [Pledgor name and address]

         and

         First Union National Bank of Florida,
           as Administrative Agent
         100 South Ashley Drive, Suite 940
         Tampa, Florida 33602
         Attention:  Gilbert Reese

         This  statement  is to  advise  you  that a  pledge  of  the  following
uncertificated  securities  has  been  registered  in the  name of  First  Union
National Bank of Florida, as Administrative Agent:

         1.       Uncertificated Security:  All limited partnership and other
                  ownership interests of [Pledgor] in [Partnership] (the
                  "Pledged Interest").

         2.       Registered Owner:

                  [Pledgor]

                  Taxpayer Identification Number:  __________

         3.       Registered Pledgee:

                  First Union National Bank of Florida,
                    as Administrative Agent
                  100 South Ashley Drive, Suite 940
                  Tampa, Florida 33602
                  Attention:  Gilbert Reese

                  Taxpayer Identification Number:  __________


         4.       There are no liens,  restrictions or other encumbrances on the
                  Pledged  Interest,  other than  liens in favor of First  Union
                  National  Bank of Florida,  as  Administrative  Agent,  and no
                  adverse  claims to which  the  Pledged  Interest  is or may be
                  subject known to the undersigned.

         5.       The pledge was registered on April __, 1997.

         THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEES
AS OF THE TIME OF ITS ISSUANCE.  DELIVERY OF THIS STATEMENT, OF ITSELF,
CONFERS NO RIGHTS ON THE RECIPIENT.  THIS STATEMENT IS NEITHER A
NEGOTIABLE INSTRUMENT NOR A SECURITY.

                                            Very truly yours,

[SEAL]                              [PARTNERSHIP]


                                            General Partner

                                            By:
                                               Name:
                                               Title:



[364-Day Credit Agreement]

<PAGE>


                                    EXHIBIT I
                                       to
              364-Day Credit Agreement dated as of April ___, 1997
                                  by and among
                            BREED Technologies, Inc.,
                   certain of its Subsidiaries party thereto,
                            BREED Technologies, Inc.,
                                  as Guarantor,
                           the Lenders party thereto,
                      First Union National Bank of Florida,
                            as Administrative Agent,
                                       and
                            The Chase Manhattan Bank,
                             as Documentation Agent


                      FORM OF SUBSIDIARY GUARANTY AGREEMENT


         THIS UNCONDITIONAL  GUARANTY  AGREEMENT (this "Guaranty"),  dated as of
April  ___,  1997,  made by  each of the  Subsidiary  Guarantors  listed  on the
signature pages hereto (the  "Subsidiary  Guarantors"),  in favor of FIRST UNION
NATIONAL BANK OF FLORIDA,  a national  banking  association,  as  Administrative
Agent (the  "Administrative  Agent"),  for the ratable benefit of itself and the
financial  institutions  (the  "Lenders")  that  are,  or may from  time to time
become, parties to the Credit Agreements (as hereinafter defined).

                              STATEMENT OF PURPOSE

         Pursuant to the terms of the Five-Year Credit Agreement of even date by
and among BREED Technologies, Inc. ("BREED") and certain of its subsidiaries, as
Borrowers,  BREED, as Guarantor,  the Lenders party thereto,  the Administrative
Agent  and The  Chase  Manhattan  Bank,  as  Documentation  Agent  (as  amended,
restated,  supplemented or otherwise  modified from time to time, the "Five-Year
Credit  Agreement")  and the 364-Day Credit  Agreement of even date by and among
BREED and certain of its subsidiaries,  as Borrowers,  BREED, as Guarantor,  the
Lenders party thereto, the Administrative Agent and The Chase Manhattan Bank, as
Documentation  Agent (as amended,  restated,  supplemented or otherwise modified
from  time to  time,  the  "364-Day  Credit  Agreement"  and  together  with the
Five-Year  Credit  Agreement,  the "Credit  Agreements"),  the Lenders  extended
certain  credit  facilities  to the  Borrowers  as more  particularly  described
therein.  The Borrowers and the  Subsidiary  Guarantors  comprise one integrated
financial  enterprise,  and all Loans to the Borrowers  will inure,  directly or
indirectly, to the benefit of each of the Subsidiary Guarantors.

         In  connection  with  the  transactions   contemplated  by  the  Credit
Agreements,  the Lenders have requested,  and each of the Subsidiary  Guarantors
has agreed to execute and deliver, this Guaranty.

         NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
agreements  set forth  herein,  and to induce the  Lenders to  continue  to make
available Loans pursuant to the Credit Agreements, it is agreed as follows:

         SECTION 1.  Definitions.  Capitalized  terms used herein (including the
preamble  hereof)  shall  have  the  meanings  assigned  to them  in the  Credit
Agreements,  unless the context  otherwise  requires or unless otherwise defined
herein. References in the Credit Agreements to a "Subsidiary Guaranty Agreement"
or herein to this "Guaranty" shall include and mean this Guaranty, including all
amendments and supplements hereto now or hereafter in effect.

          SECTION 2. Guaranty of Obligations of the Borrowers.  Each  Subsidiary
     Guarantor  hereby,   jointly  and  severally  with  each  other  Subsidiary
     Guarantor,  unconditionally  guarantees to the Administrative Agent for the
     ratable benefit of itself,  the Lenders,  and their respective  successors,
     endorsees,  transferees and assigns,  the prompt payment and performance of
     the Dollar Amount of all  Obligations  of the  Borrowers  under each of the
     Credit Agreements (including,  without limitation, all obligations of BREED
     as a Guarantor thereunder), whether primary or secondary (whether by way of
     endorsement  or  otherwise),  whether now  existing or  hereafter  arising,
     whether or not from time to time reduced or extinguished (except by payment
     thereof) or hereafter increased or incurred, whether or not recovery may be
     or  hereafter  become  barred  by  the  statute  of  limitations,   whether
     enforceable  or  unenforceable  as  against  any  Borrower,  whether or not
     discharged,  stayed or otherwise affected by any bankruptcy,  insolvency or
     other  similar  law  or  proceeding,  whether  created  directly  with  the
     Administrative  Agent or any Lender or acquired by the Administrative Agent
     or any Lender through assignment, endorsement or otherwise, whether matured
     or unmatured, whether joint or several, as and when the same become due and
     payable  (whether  at  maturity  or  earlier,  by reason  of  acceleration,
     mandatory repayment or otherwise), in accordance with the terms of any such
     instruments  evidencing  any  such  obligations,  including  all  renewals,
     extensions or  modifications  thereof (all  Obligations of the Borrowers to
     the  Administrative  Agent or any Lender,  including all of the  foregoing,
     being   hereinafter   collectively   referred   to   as   the   "Guaranteed
     Obligations");  provided,  that  notwithstanding  anything to the  contrary
     contained herein, it is the intention of each Subsidiary  Guarantor and the
     Lenders that, in any proceeding  involving the bankruptcy,  reorganization,
     arrangement,  adjustment  of  debts,  relief  of  debtors,  dissolution  or
     insolvency  or any  similar  proceeding  with  respect  to  any  Subsidiary
     Guarantor  or  its  assets,  the  amount  of  such  Subsidiary  Guarantor's
     obligations with respect to the Guaranteed Obligations shall be in, but not
     in excess of, the  maximum  amount  thereof  not  subject to  avoidance  or
     recovery   by   operation   of   applicable   law   governing   bankruptcy,
     reorganization,  arrangement,  adjustment  of  debts,  relief  of  debtors,
     dissolution,  insolvency,  fraudulent  transfers  or  conveyances  or other
     similar laws (including,  without  limitation,  11 U.S.C.  ss.547,  ss.548,
     ss.550 and other  "avoidance"  provisions  of Title 11 of the United States
     Code),  applicable in any such proceeding to such Subsidiary  Guarantor and
     this Guaranty  (collectively,  "Applicable  Insolvency Laws"). To that end,
     but only in the event and to the extent  that such  Subsidiary  Guarantor's
     obligations with respect to the Guaranteed  Obligations or any payment made
     pursuant to the Guaranteed  Obligations would, but for the operation of the
     foregoing  proviso,  be  subject  to  avoidance  or  recovery  in any  such
     proceeding under Applicable  Insolvency Laws, the amount of such Subsidiary
     Guarantor's obligations with respect to the Guaranteed Obligations shall be
     limited to the largest  amount which,  after giving effect  thereto,  would
     not, under Applicable  Insolvency Laws, render such Subsidiary  Guarantor's
     obligations  with respect to such Guaranteed  Obligations  unenforceable or
     avoidable  or otherwise  subject to recovery  under  Applicable  Insolvency
     Laws. To the extent any payment  actually  made pursuant to the  Guaranteed
     Obligations  exceeds  the  limitation  of  the  foregoing  proviso  and  is
     otherwise  subject to avoidance and recovery in any such  proceeding  under
     Applicable  Insolvency  Laws, the amount subject to avoidance  shall in all
     events be limited to the amount by which such actual  payment  exceeds such
     limitation  and the  Guaranteed  Obligations  as limited  by the  foregoing
     proviso  shall in all  events  remain in full force and effect and be fully
     enforceable  against such Subsidiary  Guarantor.  The foregoing  proviso is
     intended  solely  to  preserve  the  rights  of  the  Administrative  Agent
     hereunder  against  such  Subsidiary  Guarantor in such  proceeding  to the
     maximum  extent  permitted by Applicable  Insolvency  Laws and neither such
     Subsidiary Guarantor,  any Borrower, any other Subsidiary Guarantor nor any
     other  Person  shall have any right or claim under such  proviso that would
     not  otherwise  be  available  under  Applicable  Insolvency  Laws  in such
     proceeding.

         SECTION 3. Nature of Guaranty.  Each Subsidiary  Guarantor  agrees that
this Guaranty is a continuing, unconditional guaranty of payment and performance
and not of  collection,  and that its  obligations  under this Guaranty shall be
primary, absolute and unconditional, irrespective of, and unaffected by:

                  (a) the genuineness,  validity, regularity,  enforceability or
         any future  amendment of, or change in, either Credit  Agreement or any
         other Loan Document or any other  agreement,  document or instrument to
         which any Borrower or any Subsidiary thereof is or may become a party;

                  (b)      any structural change in, restructuring of or other
         similar change of any Borrower or any of their Subsidiaries
         (including, without limitation, each Subsidiary Guarantor);

                  (c) the absence of any action to enforce this Guaranty, either
         Credit Agreement or any other Loan Document or the waiver or consent by
         the  Administrative  Agent or any  Lender  with  respect  to any of the
         provisions of this Guaranty,  either Credit Agreement or any other Loan
         Document;

                  (d)      the existence, value or condition of, or failure to
         perfect its Lien  against,  any security  for or other  guaranty of the
         Guaranteed  Obligations or any action, or the absence of any action, by
         the  Administrative  Agent or any Lender in respect of such security or
         guaranty  (including,  without  limitation,  the  release  of any  such
         security or guaranty); or

                  (e)    any other action or circumstances which might otherwise
         constitute a legal or equitable discharge or defense of a surety or
         guarantor;

it being agreed by each  Subsidiary  Guarantor  that,  subject to the proviso in
Section 2 hereof,  its  obligations  under this Guaranty shall not be discharged
until the final and  indefeasible  payment  and perfor  mance,  in full,  of the
Guaranteed  Obligations  and the termination of the  Commitments.  To the extent
permitted by law, each Subsidiary  Guarantor  expressly waives all rights it may
now or in the  future  have  under  any  statute,  or at  law or in  equity,  or
otherwise,  to compel  the  Administrative  Agent or any  Lender to  proceed  in
respect of the Guaranteed Obligations against any Borrower or any other party or
against any  security  for or other  guaranty of the payment and perfor mance of
the  Guaranteed  Obligations  before  proceeding  against,  or as a condition to
proceeding against, such Subsidiary  Guarantor.  To the extent permitted by law,
each Subsidiary  Guarantor  further expressly waives and agrees not to assert or
take advantage of any defense based upon the failure of the Administrative Agent
or any Lender to  commence  an action in respect of the  Guaranteed  Obligations
against any Borrower,  such  Subsidiary  Guarantor,  any other  guarantor or any
other party or any security for the payment and  performance  of the  Guaranteed
Obligations. Each Subsidiary Guarantor agrees that any notice or directive given
at any time to the Administrative Agent or any Lender which is inconsistent with
the waivers in the  preceding  two  sentences  shall be null and void and may be
ignored by the  Administrative  Agent or Lender,  and, in addi tion,  may not be
pleaded or  introduced as evidence in any  litigation  relating to this Guaranty
for the reason that such pleading or introduction  would be at variance with the
written terms of this Guaranty, unless the Administrative Agent and the Required
Lenders have specifically agreed otherwise in writing. The foregoing waivers are
of the essence of the  transaction  contemplated  by the Loan Documents and, but
for this Guaranty and such waivers,  the Administrative  Agent and Lenders would
decline to enter into the Credit Agreements.

         SECTION 4. Demand by the Administrative Agent. In addition to the terms
set forth in Section 3, and in no manner  imposing any limitation on such terms,
if all or any portion of the then outstanding  Guaranteed  Obligations under the
Credit  Agreements  are declared to be  immediately  due and  payable,  then the
Subsidiary   Guarantors   shall,   upon  demand  in  writing   therefor  by  the
Administrative Agent to the Subsidiary Guarantors,  pay the Dollar Amount of all
or such portion of the outstanding  Guaranteed Obligations then declared due and
payable.   Payment  by  the   Subsidiary   Guarantors   shall  be  made  to  the
Administrative   Agent,   to  be  credited  and  applied  upon  the   Guaranteed
Obligations, in immediately available Dollars to an account designated by the
Administrative  Agent or at the  address  referenced  herein  for the  giving of
notice to the Administrative Agent or at any other address that may be specified
in writing from time to time by the Administrative Agent.

         SECTION 5. Waivers.  In addition to the waivers contained in Section 3,
each  Subsidiary  Guarantor,  to the extent  permitted by law, waives and agrees
that it shall not at any time insist upon, plead or in any manner whatever claim
or take the benefit or advantage of, any appraisal,  valuation, stay, extension,
marshalling  of assets or redemption  laws, or exemption,  whether now or at any
time  hereafter  in force,  which may  delay,  prevent or  otherwise  affect the
performance  by such  Subsidiary  Guarantor  of its  obligations  under,  or the
enforcement by the Administrative  Agent or the Lenders of, this Guaranty.  Each
Subsidiary  Guarantor  further  hereby waives  diligence,  presentment,  demand,
protest  and  notice of  whatever  kind or  nature  with  respect  to any of the
Guaranteed Obligations and waives the benefit of all provisions of law which are
or might  be in  conflict  with the  terms  of this  Guaranty.  Each  Subsidiary
Guarantor  represents,  warrants  and  agrees  that its  obligations  under this
Guaranty  are not and shall not be  subject  to any  counterclaims,  offsets  or
defenses  of any kind  against  the  Administrative  Agent,  the  Lenders or the
Borrowers whether now existing or which may arise in the future.

         SECTION 6.  Benefits of Guaranty.  The  provisions of this Guaranty are
for the benefit of the  Administrative  Agent,  the Lenders and their respective
successors,  transferees,  endorsees and assigns,  and nothing herein  contained
shall  impair,  as  between  the  Borrowers,  the  Administrative  Agent and the
Lenders, the obligations of the Borrowers under the Loan Documents. In the event
all or any part of the Guaran  teed  Obligations  are  transferred,  endorsed or
assigned by the Administrative Agent or any Lender to any Person or Persons, any
reference to an  "Administrative  Agent",  or "Lender" herein shall be deemed to
refer equally to such Person or Persons.

         SECTION 7.  Modification  of Loan Documents etc. If the  Administrative
Agent or the Lenders shall at any time or from time to time, with or without the
consent of, or notice to, the Subsidiary Guarantors:

                  (a)     change or extend the manner, place or terms of payment
         of, or renew or alter all or any portion of, the Guaranteed Obliga
         tions;

                  (b) take any action under or in respect of the Loan  Documents
         in the exercise of any remedy,  power or privilege contained therein or
         available  to it at law,  in equity or  otherwise,  or waive or refrain
         from exercising any such remedies, powers or privileges;

                  (c)   amend or modify, in any manner whatsoever, the Loan Docu
         ments;

                  (d)      extend or waive the time for performance by any
         Subsidiary  Guarantor,  any other guarantor,  any Borrower or any other
         Person of, or compliance  with, any term,  covenant or agreement on its
         part to be performed or observed under a Loan Document (other than this
         Guaranty),  or waive such  performance  or  compliance  or consent to a
         failure of, or departure from, such per formance or compliance;

                  (e) take and hold  security or  collateral  for the payment of
         the Guaranteed Obligations or sell, exchange,  release,  dispose of, or
         otherwise deal with, any property pledged, mortgaged or conveyed, or in
         which the Administrative Agent or the Lenders have been granted a Lien,
         to secure any Debt of any Subsidiary Guarantor,  any other guarantor or
         any Borrower to the Administrative Agent or the Lenders;

                  (f)     release anyone who may be liable in any manner for the
         payment of any amounts owed by any Subsidiary Guarantor, any other
         guarantor or any Borrower to the Administrative Agent or any
         Lender;

                  (g)  modify or  terminate  the terms of any  intercreditor  or
         subordination  agreement pursuant to which claims of other creditors of
         any  Subsidiary  Guarantor,  any other  guarantor  or any  Borrower are
         subordinated to the claims of the  Administrative  Agent or any Lender;
         or

                  (h) apply any sums by whomever paid or however realized to any
         amounts owing by any Subsidiary  Guarantor,  any other guarantor or any
         Borrower  to the  Administrative  Agent or any Lender in such manner as
         the  Administrative   Agent  or  any  Lender  shall  determine  in  its
         reasonable discretion;

then neither the  Administrative  Agent nor any Lender shall incur any liability
to any Subsidiary Guarantor as a result thereof, and no such action shall impair
or release the obligations of any Subsidiary Guarantor under this Guaranty.

         SECTION 8. Reinstatement. Each Subsidiary Guarantor agrees that, if any
payment made by any Borrower or any other Person  applied to the  Obligations is
at  any  time  annulled,  set  aside,  rescinded,  invalidated,  declared  to be
fraudulent or preferential or otherwise required to be refunded or repaid or the
proceeds of any  collateral  are  required to be refunded by the  Administrative
Agent or any Lender to any Borrower, its estate, trustee,  receiver or any other
party,  including,  without  limitation,  any  Subsidiary  Guarantor,  under any
Applicable  Law or  equitable  cause,  then,  to the  extent of such  payment or
repayment,  each  Subsidiary  Guarantor's  liability  hereunder  (and  any  Lien
securing such liability) shall be and remain in full force and effect,  as fully
as if such payment had never been made,  and, if prior  thereto,  this  Guaranty
shall have been canceled or surrendered (and if any Lien or collateral  securing
such  Subsidiary  Guarantor's  liability  hereunder  shall have been released or
terminated by virtue of such cancellation or surrender),
this Guaranty (and such Lien) shall be reinstated in full force and effect,  and
such prior  cancellation  or surrender shall not diminish,  release,  discharge,
impair or  otherwise  affect the  obligations  of such  Subsidiary  Guarantor in
respect of the amount of such payment (or any Lien securing such obligation).

         SECTION 9.  Representations and Warranties.  To induce the Lenders
to make any Loans, each Subsidiary Guarantor hereby represents and
warrants that:

                  (a) such Subsidiary  Guarantor has the corporate right,  power
         and  authority to execute,  deliver and perform  this  Guaranty and has
         taken all  necessary  corporate  action  to  authorize  its  execution,
         delivery and performance of, this Guaranty;

                  (b) this  Guaranty  constitutes  the legal,  valid and binding
         obligation of such Subsidiary Guarantor  enforceable in accordance with
         its terms,  except as  enforceability  may be  limited  by  bankruptcy,
         insolvency,  reorganization,  moratorium or similar laws  affecting the
         enforcement of creditors'  rights  generally and by the availability of
         equitable remedies;

                  (c) the execution,  delivery and  performance of this Guaranty
         will not  violate  any  provision  of any  Applicable  Law or  material
         contractual obligation of such Subsidiary Guarantor and will not result
         in the creation or  imposition  of any Lien upon or with respect to any
         property or revenues of such Subsidiary Guarantor;

                  (d) no consent or authorization  of, filing with, or other act
         by or in respect of, any  arbitrator or  Governmental  Authority and no
         consent  of  any  other  Person  (including,  without  limitation,  any
         stockholder or creditor of such Subsidiary  Guarantor),  is required in
         connection  with the  execution,  delivery,  performance,  validity  or
         enforceability of this Guaranty;

                  (e) no actions,  suits or proceedings before any arbitrator or
         Governmental  Authority  are  pending  or,  to the  knowledge  of  such
         Subsidiary   Guarantor,   threatened  by  or  against  such  Subsidiary
         Guarantor  or  against  any of its  properties  with  respect  to  this
         Guaranty or any of the transactions contemplated hereby;

                  (f)  such  Subsidiary  Guarantor  has  such  title to the real
         property  owned  by it and a  valid  leasehold  interest  in  the  real
         property leased by it, and has good and marketable  title to all of its
         personal  property  sufficient to carry on its business free of any and
         all Liens of any type whatsoever, except those permitted by Section 9.3
         of each Credit Agreement; and

                  (g) as of the Closing Date, such Subsidiary  Guarantor (a) has
         capital  sufficient to carry on its business and  transactions  and all
         business  and  transactions  in which it engages and is able to pay its
         debts as they mature,  (b) owns property  having a value,  both at fair
         valuation and at present fair saleable  value,  greater than the amount
         required to pay its probable liabilities (including  contingencies) and
         (c) does not believe that it will incur debts or liabilities beyond its
         ability to pay such debts or liabilities as they mature.

         SECTION 10.  Remedies.

         (a) Upon the  occurrence  of any Event of Default,  with the consent of
the Required Lenders,  the Administrative  Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, enforce against the Subsidiary
Guarantors their respective  obligations and liabilities  hereunder and exercise
such other rights and remedies as may be available to the  Administrative  Agent
hereunder, under the Loan Documents or otherwise.

         (b) No right or remedy herein conferred upon the  Administrative  Agent
is intended to be exclusive of any other right or remedy  contained herein or in
any other Loan Document or otherwise,  and every such right or remedy  contained
herein and therein or now or  hereafter  existing  at law,  or in equity,  or by
statute, or otherwise shall be cumulative. The Required Lenders may instruct the
Administrative  Agent to pursue, or refrain from pursuing,  any remedy available
to the  Administrative  Agent at such  times and in such  order as the  Required
Lenders shall determine,  and the Required Lenders' election as to such remedies
shall  not  impair  any  remedies  against  any  Subsidiary  Guarantor  not then
exercised.  In addition, any election of remedies which results in the denial or
impairment  of the  right  of the  Administrative  Agent  to  seek a  deficiency
judgment  against  any  Borrower  shall not  impair any  Subsidiary  Guarantor's
obligation to pay the full amount of the Guaranteed Obligations.

          SECTION 11. No Subrogation. Notwithstanding any payment or payments by
     any of the Subsidiary Guarantors  hereunder,  or any set-off or application
     of funds of any of the Subsidiary Guarantors by the Administrative Agent or
     any Lender,  or the receipt of any amounts by the  Administrative  Agent or
     any Lender with respect to any of the Guaranteed  Obligations,  none of the
     Subsidiary  Guarantors  shall be  entitled to be  subrogated  to any of the
     rights of the  Administrative  Agent or any Lender  against any Borrower or
     any of the other Subsidiary  Guarantors or against any collateral  security
     held by the  Administrative  Agent or any  Lender  for the  payment  of the
     Guaranteed  Obligations nor shall any of the Subsidiary Guarantors seek any
     reimbursement  from any Borrower or any of the other Subsidiary  Guarantors
     in respect of payments made by such Subsidiary Guarantor in connection with
     the Guaranteed  Obligations,  until all amounts owing to the Administrative
     Agent and the Lenders  onaccount of the Guaranteed  Obligations are paid in
     full and the Commitments are terminated. If any amount shall be paid to any
     Subsidiary Guarantor on account of such subrogation rights at any time when
     all of the Guaranteed  Obligations  shall not have been paid in full,  such
     amount  shall  be  held by  such  Subsidiary  Guarantor  in  trust  for the
     Administrative  Agent,  segregated  from  other  funds  of such  Subsidiary
     Guarantor,  and shall, forthwith upon receipt by such Subsidiary Guarantor,
     be turned over to the  Administrative  Agent in the exact form  received by
     such Subsidiary  Guarantor  (duly endorsed by such Subsidiary  Guarantor to
     the Administrative Agent, if required) to be applied against the Guaranteed
     Obligations,  whether  matured or unmatured,  in such order as set forth in
     the Credit Agreement.

         SECTION 12.  Miscellaneous.

         (a) Entire  Agreement;  Amendments.  This  Guaranty,  together with the
other Loan Documents,  constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes  all prior  agreements  with
respect to the  subject  matter  hereof  and may not be amended or  supplemented
except by a writing signed by each Subsidiary  Guarantor and the  Administrative
Agent,  consented to by such Lenders as required by Section  13.11 of the Credit
Agreements.

         (b)      Headings.  Titles and captions of sections and subsections in
this Guaranty are for convenience of reference only, and neither limit
or amplify the provisions of this Guaranty.

         (c)  Severability.  In the event that any one or more of the provisions
contained  in this  Guaranty  shall be  determined  to be  invalid,  illegal  or
unenforceable  in any  respect  for  any  reason,  the  validity,  legality  and
enforceability  of any such  provision or  provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.

         (d)      Notices.  All notices and communications hereunder shall be
given in accordance with Section 13.1 of the Credit Agreements.

         (e) Binding Effect. This Guaranty shall bind each Subsidiary  Guarantor
and shall  inure to the  benefit of the  Administrative  Agent,  the Lenders and
their respective successors and assigns. No Subsidiary Guarantor may assign this
Guaranty or delegate any of its duties hereunder,  other than in connection with
the merger of such  Subsidiary  Guarantor into such other Person as permitted by
Section 9.5 of the Credit Agreements.

         (f) Non-Waiver.  The failure of the Administrative  Agent or any Lender
to enforce any right or remedy hereunder,  or promptly to enforce any such right
or remedy,  shall not constitute a waiver thereof, nor give rise to any estoppel
against  the  Administrative  Agent or any  Lender,  nor excuse  any  Subsidiary
Guarantor  from its  obligations  hereun  der.  Any  waiver of any such right or
remedy by the Lenders must be in writing and signed by the Required Lenders.

         (g)  Termination.  This Guaranty  shall  terminate and be of no further
force  or  effect  on  the  date  when  the  Guaranteed  Obligations  have  been
indefeasibly paid in full and the Commitments terminated.

         (h)      Governing Law.  This Guaranty shall be governed by and
construed and enforced in accordance with the laws of the State of North
Carolina, without reference to the conflicts or choice of law principles
thereof.

         (i)  Consent  to   Jurisdiction.   Each  Subsidiary   Guarantor  hereby
irrevocably  consents  to the  personal  jurisdiction  of the state and  federal
courts located in Mecklenburg County,  North Carolina,  in any action,  claim or
other  proceeding  arising out of any dispute in connection  with this Guaranty,
any rights or  obligations  hereunder,  or the  performance  of such  rights and
obligations.  Each  Subsidiary  Guarantor  hereby  irrevocably  consents  to the
service of a summons and  complaint  and other  process in any action,  claim or
proceeding brought by the Administrative  Agent or any Lender in connection with
this Guaranty, any rights or obligations  hereunder,  or the performance of such
rights  and  obligations,  on behalf of itself or its  property,  in the  manner
referenced  in Section  12(d).  Nothing in this  Section  12(i) shall affect the
right of the  Administrative  Agent or any Lender to serve legal  process in any
other  manner   permitted  by  Applicable   Law  or  affect  the  right  of  the
Administrative Agent or any Lender to bring any action or proceeding against any
Subsidiary Guarantor or its properties in the courts of any other jurisdictions.

         (j)      Binding Arbitration; Waiver of Jury Trial.

                  (i) Binding  Arbitration.  Upon  demand of any party,  whether
         made  before  or after  institution  of any  judicial  proceeding,  any
         dispute,  claim  or  controversy  arising  out  of,  connected  with or
         relating  to this  Guaranty or any other Loan  Documents  ("Disputes"),
         between or among  parties to this  Guaranty or any other Loan  Document
         shall  be  resolved  by  binding   arbitration   as  provided   herein.
         Institution  of a  judicial  proceeding  by a party  does not waive the
         right of that  party to  demand  arbitration  hereunder.  Disputes  may
         include, without limitation, tort claims, counterclaims, claims brought
         as class actions,  claims  arising from Loan Documents  executed in the
         future, or claims concerning any aspect of the past,  present or future
         relationships  arising  out  or  connected  with  the  Loan  Documents.
         Arbitration  shall be conducted  under and  governed by the  Commercial
         Financial Disputes  Arbitration Rules (the "Arbitration  Rules") of the
         American  Arbitration  Association  and Title 9 of the U.S.  Code.  All
         arbitration  hearings shall be conducted in Charlotte,  North Carolina.
         The  expedited  procedures  set  forth  in  Rule  51,  et  seq.  of the
         Arbitration   Rules  shall  be   applicable  to  claims  of  less  than
         $1,000,000.  All applicable  statutes of limitation  shall apply to any
         Dispute.  A judgment  upon the award may be entered in any court having
         jurisdiction. The panel from which all arbitrators are selected
         shall  be  comprised  of  licensed  attorneys.  The  single  arbitrator
         selected  for  expedited  procedure  shall be a retired  judge from the
         highest court of general  jurisdiction,  state or federal, of the state
         where the hearing will be conducted.

                  (ii) Jury Trial.  TO THE EXTENT  PERMITTED BY APPLICABLE  LAW,
         THE  Administrative  Agent,  EACH LENDER AND EACH SUBSIDIARY  GUARANTOR
         HEREBY  IRREVOCABLY  WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH
         RESPECT TO ANY  ACTION,  CLAIM OR OTHER  PROCEEDING  ARISING OUT OF ANY
         DISPUTE IN CONNECTION  WITH THIS GUARANTY OR THE OTHER LOAN  DOCUMENTS,
         ANY RIGHTS OR OBLIGATIONS  HEREUNDER OR THEREUNDER,  OR THE PERFORMANCE
         OF SUCH RIGHTS AND OBLIGATIONS.

                  (iii)  Preservation of Certain Remedies.  Notwithstanding  the
         preceding binding  arbitration  provisions,  the parties hereto and the
         Loan Documents preserve, without diminution, certain remedies that such
         Persons may employ or exercise  freely,  either alone,  in  conjunction
         with or  during a  Dispute.  Each such  Person  shall  have and  hereby
         reserves the right to proceed in any court of proper jurisdiction or by
         self help to exercise or  prosecute  the  following  remedies:  (A) all
         rights to  foreclose  against  any real or  personal  property or other
         security by exercising a power of sale granted in the Loan Documents or
         under  applicable  law or by  judicial  foreclosure  and sale,  (B) all
         rights of self help  including  peaceful  occupation  of  property  and
         collection of rents, set off, and peaceful possession of property,  (C)
         obtaining   provisional  or  ancillary  remedies  including  injunctive
         relief, sequestration, garnishment, attachment, appointment of receiver
         and in  filing  an  involuntary  bankruptcy  proceeding,  and (D)  when
         applicable, a judgment by confession of judgment. Preservation of these
         remedies  does not limit the power of an  arbitrator  to grant  similar
         remedies that may be requested by a party in a Dispute.

         (k)  Limitation of Liability.  Neither the  Administrative  Agent,  the
Lenders nor any Affiliate  thereof shall have any liability with respect to, and
each Subsidiary  Guarantor  hereby waives,  releases and agrees not to sue upon,
any  claim for any  special,  indirect,  punitive,  exemplary  or  consequential
damages suffered by such Subsidiary  Guarantor in connection  with,  arising out
of, or in any way related to this  Guaranty  and the other Loan  Documents,  the
transactions  contemplated  herein or  therein,  or any act,  omission  or event
occurring in connection herewith or therewith.

         (l) Expenses.  The Subsidiary Guarantors agree that they will reimburse
the  Administrative  Agent  and each  Lender  for all  reasonable  out-of-pocket
expenses  (including  reasonable  attorneys' fees and expenses)  incurred by the
Administrative  Agent or such Lender in connection  with the  enforcement of the
obligations of the Subsidiary  Guarantors under this Guaranty and any other Loan
Documents  and  all  reasonable  out-of-pocket  expenses  (including  reasonable
attorneys' fees and expenses) incurred by the Administrative Agent in connection
with the amendment or modification of this Guaranty.

         (m)  Indemnities.   Each  Subsidiary   Guarantor  agrees  to  hold  the
Administrative  Agent and the  Lenders  harmless  from and  against  all  losses
suffered by the Administrative  Agent and the Lenders in connection with (i) the
exercise  by the  Administrative  Agent or the  Lenders  of any  right or remedy
granted to them under this  Guaranty,  (ii) any claim,  and the  prosecution  or
defense thereof,  arising out of or in any way connected with this Guaranty, and
(iii)  the  collection  or  enforcement  of  the  Obligations,   the  Guaranteed
Obligations or any of them;  provided,  that such Subsidiary Guarantor shall not
be obligated to reimburse the Administrative  Agent or the Lenders for costs and
expenses,  or indemnify  the  Administrative  Agent or the Lenders for any loss,
resulting from the gross negligence or willful  misconduct of the Administrative
Agent or such Lenders.  Notwithstanding  any  termination of this Guaranty,  the
indemnities  to which the  Administrative  Agent and Lenders are entitled  under
this  Guaranty  shall  continue  in full force and effect and shall  protect the
Administrative   Agent  and  the  Lenders  against  events  arising  after  such
termination as well as before.


[364-Day Credit Agreement]


<PAGE>



         IN WITNESS WHEREOF,  each of the Subsidiary Guarantors has executed and
delivered this Guaranty under seal as of the date first above written.

[CORPORATE SEAL]

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]

                                                     By:
                                                        Name:
                                                        Title:


[CORPORATE SEAL]

                                                     By:
                                                        Name:
                                                        Title:




[364-Day Credit Agreement]


<PAGE>



                   UNCONDITIONAL GUARANTY AGREEMENT SUPPLEMENT

         UNCONDITIONAL  GUARANTY AGREEMENT  SUPPLEMENT,  dated as of __________,
(the   "Supplement"),   made   by   [INSERT   NAME   OF   NEW   SUBSIDIARY],   a
____________________  (the "New Subsidiary Guarantor"),  in favor of FIRST UNION
NATIONAL  BANK OF  FLORIDA,  as agent  (in such  capacity,  the  "Administrative
Agent")  under the  Credit  Agreements  (as  defined in the  Guaranty  Agreement
referred to below) for the ratable benefit of itself and the Lenders.

         1. Reference is hereby made to the Guaranty Agreement dated as of April
__, 1997, made by certain Subsidiaries of BREED Technologies, Inc. party thereto
(the "Subsidiary  Guarantors"),  as guarantors,  in favor of the  Administrative
Agent (as amended,  restated,  supplemented or otherwise modified as of the date
hereof,  the "Guaranty  Agreement").  This  Supplement  supplements the Guaranty
Agreement, forms a part thereof and is subject to the terms thereof. Capitalized
terms used and not  defined  herein  shall have the  meanings  given  thereto or
referenced in the Guaranty Agreement.

         2.  The New  Subsidiary  Guarantor  hereby  agrees  to  unconditionally
guarantee to the  Administrative  Agent for the ratable  benefit of itself,  the
Lenders and their respective successors, endorsees, transferees and assigns, the
prompt payment  (whether at stated  maturity,  by acceleration or otherwise) and
performance of all  Obligations of the Borrowers to the same extent and upon the
same terms and conditions as are contained in the Guaranty Agreement.

         3. The New Subsidiary Guarantor hereby agrees that it is a party to the
Guaranty  Agreement as if a signatory  thereto on the Closing Date of the Credit
Agreement,  and the New Subsidiary Guarantor shall comply with all of the terms,
covenants,  conditions and agreements and hereby makes each  representation  and
warranty,  in each case set forth therein.  The New Subsidiary  Guarantor agrees
that the "Guaranty Agreement" or "Guaranty" as used therein or in any other Loan
Documents shall mean the Guaranty Agreement as supplemented hereby.

         4.       The New Subsidiary Guarantor hereby acknowledges it has
received a copy of the Guaranty Agreement and that it has read and
understands the terms thereof.



[364-Day Credit Agreement]

<PAGE>



         IN WITNESS WHEREOF, the undersigned hereby causes this Supplement to be
executed and delivered as of the date first above written.

[CORPORATE SEAL]                            [INSERT NAME OF NEW SUBSIDIARY]


                                                     By:
                                                        Name:
                                                        Title:


[364-Day Credit Agreement]


<PAGE>





                            364-DAY CREDIT AGREEMENT

                           dated as of April __, 1997,

                                  by and among

                            BREED TECHNOLOGIES, INC.,
               and certain Subsidiaries thereof designated herein,

                                  as Borrowers,

                            BREED TECHNOLOGIES, INC.,

                                  as Guarantor,

                         the Lenders referred to herein,

                      FIRST UNION NATIONAL BANK OF FLORIDA,

                            as Administrative Agent,

                                       and

                            THE CHASE MANHATTAN BANK,

                             as Documentation Agent,

                                  evidencing a

                              364-DAY, $250,000,000
                                 CREDIT FACILITY




[364-Day Credit Agreement]

<PAGE>





ARTICLE I

        DEFINITIONS..........................................................  1
        SECTION 1.1    Definitions...........................................  1
        SECTION 1.2    General............................................... 18
        SECTION 1.3    Other Definitions and Provisions...................... 19

ARTICLE II

        CREDIT FACILITY.......................................................19
        SECTION 2.1    Revolving Credit Loans................................ 19
        SECTION 2.2    Finnish Mark Loans.................................... 20
        SECTION 2.3    Swingline Loans....................................... 22
        SECTION 2.4    Procedure for Advances of Revolving Credit
                       Loans, Finnish Mark Loans and Swingline Loans......... 23
        SECTION 2.5    Repayment of Revolving Credit Loans, Finnish
                       Mark Loans and Swingline Loans........................ 26
        SECTION 2.6    Notes................................................. 28
        SECTION 2.7    Permanent Reduction of the Aggregate Commitment....... 28
        SECTION 2.8    Termination of Credit Facility........................ 29
        SECTION 2.9    Use of Proceeds....................................... 31
        SECTION 2.10   Nature of Obligations................................. 31
        SECTION 2.11   Security.............................................. 31
        
ARTICLE III

        GENERAL LOAN PROVISIONS.............................................. 31
        SECTION 3.1    Interest.............................................. 31
        SECTION 3.2    Notice and Manner of Conversion or
                       Continuation of Revolving Credit Loans and
                       Finnish Mark Loans.................................... 34
        SECTION 3.3    Fees.................................................. 35
        SECTION 3.4    Manner of Payment..................................... 37
        SECTION 3.5    Crediting of Payments and Proceeds.................... 38
        SECTION 3.6    Adjustments........................................... 38
        SECTION 3.7    Nature of Obligations of Lenders Regarding
                       Loans; Assumption by the Administrative Agent......... 39
        SECTION 3.8    Mandatory Redenomination of Alternative
                       Currency Loans........................................ 41
        SECTION 3.9    Regulatory Limitation................................. 41
        SECTION 3.10   Changed Circumstances................................. 42
        SECTION 3.11   Indemnity............................................. 44
        SECTION 3.12   Capital Requirements.................................. 45
        SECTION 3.13   Taxes................................................. 45
        SECTION 3.14   Replacement Lenders................................... 47
        
ARTICLE IV

        CLOSING; CONDITIONS OF CLOSING AND BORROWING......................... 48
        SECTION 4.1    Closing............................................... 48
        SECTION 4.2    Conditions to Closing and Initial Loans............... 48
        SECTION 4.3    Conditions to All Loans............................... 53

ARTICLE V

        REPRESENTATIONS AND WARRANTIES OF THE BORROWERS...................... 54
        SECTION 5.1    Representations and Warranties........................ 54
        SECTION 5.2    Survival of Representations and Warranties,Etc.........61

ARTICLE VI

        FINANCIAL INFORMATION AND NOTICES.................................... 61
        SECTION 6.1    Financial Statements and Projections.................. 61
        SECTION 6.2    Officer's Compliance Certificate...................... 63
        SECTION 6.3    Accountants' Certificate.............................. 63
        SECTION 6.4    Other Reports......................................... 63
        SECTION 6.5    Notice of Litigation and Other Matters................ 64
        SECTION 6.6    Accuracy of Information............................... 65

ARTICLE VII

        AFFIRMATIVE COVENANTS................................................ 65
        SECTION 7.1    Preservation of Corporate Existence and
                       Related Matters....................................... 65
        SECTION 7.2    Maintenance of Property............................... 65
        SECTION 7.3    Insurance............................................. 66
        SECTION 7.4    Accounting Methods and Financial Records.............. 66
        SECTION 7.5    Payment and Performance of Obligations................ 66
        SECTION 7.6    Compliance With Laws and Approvals.................... 66
        SECTION 7.7    Environmental Laws.................................... 66
        SECTION 7.8    Compliance with ERISA................................. 67
        SECTION 7.9    Compliance With Agreements............................ 67
        SECTION 7.10   Conduct of Business................................... 67
        SECTION 7.11   Visits and Inspections................................ 67
        SECTION 7.12.  Additional Subsidiary Guarantors and
                       Subsidiary Pledgors................................... 68
        SECTION 7.13   Intercompany Notes.................................... 69
        SECTION 7.14   Further Assurances.................................... 69
                                
ARTICLE VIII

        FINANCIAL COVENANTS.................................................. 70
        SECTION 8.1.  Leverage Ratio......................................... 70
        SECTION 8.2   Minimum Net Worth...................................... 70
        SECTION 8.3.  Interest Coverage Ratio................................ 70

ARTICLE IX

        NEGATIVE COVENANTS................................................... 71
        SECTION 9.1    Limitations on Debt................................... 71
        SECTION 9.2    Limitations on Contingent Obligations................. 72
        SECTION 9.3    Limitations on Liens.................................. 72
        SECTION 9.4    Limitations on Loans, Advances, Investments
                       and Acquisitions...................................... 73
        SECTION 9.5    Limitations on Mergers and Liquidation................ 75
        SECTION 9.6    Limitations on Sale of Assets......................... 76
        SECTION 9.7    Limitations on Dividends and Distributions............ 76
        SECTION 9.8    Transactions with Affiliates.......................... 77
        SECTION 9.9    Certain Accounting Changes............................ 77
        SECTION 9.10   Restrictive Agreements................................ 77
        SECTION 9.11   Payments under Convertible Preferred Stock............ 78
ARTICLE X

        UNCONDITIONAL GUARANTY............................................... 78
        SECTION 10.1   Guaranty of Obligations............................... 78
        SECTION 10.2   Nature of Guaranty.................................... 78
        SECTION 10.3   Demand by the Administrative Agent.................... 79
        SECTION 10.4   Waivers............................................... 80
        SECTION 10.5   Modification of Loan Documents etc.................... 80
        SECTION 10.6   Reinstatement......................................... 81
        SECTION 10.7   No Subrogation........................................ 81

ARTICLE XI

        DEFAULT AND REMEDIES................................................. 82
        SECTION 11.1   Events of Default..................................... 82
        SECTION 11.2   Remedies.............................................. 85
        SECTION 11.3   Rights and Remedies Cumulative; Non-Waiver;
                       Etc................................................... 85
        SECTION 11.4   Judgment Currency..................................... 85

ARTICLE XII

        THE ADMINISTRATIVE AGENT............................................. 86
        SECTION 12.1    Appointment.......................................... 86
        SECTION 12.2    Delegation of Duties................................. 86
        SECTION 12.3    Exculpatory Provisions............................... 87
        SECTION 12.4    Reliance by the Administrative Agent................. 87
        SECTION 12.5    Notice of Default.................................... 88
        SECTION 12.6    Non-Reliance on the Administrative Agent
                        and Other Lenders.................................... 88
        SECTION 12.7    Indemnification...................................... 89
        SECTION 12.8    The Administrative Agent in Its Individual
                        Capacity............................................. 89
        SECTION 12.9    Resignation of the Administrative Agent;
                        Successor Administrative Agent....................... 89
        SECTION 12.10   Documentation Agent.................................. 90
        
ARTICLE XIII

        MISCELLANEOUS........................................................ 90
        SECTION 13.1    Notices.............................................. 90
        SECTION 13.2    Expenses; Indemnity.................................. 92
        SECTION 13.3    Set-off.............................................. 92
        SECTION 13.4    Governing Law........................................ 93
        SECTION 13.5    Consent to Jurisdiction.............................. 93
        SECTION 13.6    Binding Arbitration; Waiver of Jury Trial............ 93
        SECTION 13.7    Reversal of Payments................................. 94
        SECTION 13.8    Injunctive Relief; Punitive Damages.................. 95
        SECTION 13.9    Accounting Matters................................... 95
        SECTION 13.10   Successors and Assigns; Participations............... 95
        SECTION 13.11   Amendments, Waivers and Consents..................... 99
        SECTION 13.12   Performance of Duties................................100
        SECTION 13.13   All Powers Coupled with Interest.....................100
        SECTION 13.14   Survival of Indemnities..............................100
        SECTION 13.15   Releases.............................................100
        SECTION 13.16   Titles and Captions..................................100
        SECTION 13.17   Severability of Provisions...........................100
        SECTION 13.18   Counterparts.........................................100
        SECTION 13.19   Term of Agreement....................................101




[364-Day Credit Agreement]
                                        i

<PAGE>


                             Exhibits and Schedules


Exhibits

Exhibit A-1       -        Form of Revolving Credit Note
Exhibit A-2       -        Form of Finnish Mark Note
Exhibit A-3       -        Form of Swingline Note
Exhibit B         -        Form of Notice of Borrowing
Exhibit C         -        Form of Notice of Prepayment
Exhibit D         -        Form of Notice of Conversion/Continuation
Exhibit E         -        Form of Officer's Compliance Certificate
Exhibit F         -        Form of Assignment and Acceptance
Exhibit G         -        Form of Notice of Account Designation
Exhibit H         -        Form of Pledge Agreement
Exhibit I         -        Form of Subsidiary Guaranty Agreement


Schedules

Schedule 1.1(a)   -        A/C Borrowers
Schedule 1.1(b)   -        Lenders and Commitments
Schedule 1.1(c)   -        Finnish Mark Lenders and Finnish Mark
                           Commitments
Schedule 1.1(d)   -        Pledge Agreement and Issuers
Schedule 1.1(e)   -        Subsidiary Guarantors
Schedule 2.1      -        Applicable Alternative Currencies
Schedule 4.2(a)   -        Foreign Jurisdiction Pledge Agreement Issuers
Schedule 4.2(b)   -        Foreign Jurisdiction Organizational Issues
Schedule 4.2(c)   -        Schedule of Insurance
Schedule 5.1(a)   -        Jurisdictions of Organization and
                           Qualification
Schedule 5.1(b)   -        Subsidiaries and Capitalization
Schedule 5.1(i)   -        ERISA Plans
Schedule 5.1(m)   -        Labor and Collective Bargaining
                           Agreements
Schedule 5.1(t)   -        Debt and Contingent Obligations
Schedule 5.1(u)   -        Litigation
Schedule 9.2      -        Contingent Obligations
Schedule 9.3      -        Existing Liens
Schedule 9.4      -        Existing Loans, Advances and Investments


[364-Day Credit Agreement]
                                       ii

                   FIRST AMENDMENT TO 364-DAY CREDIT AGREEMENT

         THIS  FIRST   AMENDMENT  TO  364-DAY  CREDIT   AGREEMENT  (this  "First
Amendment")  is made and  entered  into as of the 28th day of June,  1997 by and
among BREED TECHNOLOGIES,  INC., a Delaware corporation,  ("BREED"), and certain
Subsidiaries  thereof  designated on the signature  pages hereto  (collectively,
with BREED, the "Borrowers"),  BREED, as guarantor (the "Guarantor") the lenders
who are or may become a party to the  Credit  Agreement  referred  to below (the
"Lenders"), FIRST UNION NATIONAL BANK (successor to First Union National Bank of
Florida),  a  national  banking  association,  as  Administrative  Agent for the
Lenders ("First Union" or the "Administrative  Agent"),  and THE CHASE MANHATTAN
BANK, a national banking  association,  as  Documentation  Agent for the Lenders
(the "Documentation Agent").


                              Statement of Purpose

         The Lenders have previously  agreed to extend certain credit facilities
to the Borrowers  pursuant to the 364-Day Credit Agreement dated as of April 30,
1997 by and among the Borrowers,  the Guarantor, the Lenders, the Administrative
Agent and the  Documentation  Agent (as further  amended,  restated or otherwise
modified, the "Credit Agreement").

         The Borrowers and the Guarantor  have requested  certain  modifications
and  amendments  to the Credit  Agreement  and the  Lenders  have agreed to such
modifications and amendments as set forth more fully below, subject to the terms
and conditions contained herein.

         NOW THEREFORE,  for and in  consideration  of the premises,  the mutual
agreements  and  covenants  hereinafter  set forth and other  good and  valuable
consideration,  the receipt and adequacy of which are hereby  acknowledged,  the
parties hereto hereby agree as follows:

         SECTION           1.      Capitalized Terms.  All capitalized undefined
terms used in this First Amendment shall have the meanings assigned
thereto in the Credit Agreement.


                                        1

<PAGE>



         SECTION           2.      Modification of Credit Agreement.  The Credit
Agreement is hereby modified as follows:

         (a)      Section 2.3 (a) shall be deleted in its entirety and the
following Section 2.3(a) shall be substituted in lieu thereof:

         "(a)  Availability.  Subject  to  the  terms  and  conditions  of  this
Agreement,  the Swingline  Lender agrees to make  Swingline  Loans to BREED from
time to time from the Closing  Date  through  the  Swingline  Termination  Date;
provided,  that (i) all Swingline Loans shall be denominated in Dollars and (ii)
the aggregate principal amount of all outstanding  Swingline Loans (after giving
effect to any amount requested) shall not exceed the lesser of (A) the Aggregate
Commitment less the sum of the Dollar Amount of the aggregate  principal  amount
of all outstanding  Revolving  Credit Loans less the sum of the Dollar Amount of
the aggregate principal amount of all outstanding Finnish Mark Loans and (B) the
Swingline  Commitment  less  the  sum  of the  Dollar  Amount  of the  aggregate
principal  amount of all outstanding  Swingline Loans under the Five-Year Credit
Agreement."

         (b)      Section 2.7(b) shall be deleted in its entirety and the
following Section 2.7(b) shall be substituted in lieu thereof:

         "(b)     Mandatory Permanent Reductions.

                  (i) Incurrence of Debt. The Total Aggregate  Commitment  shall
         be permanently reduced by an amount equal to one hundred percent (100%)
         of the amount of any Debt  incurred  pursuant to Section  9.1(j),  with
         such  reduction to be applied first to the Aggregate  Commitment  under
         this Agreement and then to the Aggregate Commitment under the Five-Year
         Credit  Agreement.  Such  reduction  shall  be made  promptly  upon the
         incurrence of such Debt.

             (ii)  Sale of  Assets.  The  Total  Aggregate  Commitment  shall be
         permanently reduced by an amount equal to seventy-five percent (75%) of
         the  aggregate  Net  Proceeds  from any sale or  disposition  of assets
         permitted pursuant to Section 9.6(e), with such reduction to be applied
         first to the Aggregate  Commitment under this Agreement and then to the
         Aggregate  Commitment  under the Five-Year Credit  Agreement;  provided
         that, so long as the Leverage Ratio is less than or equal to

                                        2

<PAGE>



         2.50 to 1.00 as of (A) the date of such Asset Sale (as  evidenced  by a
         certificate  of the chief  financial  officer or  treasurer of BREED in
         form and substance  satisfactory to the Administrative  Agent delivered
         immediately  prior to the  consummation of such Asset Sale) and (B) the
         date of the most recent  Officer's  Compliance  Certificate,  the Total
         Aggregate Commitment shall be permanently reduced by an amount equal to
         fifty percent (50%) of such  aggregate  Net  Proceeds.  Such  reduction
         shall be made  promptly  upon  the  consummation  of any  such  sale or
         disposition.

             (iii)Equity  Issuance.  The  Total  Aggregate  Commitment  shall be
         permanently  reduced by an amount equal to fifty  percent  (50%) of the
         aggregate net proceeds from any Equity  Issuance  permitted  under this
         Agreement,  with such  reduction to be applied  first to the  Aggregate
         Commitment   under  the  this  Agreement  and  then  to  the  Aggregate
         Commitment under the Five-Year Credit Agreement; provided that, so long
         as the  Leverage  Ratio is less than or equal to 2.50 to 1.00 as of (A)
         the date of such Equity  Issuance (as evidenced by a certificate of the
         chief  financial  officer or treasurer  of BREED in form and  substance
         satisfactory to the Administrative  Agent) and (B) the date of the most
         recent Officer's Compliance Certificate, no mandatory reduction will be
         required on account of any such Equity  Issuance.  Such reduction shall
         be made promptly upon the consummation of any Equity Issuance."

         (c) Section  3.1(c)(ii) and the remainder of Section  3.1(c)  appearing
         thereafter   shall  be  deleted  in  its  entirety  and  the  following
         provisions shall be substituted in lieu thereof:

                  "(ii) for the period  commencing  on the fifth (5th)  Business
         Day  following  receipt by the  Administrative  Agent of the  financial
         statements of BREED and its  Subsidiaries for the fiscal quarter ending
         June 30, 1997 and the accompanying Officer's Compliance Certificate and
         continuing through and including the Credit Facility  Termination Date,
         be determined  by reference to the Leverage  Ratio as of the end of the
         fiscal  quarter  immediately  preceding the delivery of the  applicable
         Officer's Compliance Certificate in accordance with the chart below:

                           Applicable Margin Per Annum

                                        3

<PAGE>



    Leverage Ratio                          Base Rate +       LIBOR Rate +

         Greater than 4.00                     0.00%                      1.500%

         Less than or equal
         to 4.00 and greater
         than 3.50                             0.00%                      1.250%

         Less than or equal
         to 3.50 and greater
         than 3.25                             0.00%                      1.050%

         Less than or equal
         to 3.25 and greater
         than 3.00                             0.00%                      0.800%

         Less than or equal
         to 3.00 and greater
         than 2.50                             0.00%                      0.600%

         less than or equal
         to 2.50 but greater
         than 2.00                             0.00%                      0.475%

         less than or equal
         to 2.00                               0.00%                      0.375%

         Adjustments,  if any,  in the  Applicable  Margin  shall be made by the
         Administrative  Agent on the tenth (10th) Business Day (the "Adjustment
         Date")  after  receipt  by the  Administrative  Agent of the  quarterly
         financial   statements   for  BREED  and  its   Subsidiaries   and  the
         accompanying   Officer's  Compliance   Certificate  setting  forth  the
         Leverage  Ratio as of the most recent  fiscal  quarter end.  Subject to
         Section  3.1(d),  in the  event  the  Borrowers  fail to  deliver  such
         financial  statements  and  certificate  within  the time  required  by
         Section  6.2  hereof,  the  Applicable  Margin  shall  be  the  highest
         Applicable  Margin set forth above until the delivery of such financial
         statements and certificate.

                  Notwithstanding  anything to the contrary contained herein, in
         the event  the  Interest  Coverage  Ratio (as  determined  pursuant  to
         Section 8.3 of this Agreement) is less

                                        4

<PAGE>



         than 3.00 to 1.00, the Applicable  Margin set forth in this Section 3.1
         shall be deemed to be 1.000%  with  resect to LIBOR Rate Loans  (unless
         the Applicable Margin with respect to LIBOR Rate Loans is determined to
         be greater  pursuant to the terms of this Section  3.1(c) in which case
         the Applicable Margin shall be deemed to be such greater amount)."

         (d)  Section   3.3(a)(ii)  and  the  remainder  of  Section  3.3(a)(ii)
         appearing thereafter shall be deleted in its entirety and the following
         provisions shall be substituted in lieu thereof:

                  "(ii) for the period  commencing  on the fifth (5th)  Business
         Day  following  receipt by the  Administrative  Agent of the  financial
         statements of BREED and its  Subsidiaries for the fiscal quarter ending
         June 30, 1997 and the accompanying Officer's Compliance Certificate and
         continuing through and including the Credit Facility  Termination Date,
         be determined  by reference to the Leverage  Ratio as of the end of the
         fiscal  quarter  immediately  preceding the delivery of the  applicable
         Officer's Compliance Certificate in accordance with the chart below:

    Leverage Ratio                                   Facility Fee Rate

         Greater than 3.50                                     0.250%

         Less than or equal
         to 3.50 and greater
         than 3.25                                             0.200%

         Less than or equal
         to 3.25 and greater
         than 3.00                                             0.200%

         Less than or equal
         to 3.00 and greater
         than 2.50                                             0.150%

         less than or equal
         to 2.50 but greater
         than 2.00                                             0.150%



                                       5

<PAGE>



         less than or equal
         to 2.00                                               0.125%

         Adjustments,  if any,  in the  facility  fee rate  shall be made by the
         Administrative  Agent on the tenth (10th) Business Day (the "Adjustment
         Date")  after  receipt  by the  Administrative  Agent of the  quarterly
         financial   statements   for  BREED  and  its   Subsidiaries   and  the
         accompanying   Officer's  Compliance   Certificate  setting  forth  the
         Leverage  Ratio as of the most recent fiscal  quarter end. In the event
         the Borrowers fail to deliver such financial statements and certificate
         within the time  required by Section 6.2 hereof,  the facility fee rate
         shall be the  highest  facility  fee rate set  forth  above  until  the
         delivery of such financial statements and certificate.

                  Notwithstanding  anything to the contrary contained herein, in
         the event  the  Interest  Coverage  Ratio (as  determined  pursuant  to
         Section 8.3 of this  Agreement) is less than 3.00 to 1.00, the facility
         fee rate set  forth  in this  Section  3.3(a)  shall  be  deemed  to be
         0.300%."

         (e)      Section 8.1 shall be deleted in its entirety and the
         following Section 8.1 shall be substituted in lieu thereof:

         "8.1 Leverage Ratio.  As of the end of any fiscal  quarter,  permit the
         ratio (the "Leverage  Ratio") of (a) the Consolidated Debt of BREED and
         its  Subsidiaries  as of  such  date to (b)  EBITDA  of  BREED  and its
         Subsidiaries  for the period of four (4)  consecutive  fiscal  quarters
         ending  on such  date,  to exceed  the  ratio  set forth  below on such
         corresponding date:

                  June 30, 1997                                  3.70 to 1.00

                  September 30, 1997                             4.10 to 1.00

                  December 31, 1997                              3.90 to 1.00

                  March 31, 1998 and,                            3.75 to 1.00

                  if this Agreement
                  is extended pursuant
                  to the terms hereof,

                                        6

<PAGE>



                  June 30, 1998 and each
                  fiscal quarter-end
                  thereafter                                     3.50 to 1.00;

provided, however, that, notwithstanding anything herein to the contrary, in the
event of any one or more Equity  Issuances  with net proceeds of  $50,000,000 or
more in the  aggregate,  the Leverage  Ratio as of the fiscal  quarter ending on
September 30, 1997 shall not exceed 3.75 to 1.00 and for each fiscal quarter-end
thereafter shall not exceed 3.50 to 1.00."

         (f)      Section 8.3 shall be deleted in its entirety and the
following Section 8.3 shall be substituted in lieu thereof:

         "8.3  Interest  Coverage  Ratio.  As of the end of any fiscal  quarter,
         permit  the  ratio of (a) EBIT of BREED  and its  Subsidiaries  for the
         period of four (4)  consecutive  fiscal quarters ending on such date to
         (b) Interest Expense of BREED and its Subsidiaries for such period,  to
         be less than the ratio set forth below on such corresponding date:

                  June 30, 1997                                   1.70 to 1.00

                  September 30, 1997                              1.30 to 1.00

                  December 31, 1997                               1.30 to 1.00

                  March 31, 1998 and,                             1.55 to 1.00

                  if this Agreement
                  is extended pursuant
                  to the terms hereof,

                  June 30, 1998                                   2.00 to 1.00


                                        7

<PAGE>



                  September 30, 1998                              2.25 to 1.00

                  December 31, 1998                               2.50 to 1.00

                  March 31, 1999                                  2.75 to 1.00

                  June 30, 1999 and
                  each fiscal quarter-end
                  thereafter                                       3.00 to 1.00"

         (g)  Schedule  1.1(a) to the Credit  Agreement  shall be deleted in its
entirety and Schedule 1.1(a) attached hereto shall be substituted therefor.

         SECTION 3.  Termination  of Certain  Borrowers and A/C  Borrowers.  The
parties hereto hereby agree and acknowledge that, as of the date hereof, (i) the
parties listed on Exhibit 1 hereto (collectively,  the "Former Borrowers") shall
no longer be Borrowers or A/C Borrowers under the Credit  Agreement or any other
Loan Document,  (ii) all rights of the Former  Borrowers and  obligations of the
Lenders to the Former  Borrowers  under the Credit  Agreement  or any other Loan
Document  are  hereby  terminated  and (iii) the  pledge of stock of the  Former
Borrowers by reason of their being A/C Borrowers as of the Closing Date shall no
longer be required as set forth in Section  4.2(c) of the Credit  Agreement.  To
the extent that any of the Former Borrowers becomes a Material Subsidiary at any
time  after the date  hereof,  the  Borrowers  shall  cause to be  executed  and
delivered  to the  Administrative  Agent each of the  documents  required  under
Section 7.12(b) of the Credit Agreement as and when required thereunder.

         SECTION           4.      Agreements.  (a) The date for delivery of the
pledge of stock of BREED Italia, S.r.l. ("BREED Italia") by reason
of its being a Material Subsidiary as required under Section 4.2(c)
of the Credit Agreement shall be, and hereby is, extended to that
date which is ninety (90) days from the date hereof.

         (b) The date for delivery of the pledge of stock of Gallino Plasturgia,
S.r.l.  ("Gallino")  by  reason  of its  being an A/C  Borrower  and a  Material
Subsidiary as required  under Section 4.2(c) of the Credit  Agreement  shall be,
and hereby  is,  extended  to that date which is ninety  (90) days from the date
hereof;  provided  that Gallino  shall not be  permitted to make any  borrowings
under the


                                        8

<PAGE>



Credit  Agreement  nor shall it be  permitted  to receive  the  proceeds  of any
borrowings  thereunder  unless and until all documents as required under Section
4.2(c) thereof have been executed and delivered to the Administrative Agent.

         (c) The  Administrative  Agent and the Lenders hereby consent and agree
that, if Gallino is not either an A/C Borrower or a Material  Subsidiary on that
date which is ninety (90) days from the date hereof,  a pledge of its stock will
not be  required  under the terms of  Section  4.2(c) of the  Credit  Agreement;
provided  that in such event the rights of Gallino  and the  obligations  of the
Lenders to Gallino under the Credit  Agreement or any other Loan Document  shall
then and  thereafter  be  terminated.  To the  extent  that  Gallino at any time
thereafter again becomes a Material Subsidiary,  the Borrowers shall cause to be
executed  and  delivered  to the  Administrative  Agent  each  of the  documents
required  under  Section  7.12(b) of the Credit  Agreement as and when  required
thereunder.

         (d) The  Administrative  Agent and the Lenders hereby consent and agree
that Gallino and BREED Italia may, at any time during the ninety (90) day period
after the date hereof,  reincorporate  themselves  as a S.p.A (i.e.  Societa per
Azioni).

Failure  to comply  with any  provision  of this  Section 4 shall be an Event of
Default under the Credit Agreement.

         SECTION           5.       Conditions.  The effectiveness of the
amendments set forth herein shall be conditioned upon delivery to
the Administrative Agent of the following items:

         (a)      First Amendment.  Receipt by the Administrative Agent of
this First Amendment executed by the Borrowers, the Guarantor and
Lenders constituting Required Lenders.

         (b)      First Amendment to Five-Year Credit Agreement.  Receipt
by the Administrative Agent of that certain First Amendment to
Five-Year Credit Agreement executed by the Borrowers, the Guarantor
and Lenders constituting Required Lenders.

         (c)      Officer's Certificate.  A certificate from the chief
executive officer or chief financial officer of BREED in form and
substance reasonably satisfactory to Administrative Agent, to the
effect that, after giving effect to the transactions contemplated


                                        9

<PAGE>



by this First  Amendment,  all  representations  and warranties of the Borrowers
(including the Former Borrowers) contained in the Credit Agreement and the other
Loan Documents are true, correct and complete; that the Borrowers (including the
Former Borrowers) are not in violation of any of the covenants  contained in the
Credit Agreement and the other Loan Documents;  and that no Default has occurred
and is continuing.

         (d) Amendment Fees. Payment of (i) the amendment fees and other fees to
the  Administrative  Agent  for  the  ratable  benefit  of  the  Lenders  to  be
distributed  to the  Lenders  in  accordance  with the terms  contained  in that
certain  letter  dated as of July __,  1997 from First  Union to the Lenders and
(ii) the  amendment  and  other  fees to the  Administrative  Agent  for its own
account pursuant to that certain fee letter dated as of July __, 1997 from First
Union to BREED, all of which such fees are hereby  acknowledged and consented to
by the Borrowers.

         (e)  Opinions  of  Counsel.  The Agent  shall have  received  favorable
opinions  addressed  to the  Lenders  from  counsel  to the  Borrowers  and  the
Guarantor in form and substance satisfactory to the Administrative Agent.

         (f)      Additional Documents.  Receipt by the Administrative
Agent of any other document or instrument reasonably requested by
the Administrative Agent, the Documentation Agent or the Lenders in
connection with the execution of this First Amendment.

         (g)  Amendment  Expenses . Payment by the  Borrowers of all  reasonable
out-of-pocket  expenses  of the  Administrative  Agent  in  connection  with the
preparation,  execution and delivery of this First Amendment,  including without
limitation,   the  reasonable  fees  and   disbursements   of  counsel  for  the
Administrative Agent.

         SECTION 6. Representations and Warranties/No  Default. By its execution
hereof,  the  Borrowers  hereby  certify  that each of the  representations  and
warranties  set forth in the Credit  Agreement  and the other Loan  Documents is
true and correct as of the date hereof as if fully set forth  herein and that as
of the  date  hereof  no  Default  or  Event  of  Default  has  occurred  and is
continuing.




                                       10

<PAGE>



         SECTION 7. Limited  Amendment.  Except as expressly  amended and waived
herein,  each provision of the Credit Agreement and each provision of each other
Loan Document shall continue to be, and shall remain,  in full force and effect.
This First  Amendment  shall not be deemed or  otherwise  construed  (a) to be a
waiver of, or consent to, or a  modification  or amendment of, any other term or
condition  of the  Credit  Agreement  or any other  Loan  Document,  (b) to be a
commitment or any other  undertaking  by the Lenders or any of them to engage in
any  further  restructuring  of any  aspect of the  Credit  Agreement,  the Loan
Documents or the Obligations,  (c) to constitute any obligation to further amend
or  otherwise  modify  the  Credit  Agreement  or any  Loan  Document  or (d) to
prejudice  any  other  right or  rights  which  the  Administrative  Agent,  the
Documentation  Agent or Lenders may now have or may have in the future  under or
in  connection  with the Credit  Agreement  or the Loan  Documents or any of the
instruments  or  agreements  referred  to  therein,  as the same may be amended,
restated or otherwise modified.

         SECTION 8.  Confirmation of Guaranty.  The Guarantor  hereby  expressly
acknowledges and consents to the  modifications and amendments set forth in this
First Amendment and hereby confirms,  represents and agrees that its obligations
under the Guaranty shall remain in full force and effect.

         SECTION           9.       References.  From and after the date hereof,
all references in the Loan Documents to the Credit Agreement shall
be deemed to be references to the Credit Agreement as modified by
this First Amendment.

         SECTION 10. No Defenses. Each of the Borrowers and the Guarantor hereby
acknowledges and affirms that such party has no defenses, legal or equitable, to
the  validity  and  enforceability  of any  Loan  Document  (including,  without
limitation, the Credit Agreement as amended by this First Amendment).

         SECTION 11. Entire Agreement.  This First Amendment,  together with the
Credit Agreement and the other Loan Documents,  constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements.  The Borrowers  acknowledge that there are no other agreements
of any kind,  whether  written or oral  pertaining to the subject matter hereof,
not memorialized in the First Amendment,  together with the Credit Agreement and
the other Loan Documents.

                                       11

<PAGE>



         SECTION           12.     Governing Law.  This First Amendment shall be
governed by and construed in accordance with the laws of the State
of North Carolina.

         SECTION           13.      Counterparts.  This First Amendment may be
executed in separate counterparts, each of which when executed and
delivered is an original but all of which taken together constitute
one and the same instrument.

                                             [Signature Pages Follow]

                                       12

<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this First Amendment
to be duly executed as of the date and year first above written.






                                       13

<PAGE>



                                 SCHEDULE 1.1(a)

                              LIST OF A/C BORROWERS


Name of Company                                      Place of Incorporation

BREED Technologies, Inc.*                            Delaware, USA
United Steering Systems, Inc.                        Delaware, USA
BREED European Holdings Limited                      United Kingdom
Auto Trim, Inc.                                      Texas, USA
Custom Trim, Ltd.                                    Ontario, Canada
Hamlin Electronics Europe Limited                    United Kingdom
Hamlin Electronics, GmbH                             Germany
VTI Hamlin Oy*                                       Finland
Momo, S.p.A.                                         Italy
Gallino Plasturgia, S.r.l.                           Italy
United Steering Systems Clifford Limited             United Kingdom


* These are the only entities permitted to borrow in Finnish Marks.





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<PAGE>


                                    EXHIBIT 1

                                FORMER BORROWERS


BREED Italia, S.r.l.

Italtest, S.r.l.

BREED Italian Holdings, S.r.l.



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